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The Curious Case Of Lucid Motors - $11.75 Billion, $24 Billion Or $57 Billion?

Feb. 24, 2021 11:39 AM ETLCID, F, GM, NIO1 Comment
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  • Two articles in the WSJ and Barrons are among the few sources prominently showing the implied market cap for Lucid post-IPO: $50-60 BILLION at current share prices.
  • This is another insane valuation for a new EV entrant that hasn't shipped a single car yet - first Lucid Air deliveries now planned for H2 2021 (a slight delay).
  • I applaud both Rivian and Lucid for their in-house R&D efforts, newly built factories and a starting focus on premium niches (enter the market at the top end).
  • However, both Rivian's and Lucid's valuations (per market caps) seem completely out of touch with the car sector reality and solely attached to the Tesla bubble story (market comparable bubble justification).

A single chart tells the story for the implied market cap valuation for Lucid Motors as of late February - the huge change from Monday to Tuesday shows the wild daily gyrations as retail investors realized they overpaid for the $CCIV SPAC vehicle:


Ignoring the complete bubble that is Tesla (therefore $TM, Toyota is in the top spot in the Barrons chart above) Lucid Motors would be among the highest-valued car companies on the market today - without selling a single car so far.

Is this the new normal in 2021? Apparently so.

All of the other companies (except for the bubble EV entrant named NIO making it into the top 10) on the chart sell millions of cars per year - Lucid hasn't shipped a single car yet. That's worth repeating.

Before someone tells me that the chart is wrong by definition and that companies like Tesla and Lucid are "tech companies" - therefore not be compared to "traditional" car companies - consider this:

Tesla still is a CAR company with some solar/battery sales on the side, NOT a TECH company. Look at their revenue if you don't believe me. The same applies for Lucid (no solar sides on the horizon, but they also plan to sell some stationary ESS batteries on the side soon).

If you still think that both are "tech" companies, you can apply that sector sticker to any other carmaker out there as well nowadays. Three examples:

- Why isn‘t $NIO a tech company (battery swaps and BaaS, aka Battery as a Service or the NIO EVE/NOMI digital assistant)?

- Why isn‘t Daimler a tech company (car operating system MB.OS and MBUX)?

- Why aren‘t $F or $GM tech companies (robocar partnerships with Argo AI and GM Cruise, some even say Cruise is at the very forefront of autonomous cars along with Waymo)?

Conclusion: Lucid (like Rivian) has very interesting EV technology and R&D efforts - but it remains a car company in the end.

The competition isn't sleeping (all of them will have various mass-market EVs in showrooms soon or already on sale today - before Lucid sells a single car).

Lucid will meanwhile face the usual pain of high cap-ex in the automotive sector as it increases production and plant capacity (Lucid has a single plant, for now, another critical point of failure if something goes wrong) to around 400k car units/year over the coming years:

High cash burn is often a problem for new entrants to the automotive industry — just ask Tesla Inc. or NIO Inc. But some of the latest crop, such as Fisker Inc., have sought to cut their need for capital by outsourcing manufacturing and engineering.

Lucid is going the traditional route. It’s built a small plant in Arizona, and faces a mounting bill to add factory capacity, develop technology and build a network of sales and service outlets. This may pay off in the long term, as it has for Tesla, but Lucid’s near-term projected cash flows look like this:

Lucid Motors expects to burn almost $10 billion of cash in the next four years

Right now its finances aren’t in tip-top condition. Lucid’s company statements include an “explanatory paragraph relating to Lucid’s ability to continue as a going concern,” the slide deck notes. It will need $600 million in bridge financing until the SPAC deal closes.


Forget about the $11.75 and $24 billion (link to the aforementioned WSJ article) and focus on the cash burn over the coming years and the current (insanely high in my opinion) market cap of $50-60 billion of $LCID (that will be the future ticker for Lucid) compared to its car sector peers.

In my opinion, Lucid (much like Tesla) is overvalued by around 80-90% at the moment - but that's just my take and the market doesn't agree with me, at least not for now.

A market cap around $6-10 billion for Lucid seems to be inline with car sector valuations given the various execution risks ahead in my opinion.

Analyst's Disclosure: I am/we are short TSLA.

I may initiate a short position for LUCID and other EV SPAC stocks in the future.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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