Lucid Group (LCID 1.53%) is an up-and-coming electric vehicle (EV) manufacturer with significant backing from the Saudi Arabia Public Investment Fund. The company, which focuses on luxury EVs with extended driving ranges, has drawn investor interest since its merger with a special purpose acquisition company (SPAC) three years ago.

The company aims to compete with industry giant Tesla with its premium offerings. However, it has struggled to ramp up production and meet the aggressive targets laid out a few years ago when it went public. The stock reached as high as $57 per share in 2021, but is now down 95%.

Lucid has had to tap into equity markets several times and continues to bleed cash. However, the company is optimistic that its newer models can help improve margins and reach profitability. If you're considering owning Lucid Group stock, here are some things to consider first.

Reasons to buy or hold Lucid Group

Lucid Group's luxury electric cars target a more affluent customer demographic, and the company aims to establish itself as a premium automotive brand.

One element that makes Lucid's offerings stand out is the range of its vehicles. Its flagship model, the Lucid Air Pure ($69,900), attracts customers looking for range and practicality. The car offers 430 horsepower and an impressive driving range of 420 miles per charge. For those seeking higher performance, its Grand Touring model ($110,900) delivers an impressive 819 horsepower and an even greater driving range of 512 miles.

In addition, Lucid recently launched its long-awaited SUV model, the Lucid Gravity Grand Touring, in early November and has begun taking orders for the vehicle, priced at $94,900. It promises 450 miles on a single charge and has fast-charging capabilities to charge up to 200 miles in only 12 minutes, addressing consumers' primary concerns around EVs. The company has begun production on this model and expects to begin deliveries sometime later this year.

Image source: Lucid Group.

According to estimates from Motor Intelligence, the company sold a record 780 units in December and a solid 665 units in January, which represented a 51% increase in sales year over year. January sales included 615 of its Air sedans and another 50 Gravity SUVs.

Lucid's technology is impressive, and its focus on luxury and performance makes it an intriguing stock for EV investors to consider. It is also seeing positive momentum, with sales growing every month from September through December. The company also has substantial support from the Public Investment Fund of Saudi Arabia, which will help it grow. 

Reasons to sell Lucid Group

However, there are some risks for investors to consider first.

Last year was solid for Lucid, as the company produced 9,029 vehicles and delivered 10,241 vehicles. However, the biggest issue is that this has failed to live up to management's lofty expectations laid out when it first went public in 2021.

At that time, management projected Lucid would deliver 49,000 vehicles in 2023 and another 90,000 in 2024. Instead, the luxury EV maker has delivered a fraction of that amount, showing how difficult and costly it can be for up-and-coming companies to ramp up production on a wide scale.

Through the first three quarters of last year, Lucid's revenue grew a solid 31% to $573 million. However, expenses continue to be a primary point of concern. Over that same period, expenses came in around $2.9 billion, and the company's operating loss was a staggering $2.3 billion.

LCID Revenue (TTM) data by YCharts

As a pre-profit company, Lucid has had to spend significantly on research and development and ramping up its production capabilities. Because of the high costs, funding is crucial for Lucid's ongoing growth and long-term success. The EV maker has had to raise capital numerous times from outside investors, including capital raises through public equity offerings and additional investments from Saudi Arabia's Public Investment Fund.

Last October, Lucid raised another $719 million by selling 262.5 million shares priced at around $2.66 per share. The PIF invested another $1 billion in Lucid, bringing the PIF's total investment in Lucid since 2018 to $8.9 billion. The move provides Lucid with enough funding for a financial runway through 2026, but those capital raises have significantly diluted longtime shareholders in the process.

The final verdict

Lucid Group is pushing EV technology forward with its combination of power and range. The company may be able to benefit from long-term tailwinds for EVs. According to projections from consulting firm PwC, the number of EVs in the U.S. could reach 27 million by 2030 and 92 million by 2040. If Lucid can gain its footing and generate positive cash flows, it has an opportunity to be a formidable player in this industry.

The EV maker has taken steps to rein in costs, but has also required further investments from equity offerings and the Saudi Arabia Public Investment Fund to keep things going. While it has the cash runway to fund its business well into 2026, I want to see it improve its production numbers and bottom-line results. Until then, investors should avoid or sell the stock until more positive results become visible.