The reservation number of over 37,000, represents potential future revenue of approximately $3.5B, and that's before including the up to 100K vehicle deal with Saudi Arabia and the future reservations for the Gravity since we've not yet opened the order book for our upcoming SUV. Management also reminded investors of the company's medium-term potential, as it articulated: But, we must highlight that Lucid's mid-decade's (FY25) project milestones have not shifted, which was seldom touched upon by the bears.įurthermore, management assured investors that it had taken the necessary steps to remediate its recent production challenges by bringing its logistics operations in-house, seeking to eliminate the logistical bottlenecks which hobbled its production. We are not trying to suggest that production issues are not critical. It's easy to focus on near-term production misses, especially for an upstart like Lucid. Lucid Has Not Shifted Its Medium-Term Goalposts Lucid's medium-term market opportunity to leverage the Saudi Arabian and Middle East markets should also not be understated. As a result, near-term downside volatility could represent tremendous opportunities for investors who share the PIF's long-term vision to add exposure. Therefore, we believe the PIF's confidence and support suggest that Lucid investors need to consider its long-term thesis to reap the benefits from their investments. The company is on target to deliver cars to customers in Riyadh in the second quarter of next year. When the world re-emerges from the pandemic and the supply chain catches up, we will be ready. The company is not seeing pressure from investors. understands the challenges around supply chain issues and costs. Lucid updated recently that its cornerstone investor, Saudi Arabia's PIF, has maintained its confidence despite Lucid's cutting its production targets for the second time in FY22. Saudi's PIF Maintains Support Despite Near-Term Production Challenges Therefore, we are confident that LCID's recent price action suggests that the market sees such hurdles as transitory, which should improve subsequently.Īccordingly, we reiterate our Buy rating on LCID and urge Lucid investors to accumulate with the market. Furthermore, Lucid's project launches remain on track, corroborating management's confidence in meeting its ramp targets moving forward. It recognizes that these challenges are likely transitory and would not represent a structural threat to Lucid's ability to ramp manufacturing. Investors need to remember that Lucid has a cornerstone back in Saudi Arabia's Public Investment Fund (PIF) which has maintained its steadfast support despite its production challenges. Therefore, we are increasingly confident that the market used the initial post-earnings sell-off as an 'excuse' to shake out some weak hands, helping long-term dip buyers to accumulate further. Consequently, despite management slashing its FY22 production guidance by 50% to 6.5K (midpoint), LCID has held its August lows remarkably well. Notwithstanding, we explained in our previous article that LCID had formed its long-term bottom in May, which supported its recovery through its earnings release. Despite garnering 37K reservations through Q2, the company only produced 1,405 vehicles in H1'22, underperforming its guidance and the Street's consensus by a wide margin.

Lucid Group, Inc.'s ( NASDAQ: LCID) Q2 earnings card demonstrated how tough it is for an electric vehicle ('EV') upstart to scale high-volume manufacturing in a harsh macro environment.

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