If a well-established firm made a sizable investment in electric vehicle (EV) manufacturer Lucid Group (NASDAQ:LCID), does that mean you should buy LCID stock now? Not necessarily. Lucid Group’s pricing strategy seems to exclude a large number of automotive buyers. There’s evidence that Lucid might even be aware that its EVs are too expensive, but the company isn’t really solving the problem.
With each passing quarter, it’s getting harder to hold Lucid stock with confidence. For 2023’s first quarter, Lucid Group reported a widening net earnings loss and a dwindling position of cash, cash equivalents and restricted cash.
Given the company’s financial problems, Lucid Group needs to sell a whole lot of vehicles in order to continue as a “going concern,” as the old saying goes. Nevertheless, at least one financial firm audaciously invested in Lucid Group, so let’s delve into the details now.
A Vanguard Firm Makes a Bold Bet on LCID Stock
I won’t deny that Vanguard is a widely respected financial management firm. Vanguard’s funds are sometimes known as relatively safe, well-diversified places to park one’s capital.
Yet, I spotted something surprising in the holdings of a Vanguard-owned firm known as Vanguard Personalized Indexing Management, LLC. A Form 13F-HR filed in May revealed this firm held 56,576 shares of Lucid stock, valued at $454,871 at the time of the filing.
Another large-scale Lucid Group investor, by the way, is the Saudi Arabian Public Investment Fund (PIF). So clearly, there are big-money whales that have provided financial backing to Lucid Group.
Apparently, they’re somehow willing to ignore the Lucid’s poor track record of vehicle sales. Alarmingly, Lucid Group only produced 2,314 EVs at its Arizona production plant during the first quarter of 2023. Worse yet, the automaker only delivered 1,406 vehicles in Q1.
Lucid Group May Be Aware That Its Pricing Strategy Is Failing
InvestorPlace contributor Vandita Jadeja recently wrote about Lucid Group, “If the company did not have Saudi backing, it would have packed up the business long back.” This could be a spot-on assessment of Lucid Group’s dire financial situation. Just because the company has some financial backers, doesn’t mean it deserves your investable capital now.
A major problem for Lucid Group is that the company has consistently ignored the middle class and targeted big-ticket EV shoppers. The company unabashedly states that it’s “Here for luxury.” But, is Lucid here for automotive buyers who can’t or don’t want to spend six figures?
Perhaps there’s a sign that Lucid Group’s management understands that its luxury-focused pricing strategy isn’t working. Not long ago, the company announced “special lease and financing offers” on selected EV models.
Of course, when automakers take action to make their vehicles more affordable, it’s not because they actually want to do it. Rather, they do this because they feel the need to make their vehicles more affordable. However, this tactic probably won’t work for Lucid.
Even with the “special” offers, Lucid Group’s vehicles will still be inaccessible to many automotive buyers. The cheapest vehicle featured on Lucid’s special offers page is the Air Touring. This EV has a starting price of $107,400. And, if you’ve ever purchased a new vehicle, you’ll surely know that the starting price is typically less than what you’ll actually pay.
A Big Firm Bought Lucid Stock, But You Don’t Have To
Certainly, it’s notable that Vanguard Personalized Indexing Management, LLC, took a share position in Lucid Group. Plus, Lucid has the backing of the Saudi PIF. This doesn’t necessarily mean their large-scale investments will be profitable, though.
In the final analysis, Lucid Group is an EV startup in a competitive market that hasn’t sold many vehicles. Moreover, the company isn’t in an ideal financial position. Therefore, it’s somewhat baffling that any respectable financial firm would invest in Lucid Group.
Still, it’s fine to keep an eye on LCID stock and the firms that choose to buy it. However, cautious investors should avoid the stock completely in 2023.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
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