Luxury electric-vehicle maker
Lucid
(ticker: LCID) is planning on selling automobiles in China, the biggest market for cars, according to a report.
Lucid will sell imported cars in China and consider opening production facilities there, Reuters reported, citing a person familiar with the matter.
Lucid didn’t respond to a request for comment from Barron’s, but the move isn’t a surprise. Lucid’s guidance for cash flow back in 2022 included entering the Chinese market in 2023. Shares were up though, rising 2.5% to $6.56 in premarket trading, while
S&P 500
and
Nasdaq Composite
futures both gained about 0.1%. A new market represents growth and investors expect growth.
Lucid sold about 4,300 vehicles in 2022 and said it plans to produce more than 10,000 units in 2023. That won’t be enough to generate positive free cash flow. Wall Street projects cash use of about $4 billion this year.
China’s
BYD
(1211.Hong Kong) and
Tesla
(TSLA) are the two largest EV sellers in China. Lucid isn’t much of a threat to that pair yet. The leaders sell the bulk of their cars in the roughly $30,000 to $60,000 range. Lucid, for now, sells cars that cost more than $100,000.
Analysts don’t expect the company to generate positive free cash flow for the next few years, so investors can expect Lucid to raise more capital eventually. Lucid announced this month that it had raised a fresh $3 billion from stock sales, mainly to Saudi Arabian investors, to keep the company going through 2025.
Reuters said that Lucid’s head of China operations, Zhu Jiang, confirmed plans to sell cars in the country, but declined to comment on plans for production there.
China is the largest market for new cars and new EVs on the planet. EV penetration of new car sales has topped 30% in some recent months. That figure includes plug-in hybrid vehicles too, although about 75% of EVs sold in China are all battery-electric, the kind Lucid makes. About 4.6 million battery-electric EVs were sold in China in 2022, accounting for about 60% of the world’s total.
Lucid entered the European market late in 2022, opening design studios on the continent. In May, the company announced pricing for some versions of its Air sedan for Germany, the Netherlands, Switzerland, and Norway.
Coming into Thursday trading, Lucid shares have fallen 66% over the past 12 months. Difficulty ramping up sales is one reason. When Lucid reported fourth-quarter figures in February, management told investors to expect 2023 production of 10,000 to 14,000 vehicles, but the latest forecast given in May didn’t include the top end of the range. What’s more, coming into 2023, Wall Street had projected annual production of roughly 20,000 to 22,000 units.
Barron’s wrote cautiously about Lucid stock in November, partly believing that ramping up sales would be difficult. The stock has declined more than 50% since that article appeared.
Write to Brian Swint at [email protected] and Al Root at [email protected].
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