Electric vehicle manufacturer Lucid Group (NASDAQ:LCID) is looking expand its horizons and conquer a well-populated nation. That’s definitely easier said than done, however. Despite Lucid Group’s enthusiasm, LCID stock could end up losing value because of the company’s new international venture.
Of course, Lucid Group isn’t the first automaker, or even the first U.S. automaker, to enter Asia’s EV market. This is a strategy that others have attempted and struggled with.
Clearly, Lucid Group’s management feels that the company can succeed in a tough market. However, confidence and high self-esteem won’t be enough. So, Lucid Group stock investors should be skeptical as there’s no guarantee that the automaker’s expansion will be worth the cost.
| LCID | Lucid Group | $6.33 |
Entry Into China Doesn’t Make LCID Stock a Buy
LCID stock has been on a steep decline over the past year. Lucid Group’s shareholders need a catalyst, and the sooner, the better. Could Lucid’s move into China’s EV market prompt a major turnaround?
Lucid Group’s head of China operations, Zhu Jiang, seems to think so. Funding from Saudi Arabia’s Public Investment Fund will, Jiang assures, help Lucid to “bring the advanced EV technology and product experience to the industry and users globally at a faster pace.”
That may be the case. However, it’s less certain that “China is also looking forward to it,” even though that’s what Jiang claims. China already has plenty of EV manufacturers vying for automotive buyers’ attention.
It will require substantial capital outlays to pay for marketing and commercialization in China.
Lucid Group’s China Venture Is Risky
Lucid Group hasn’t been flexible regarding the $87,400 starting price for Lucid’s Air model sedan in the U.S. Perhaps that’s one of the reasons Lucid only delivered 1,406 vehicles from its Arizona factory during 2023’s first quarter.
Does the company miraculously expect to do better in China? Jiang’s confidence isn’t the same thing as a specific, well-documented road map to success in a highly competitive market.
If Lucid Group’s foray into China fails, the automaker could be in real trouble. It wasn’t a positive sign when Lucid announced a “public offering” (i.e., sale) of 173,544,948 stock shares. Businesses that are in good financial shape typically don’t feel the need to sell huge numbers of stock shares like this.
That, along with Lucid Group’s widening net earnings loss and declining cash, cash equivalents and restricted cash, doesn’t bode well for the company. Most likely, this isn’t an appropriate time for Lucid Group to spend money to expand into new, ultra-competitive areas.
Don’t Have Great Expectations for Lucid
It’s probably part of Jiang’s job to be confident and enthusiastic about Lucid Group’s move into the Chinese EV market. Informed investors need to form their own conclusions, however.
LCID stock may have occasional bumps, but overall, it’s in a state of decline. Lucid Group’s financial situation isn’t ideal. Will Lucid’s foray into China prove to be the catalyst that the shareholders have been waiting for?
Don’t count on it, as nothing can be guaranteed here. All in all, it’s wise to avoid overconfidence in 2023 and to steer clear of LCID stock.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.