Lucid Is Making Progress, Just Not Enough to Make a Profit

Lucid (NASDAQ: LCID), like all companies, wants to accentuate the positives when it reports financial results. The big positive in 2024 was the fact that the electric vehicle (EV) maker produced a record number of vehicles in each quarter of the year. That's great news and helped the company deliver on a promise.

But there's still one important goal that's a long way away.

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What did Lucid promise to do in 2024?

Lucid is attempting to build an electric vehicle company from scratch. At the start of 2024, management set a target of producing 9,000 vehicles for the year. It achieved that goal, with total production of 9,029 of its cars. It is important for companies to live up to their promises, so this is a good thing.

Image source: Getty Images.

In its fourth-quarter 2024 earnings release, management proudly announced that it "saw significant momentum in 2024, with four consecutive quarters of record deliveries." Fair enough, but full-year production in 2023 was 8,428 vehicles. The increase from year to year was, on a percentage basis, only around 7%. Sure, that was enough to be a record-setting year, but the company really just managed to maintain its production levels for a year.

The big change is going to come in 2025 when Lucid attempts to reach a production goal of around 20,000 vehicles. Doubling production will be a true test of the company's production facilities and management's ability to oversee a rapid increase in activity.

Lucid is a long way from the most important goal

A manufacturing company being built from the ground up has to go through these stages, so it isn't, perhaps, fair to knock Lucid on any of this. It is making solid progress. There's just one big problem: The real end goal is profitability. And Lucid is nowhere near the point when it will turn a profit.

Some numbers will help explain what I mean. In 2024, Lucid's vehicle sales brought in roughly $809 million. Making those cars, however, cost the company $1.7 billion. It basically lost money on every single car it sold.

And not by a small amount, either, given that building the cars cost $900 million more than their sales brought in the door. That's not a sustainable business model, though increasing production will allow the company to spread its costs over more vehicles and, hopefully, help reduce the deeply negative gross profit figure.

If that were the only headwind, Lucid would probably be well on its way to turning a profit. But there are two more big expenses management has to overcome. The first is its research and development budget, which was a nearly $1.2 billion expense in 2024. The company is attempting to differentiate its vehicles by being technologically advanced, so it is hard to see how this cost dramatically falls anytime soon.

Then there are selling, general, and administrative expenses, which totaled just over $900 million in 2024. That's another higher number, albeit only slightly, than the revenue the company generated from the sale of its vehicles. Cost-cutting is entirely possible here, but only so much can be done to eliminate these expenses, which are basically the costs associated with running the business.

Lucid has an uphill climb

Investors looking at Lucid should recognize the progress the company is making, which is good. But that progress has to be juxtaposed against the reality of how much it costs to run the car manufacturer. And right now, while management is making important progress on important goals, it is a very long way away from the most important goal for investors: turning a profit. This is a high-risk investment that is likely years away from where it needs to be if it wants to be a sustainable business.

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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.