Stepping Towards Brighter Days for Lucid in 2025: Should Investments Be Made Immediately?
With the 2024 Presidential election concluded, EV investors are pondering if the U.S. is about to encounter a significant industry barrier. The President-elect Donald Trump has occasionally voiced his disapproval of EVs, and rumors suggest his transition team is considering abolishing the $7,500 federal tax credit, which might dampen EV demand.
However, Lucid Group's (LCID -7.06%) CEO Peter Rawlinson might allay investor worries. Here's why.
Time for Change
Recently, Lucid has rewarded persistent investors, some of whom have waited through numerous delivery delays and production issues, with three consecutive quarters of deliveries in 2024. In fact, the budding EV manufacturer has surpassed its 6,001-delivery mark set in 2023 by over 1,100 vehicles during the first nine months of 2024.
This delivery momentum, if you want to call it that, could encounter a hurdle, as Reuters reports that Trump's transition team is planning to eliminate the industry's $7,500 federal tax credit. According to the report, Tesla representatives supported the plans to rescind the tax credit. Tesla CEO Elon Musk is a Trump supporter and believes that losing the tax credit will impact rivals more severely than it will affect Tesla.
One person disagrees. Rawlinson appeared on Bloomberg Television and, in essence, said that Lucid had assumed the mantle of technological leadership from Tesla and was well-prepared to navigate the incoming administration, irrespective of the tax credit's fate. "Lucid, among all EV manufacturers, is most resistant to that [tax credit elimination]," Rawlinson stated.
It's true that Lucid would be less affected by the loss of the tax credit, as its Air sedan doesn't qualify for the $7,500 credit in the first place, and Rawlinson pointed out that many of its consumers exceed the income threshold required for tax credit eligibility.
Playing Catch-up
If the tax credit is abolished, Lucid may not feel as much of an impact as some competitors, but it's crucial to remember that losing the tax credit is a setback to the U.S. EV industry's early advancements. The industry has already lagged behind countries like China in EV technology, development, and infrastructure.
In fact, an illustration of China's rapid EV growth can be found in the delivery growth of EV manufacturer BYD. As recently as 2021, BYD recorded fewer than 750,000 global deliveries, but it is estimated to reach 4 million global deliveries in 2024.
Is Lucid a Good Investment?
Lucid isn't an automatic buy due to its perceived immunity to the federal tax credit elimination or its surging deliveries in 2024. However, Lucid could be an appealing investment for investors who trust in the company's advanced EV technology and vehicles, despite their premium prices.
Lucid's Gravity will contribute to deliveries through 2025 as production increases and more affordable trims become available; Lucid will initially produce a more expensive trim. Lucid also has a more reasonably priced midsize electric SUV in the works, starting under $50,000, not including shipping fees, and it will be the first of at least three midsize EVs, with production anticipated in late 2026.
Lucid boasts delivery momentum, a diverse product pipeline, and a wealthy backer in Saudi Arabia's PIF, and it shouldn't encounter a major roadblock if the new administration does away with the tax credit. For these reasons, Lucid could be an intriguing prospect for investors willing to accept significant risk with a young, unprofitable company in an industry with a promising future.
Despite the potential elimination of the $7,500 federal tax credit by the incoming administration, Lucid Group's CEO, Peter Rawlinson, expressed confidence in the company's ability to navigate the changes, citing Lucid's technological leadership and a significant portion of its consumer base exceeding the income threshold for tax credit eligibility. This situation highlights the importance of diversifying investment strategies in the ever-evolving world of finance, especially in the context of investing in the promising future of the electric vehicle industry.
