Lucid Group insists it is not considering bankruptcy, but the luxury electric vehicle maker is clearly facing a critical period that will determine whether it can become financially sustainable or remain dependent on outside funding.
The controversy erupted after a small EV-focused publication reported that Lucid and restructuring adviser AlixPartners were examining alternatives that could include a Chapter 11 bankruptcy filing. Lucid called that suggestion “completely false” and said AlixPartners had not recommended bankruptcy to either management or the company’s board.
Lucid said the consulting firm was brought in to help improve execution, strengthen operations and position the company to take better advantage of its technology and products. That explanation did little to calm investors initially. According to Bloomberg, Lucid shares fell 16% Tuesday, July 14, after dropping as much as 57% during trading.
Bankruptcy may not be under consideration, but it is not difficult to understand why the possibility gained traction. Lucid has never reported an annual profit and has burned through more than $5 billion since the beginning of last year, Bloomberg reported. The company has been losing roughly $1 billion per quarter while trying to expand production and develop additional vehicles.
Lucid’s primary financial lifeline has been Saudi Arabia’s Public Investment Fund, which owns a controlling interest in the automaker and has invested more than $9 billion in the company. The Saudi fund owns approximately 51% of Lucid and has repeatedly provided additional financing as the automaker has worked toward profitability.
Lucid also secured commitments totaling another $750 million in April through separate agreements involving the Saudi fund and Uber Technologies. Uber is working with Lucid on a planned robotaxi program.
The continued backing of the Saudi fund gives Lucid more breathing room than many failed EV startups had, but that support cannot automatically be assumed to continue indefinitely. Lucid’s future may ultimately depend on whether the Public Investment Fund remains willing to finance losses while the automaker attempts to bring lower-priced vehicles to market.
Lucid currently sells two vehicles. The Air luxury sedan starts at approximately $71,000, while the Gravity SUV begins around $79,000. Many versions sell for considerably more, limiting Lucid primarily to affluent buyers at a time when demand for expensive electric vehicles remains uncertain.
The company delivered 15,841 vehicles last year, according to Bloomberg. While that represented growth, the sales volume remains far below what Lucid needs to spread its development and manufacturing costs across a larger number of vehicles.
Lucid’s best opportunity to increase volume may be its forthcoming midsize vehicle platform. The company is developing several models based on the architecture, including vehicles known as Cosmos and Earth, along with a third model that has not yet been named. Lucid has also shown a two-seat, purpose-built robotaxi concept called Lunar.
Prices for the midsize vehicles are expected to begin below $50,000, potentially opening Lucid to a much larger group of buyers. The strategy resembles Rivian’s effort to move beyond expensive trucks and SUVs with smaller, more affordable vehicles.
The challenge will be producing those vehicles profitably. Lower prices could generate more sales, but they also leave less room to absorb the high cost of batteries, manufacturing, vehicle development and warranty coverage.
Lucid employees told Bloomberg that the midsize platform is receiving priority even as spending is reduced in other parts of the company. Cantor Fitzgerald analyst Andres Sheppard described the platform as Lucid’s most important potential catalyst.
New CEO Silvio Napoli is overseeing a broad operational review after formally joining Lucid in June. Napoli previously led Swiss elevator manufacturer Schindler Holding and has said his goal is to make Lucid a more resilient and sustainable business.
The restructuring has already produced significant cuts. Lucid recently announced plans to eliminate approximately 18% of its U.S. workforce, following an earlier reduction of 12% of its global staff. The company has also eliminated a second production shift, changed several senior leadership positions and removed the chief operating officer role.
Lucid suspended its production guidance in May while describing consumer demand as uneven. Work on the midsize platform had been expected to begin this year, although the company has maintained only that volume production should begin next year.
So, is Lucid considering bankruptcy? Based on the company’s public statements, the answer is no. Lucid says the report was false, and there is currently no confirmed evidence that management or the board is preparing a bankruptcy filing.
That does not mean Lucid is financially secure. The company must reduce its cash burn, increase sales, successfully launch its more affordable vehicles and maintain the confidence of its Saudi backer. Bankruptcy may not be on Lucid’s agenda today, but until the company proves it can build vehicles without burning through mountains of cash, the question is unlikely to disappear.