The Lucid Group (NASDAQ:LCID) share price has been on fire this month. The electric vehicle company has watched its stock rise by 45% since the start of September, pushing its 12-month performance to over 160%. But what’s behind this rapid growth? And should I be considering this business for my portfolio?
The surging Lucid share price
It’s no secret that electric vehicle stocks have been stellar performers this past year. With the world transitioning away from traditional petrol and diesel-powered vehicles, investor interest in electric alternatives has been skyrocketing. But this transition is proving to be relatively slow.
One of the primary reasons behind the sluggish adoption of electric vehicles by consumers (apart from the cost) is their limited range. While recharging stations are becoming more widely available, the process still takes a long time. Even with a supercharger, it can take up to an hour before the battery is fully replenished.
So, I’m not surprised to see the Lucid share price explode following the release of the latest test results for its Lucid Air Dream Edition Range. This electric vehicle achieved a distance of 520 miles on a single charge! That’s about 140 miles further than Tesla, which until recently held the crown for the longest distance. It’s also worth noting that its other models outperformed the competition. Its Edition Performance model reached 471 miles, and the Grand Touring model went as far as 516 miles. Bear in mind, these vehicles have upwards of 800 horsepower.
Needless to say, this is an impressive feat of engineering. And for individuals who tend to travel long distances, these vehicles may be the most attractive option. In turn, this could allow Lucid to steal some sizable market share from its competitors. But as with every investment, there are risks to consider.
The challenges that lie ahead
As someone with an engineering background, this efficiency achievement is quite astonishing, in my mind. However, as an investor, I’m a little sceptical about the Lucid share price. It’s clear the company has nailed its technology. But on the production side, there’s quite a bit of uncertainty.
Lucid has yet to deliver any finished vehicles to customers. And consequently, that makes it a pre-revenue business. Management has released a forecast of it producing 20,000 cars in 2022. However, with the semiconductor chip shortage continuing to wreak havoc on the automotive industry, there’s growing concern that this target won’t be met.
Given the absence of revenue and subsequent lack of profits, it seems to me that the Lucid share price is entirely being held up by expectations rather than existing fundamentals. That’s fine if the company can deliver on its promises. However, suppose it were to miss a deadline? In that case, I think it’s likely that the Lucid share price would experience a large amount of volatility.
The bottom line
Personally, I’m not tempted to add this business to my portfolio. While I can’t deny, the technology is impressive, it’s ultimately meaningless if it can’t get cars flowing out of its factories. Once production is underway, and revenue starts to flow, I may have to reconsider my position. For now, it’s staying on my watchlist.
Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.