3 Things You Have to Consider Before Even Entertaining Lucid

Most investors understand it's probably an impossible task to find the next Tesla currently. But the allure of looking for such an investment remains, and it's one reason many look to Lucid Group (NASDAQ: LCID), considering it's widely recognized for making some of the most advanced electric vehicles (EVs) on the planet.

That said, every time the company appears to be turning a corner, something comes up. Before you even consider investing in Lucid, it's important to consider these three factors.

Production hiccups

Lucid's early history was marred by multiple supplier and production issues, making progress far bumpier than investors would have liked. Just as investors hoped Lucid had grown past that -- and in the automotive industry, you never entirely grow out of these hiccups – another issue reared its ugly head.

The EV maker recently launched Gravity SUV has been slower to accelerate production than hoped. Making matters worse, Gravity deliveries were significantly impacted in February due to a rear-seat defect that triggered a recall. Between the hiccup in Gravity production, the recall, and the ensuing temporary halt in Gravity sales, as well as a widening first-quarter net loss, the company opted to suspend its full-year production guidance and will provide an update at the end of the second quarter.

Lucid is a young automaker working through the process, and that's going to come with speed bumps, likely more than investors would like. It's just one thing to consider.

Funding red flag?

You might think that Lucid and LIV Golf have nothing in common, but that would be wildly inaccurate thanks to a certain investor. Saudi Arabia's Public Investment Fund (PIF) was instrumental in starting up LIV Golf, and it was intriguing to see how it all played out, with many thinking the PIF money could be essentially endless.

Then something a little funny happened: PIF decided it was time to stop throwing money at the start-up golf entity. The PIF began major financial backing of LIV Golf when it launched in 2021, and over the years, the wealthy fund has invested over $5 billion in the circuit, only to announce last month that it would stop funding LIV Golf at the conclusion of the 2026 season.

PIF was fairly quick to pull the plug on funding LIV Golf, but investors considering Lucid should understand the same entity has poured roughly $9.5 billion into the Lucid group over a slightly longer timeline, starting back in 2018. Investors could argue that the PIF's ties with Lucid are deeper as the Saudi fund is attempting to establish an independent automotive sector in Saudi Arabia and hopes Lucid's focus on the future of EVs, smart mobility, sustainable energy, and willingness to operate in the country will make it a cornerstone of that future.

That said, we now have our latest proof that the PIF funding isn't essentially endless, and that it can and will pull the plug. That's something investors have to consider because losing that investor would be devastating for Lucid.

Path to profits

Rivian Automotive (NASDAQ: RIVN) is a natural competitor to Lucid as both are young automakers focused purely on EVs. While Lucid has fewer deliveries and less scale, Rivian's progress on gross profitability has been impressive. Rivian reported its first-ever quarterly gross profit in the fourth quarter of 2024, partly driven by a significant reduction in costs per vehicle once the second-generation R1 vehicles hit the road.

Rivian followed that up with continued cost-cutting, then took a quick step forward by leveraging its surging software and services revenue from its Volkswagen joint venture to achieve its first full-year gross profit in 2025. While both are still burning through cash and reporting net losses, the difference in trajectories is clear in the following graph.

RIVN Gross Profit (TTM) data by YCharts

What it all means

Lucid remains an intriguing and unique investment opportunity, but these three simple factors to consider highlight just how complex and risky it is. The young EV maker continues to face production issues that hinder its results, has looming funding questions and concerns, and hasn't made nearly as much gross profit progress as Rivian, which shows investors it has a path to profits.

For the vast majority of investors, it's not time, perhaps not even close to time, to entertain Lucid as an investment.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.