Regardless of its status as an electric vehicle (EV) player, Lucid Group (LCID -7.68%) is still just a car stock, and car stocks do not make investors fortunes. Tesla has been a rare exception, but we’re talking about the rarest of the rare.

Competition is one thing keeping EV makers like Lucid from rocketing shareholders to incredible wealth. In addition to Tesla, traditional automakers like General Motors and Ford also make electric vehicles, which, from personal experience, I can say are quite nice. The pure EV players don’t have any sort of monopoly on that space of the business, and it seems very unlikely that the more established players within autos are going to let up the pressure.

Lucid’s sales and financials

Lucid’s annual sales are definitely growing, increasing from a mere $4 million in 2020 to over $807 million in 2024. The problem is that the business is losing billions annually, which explains why the company’s share count continues to climb as it raises capital to cover operations by issuing shares. Total shares outstanding increased nearly 32% year over year in the first quarter of 2025, all while Lucid reported a net loss of $366 million, excluding accretion of redeemable convertible preferred stock, which took losses to $731 million.

Image source: Lucid Group.

To me, the euphoria has worn off this stock, as it is down over 70% in the last five years. This isn’t to say that it makes a bad product. Quite the opposite. Car and Driver gives the 2025 Lucid Air a five-star rating. The problem is the cost of building up a car company from scratch and competing against the established giants in the industry that are all making their own electric cars along with internal combustion engine vehicles.

Lucid’s car production came in at 9,024 vehicles in 2024, which is minuscule compared to competitors like General Motors, which sold well over 2 million vehicles. Guidance calls for around 20,000 vehicles to be produced in 2025, which is still pretty minuscule relative to the broader car market.

Too much competition

I’ve been watching auto stocks for a long time, and I don’t see the strength of the sector in terms of investment. The exception is, of course, Tesla, but its operations span across more than just cars, and I think its stock will also come back to earth at some point.

People can only buy so many cars. Whether it’s EVs or regular combustion engines, people aren’t going to buy more cars than needed. With an increasing number of options within EVs, Lucid doesn’t seem to particularly stand out from the pack, aside from the fact that it focuses on luxury vehicles. But competitors like Cadillac, Mercedes, and Volvo are all doing the same thing, and they have more of the infrastructure required to produce at scale.

Most car stocks trade at around 10 to 13 times earnings. I think these electric start-ups will end up with similar valuations once the fervor has worn off. Mercedes operates in the luxury space and has delivered gains of over 56% over the last five years. That pales in comparison to the S&P 500 return of 94% over that same time frame, and I see very little reason for car stocks to start outperforming the market. It’s a capital-intensive business and very susceptible to weak economic conditions. Back to my headline, I don’t think Lucid stock will set anyone up for life, but it could make for an OK investment if the company can continue to scale.

Lucid Group (LCID) had a record-setting year in 2024. The game plan is to break some more records in 2025. However, the stock is more than 90% below its peak prices in 2021 and is trading hands at less than $3 per share. There’s a lot going on here for investors who are wondering if Lucid is worth buying today.

What has Lucid achieved?

Lucid is an upstart electric vehicle (EV) maker. The fact that it has gone from an idea to production is a hugely impressive feat that shouldn’t be diminished. And 2024 was a year filled with important achievements, so the company is executing reasonably well right now.

To put some numbers on that, Lucid delivered a new record number of vehicles in each quarter of 2024, with year-over-year growth of 71% in the fourth quarter. Its gross margin improved steadily throughout the year, with a year-over-year improvement of 72 percentage points in the fourth quarter. It started production of a new line of vehicles, the Gravity SUV, and delivered the first of the new vehicles to customers. It also improved the efficiency of its batteries, achieving a record-setting range rating.

The company has even bigger plans for 2025, with the goal of more than doubling its production for the year. That will likely lead to a material increase in the number of vehicles Lucid delivers to customers. It should also further improve gross margin as increased scale allows for manufacturing costs to be spread over more vehicles.

The one big thing that is highly unlikely to happen in 2025, which didn’t happen in 2024, is positive earnings. This brings up an important fact about Lucid. It is still a start-up company attempting to break into the highly competitive and capital-intensive auto industry.

LCID data by YCharts

Some perspective with Lucid will help

Lucid has a lot to be proud of, but there are some very big caveats to consider if you are thinking about buying the stock. The record-setting fourth-quarter production amounted to just a rounding error compared to its much larger industry peer, Tesla. Even doubling production in 2025 to around 20,000 vehicles will leave Lucid well behind Tesla on the production side, given Tesla’s 2024 production of nearly 1.8 million vehicles.

In addition, Lucid’s gross margin is moving in the right direction, but it still has a deeply negative gross margin. Indeed, the year-over-year improvement in the fourth quarter was from a negative gross margin of 161% in the final stanza of 2023 to a negative gross margin of 89%. It is currently selling every car for less than it costs to build one of its cars.

LCID Cash and Short Term Investments (Quarterly) data by YCharts

Then there’s the balance sheet. Lucid ended 2024 with roughly $4 billion in cash and short-term investments. That’s roughly where it started out in 2024, but as the chart above highlights, there was a big dip in the middle of the year. The company’s coffers were refilled thanks to the issuance of new stock, which dilutes current shareholders. Given the still huge spending needs here, it is likely that even more cash will need to be raised in the future.

Is Lucid a buy?

Lucid’s stock is trading below $3 a share for a reason — it is a high-risk investment. The company is making important strides, but it is still unclear if it will be able to become a sustainably profitable business. Conservative investors will be better off avoiding it. More aggressive growth investors, however, might find it of interest to note the solid progress that is being made on key business goals. But go in with your eyes wide open to the risks, notably including dilution from ongoing equity issuances at what are still very low stock prices.