After the largest SPAC deal involving an electric vehicle company, is the soon-to-be publicly traded luxury automaker a good investment?
Churchill Capital Corp IV (NYSE: CCIV) is a special purpose acquisition company (SPAC) and is the fourth SPAC launched by Michael Klein. Churchill Capital’s merger with Lucid Motors was arguably the most hotly anticipated SPAC deal of 2021, causing the stock price to be highly volatile. The deal is likely to close by the end of Q2, and the combined company will be valued at approximately $24 billion, with $4 billion in cash.
Lucid Motors was founded in 2007 as Atieva, focusing on producing electrical batteries and powertrains for other vehicle manufacturers. In 2016, it was rebranded as Lucid Motors to become a luxury electric vehicle (EV) manufacturer and is headquartered in Newark, California. Lucid is yet to produce a car, and after the hype of the SPAC deal, is it a good investment?
The bull case for Lucid Motors:
The company is targeting the luxury market with price tags for its models ranging from $69,000 to $161,500. Lucid Motors also claims to have a competitive advantage due to its technology which is developed in-house. The Lucid Air’s battery has a range of over 500 miles and is the first EV with such distance, along with a charge time of 20 minutes for 300 miles. In addition, it has an impressive acceleration time of 0-60 miles per hour in under 2.5 seconds, rivaling the Tesla Model S.
Lucid Motors has several luxury models, with its first, the Lucid Air, set for production and delivery in the second half of 2021. It is also scaling its Advanced Manufacturing Plant in Arizona from a capacity of 34,000 in 2021 with a long-term view of producing 400,000 vehicles per year, which would enable it to challenge any automotive company. Lucid is attempting to go direct to consumers and has six existing retail stores and two more opening throughout 2021. Its goal is to establish the brand as a luxury automaker before launching overseas in 2022.
In February 2021, Lucid had 7,500 reservations, rising to 9,000 by May for its Lucid Air, representing over $800 million in future sales if Lucid can execute. It is forecasting revenue of $2.2 billion in 2022 and that it will reach $22 billion in 2026 and be profitable. Lucid Motors has also made some lofty projections which, if achieved, would reward shareholders. It anticipates run-rate production of greater than 500,000 units per annum in 2030 and a 4% market share. Similar to Tesla, it plans to build luxury cars initially before manufacturing cheaper vehicles at a higher volume and branching into energy storage.
Lucid Motors also has an experienced management team in the automotive industry and none more than CEO Peter Rawlinson, a former Vice President of Vehicle Engineering at Tesla and Chief Engineer of the Model S.
The bear case for Churchill Capital Corp IV:
The company is yet to produce a car and has been beset with delays since its initial launch plan for Spring 2021. Further delays may prove costly for investors as they may adversely affect the share price.
The EV industry is highly competitive, with both traditional automakers and newcomers vying for market share. Legacy automakers such as General Motors, Volkswagen, and Ford are pivoting and investing heavily while pure-play Tesla currently dominates. There are also other newcomers such as Fisker, Rivian, and many more that provide stiff competition. Lucid will face an uphill battle to gain market share.
The company’s valuation of roughly $24 billion without having delivered a single car is high and may cause concern for some investors. It also plans to scale up from less than 1,000 deliveries in 2021 to 251,000 by 2026, and this mass-market production will be a challenge.
So, should I buy Lucid Motors?
The Churchill Capital/Lucid Motorsstock merger has much promise, but there is little to no concrete evidence that the company can execute its vision just yet. This is a speculative play in the early days of the EV industry, where there is serious competition. This is undoubtedly a high-risk, high-reward investment and should only be a small addition as part of a diversified portfolio.
When will the deal between Churchill Capital Corp IV and Lucid close?
It is expected to close before June 30th, 2021.
Is Lucid Motors profitable?
No, nor does it expect to be until 2026.
What will the new ticker symbol be?
The ticker symbol will change from CCIV to LCID and will float on the New York Stock Exchange.
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