RBC Capital initiated coverage of Lucid Group (NASDAQ:LCID) with a Sector Perform rating and set their 12-month price target on the EV stock at $6.00.
After evaluating the technology advantages offered by LCID in comparison to its competitors, and accounting for variables unrelated to Lucid's core technology, such as drag/wind resistance and weight, RBC believes that Lucid is 12-23% more efficient than Tesla (NASDAQ:TSLA) and at least 30% more efficient than any other automotive manufacturers.
“Lucid's technology is better than its nearest competitor (Tesla) based on an apples to apples comparison of efficiency and work,” wrote the analysts.
Although Lucid's product offerings outshine the competition in numerous aspects, the company faces low brand awareness and only modest progress in expanding its customer base's demand.
“Lucid branded products are compelling but do not have enough traction and momentum to warrant much value today,” they added.
Based on RBC's calculations about potential battery cost savings, other car manufacturers (excluding Tesla) might have a good reason to consider partnering with Lucid for its industry-leading technology.
The automaker is in talks with multiple OEMs to license its EV technology. If OEMs were to adopt Lucid's technology, they could potentially achieve similar range with smaller batteries, resulting in substantial cost reductions. According to RBC, OEMs could increase their long-term EV earnings by 50-70% by adopting LCID technology, while luxury car makers could see an increase of 20-30%.
Lucid currently sells one model, a luxury sedan priced at an average selling price (ASP) of $107,000, with a starting price of $82,000. The company's plans include launching a luxury SUV in 2024 and a more affordable mass-market vehicle in the middle of the decade.
RBC's projections anticipate that Lucid Air's market share will grow to around 15% over the next 12-18 months. To achieve cash flow breakeven for its luxury vehicles, LCID would likely need to maintain a market share of 15% or higher in the medium term. It's important to note that the introduction of the SUV in 2024 is an additional factor in this discussion.
Shares of LCID are down 1.42% in morning trading on Friday.