Shares of Electric vehicle manufacturers Clear (LCID -1.25%) have mostly been on a downward trend since the company’s market debut, falling over 90% since their price peak in 2021.

However, since 2021, the company has made significant progress. Its first model, the Air luxury sedan, has been well received, and a large SUV will be added to the lineup by the end of this year.

Lucid’s second-quarter results — announced on August 5 — were better than expected, but the company is still a long way from profitability. But there’s a plan to get there, and a big investor with deep pockets.

Is that enough to make the stock a buy?

The Lucid Air features some of the best electric vehicle technology in the industry. Sales have been modest so far, but an upcoming SUV should help. Image source: Lucid Group.

The Lucid Bull Case: Best-in-Class EV Technology

Lucid claims to make the most efficient electric cars. The data largely backs up that claim: In base “Pure” trim, the 2025 Lucid Air sedan is rated at 146 MPGe, or “miles per gallon equivalent,” the U.S. Environmental Protection Agency’s standard for comparing electric car efficiency. Its closest competitor, Lucid says, gets just 122 MPGe.

This isn’t just a technological bragging argument. Greater efficiency – a function of both the battery chemistry and the software that controls the electric vehicle’s battery pack – means an electric vehicle manufacturer can use fewer battery cells to achieve a given range.

Considering that an electric vehicle’s battery can account for up to half of its total material costs, reducing the size and cost of the battery makes a big difference in the cost of the vehicle.

In theory at least, this means that an electric car maker with a more efficient battery can deliver a given vehicle at a lower cost than the competition. The cost difference can be used to lower the price, increase the automaker’s profit, or both.

That’s a clear competitive advantage – one that Lucid wants to license to major automakers that may not be able to develop similarly efficient batteries themselves. (This is not wishful thinking on Lucid’s part: The company already has a Deal to provide EV technology to the British super sports car manufacturer AstonMartin.)

Of course, Lucid will need to expand significantly to make sense of that advantage with its own electric vehicles. And while there is a plan to do so, it requires two things that Lucid may or may not have: time and a lot of money.

The Lucid bear case: Cash consumption makes the company vulnerable

For Lucid, time and money are closely interrelated variables. The company burns money to grow to a sustainably profitable size. For example, Lucid’s revenue in the second quarter of 2024 was about $200.6 million – but the cost of that revenue was $470.4 million.

As Lucid’s sales increase, economies of scale will help turn losses into profits. But even in the best-case scenario, that point is likely several years away.

Currently, Lucid’s cash reserve at any given time is a measure of how long the company will be able to maintain operations. At the end of the second quarter, Lucid’s cash and available credit lines totaled about $4.28 billion. That amount was boosted earlier this month by a $1.5 billion commitment from Lucid’s largest investor, an affiliate of Saudi Arabia’s Public Investment Fund (PIF).

During Lucid’s quarterly earnings call on August 5, CFO Gagan Dhingra said that with the new funds from the PIF, Lucid has enough money to finance operations “at least until the fourth quarter of 2025.”

But what happens next?

The question mark: How much more are the Saudis willing to invest?

This question might be better posed as: “How much more is PIF willing to invest in Lucid?”

PIF, which owns about 60% of Lucid, is by far the electric car maker’s largest investor. Including the recent $1.5 billion, which followed a separate $1 billion investment earlier this year, PIF has invested about $7.9 billion in Lucid. since 2018.

That is a lot of money for a stake in a loss-making EV startup. On the other hand, PIF is a gigantic The fund manages around $925 billion and has been mandated by the Saudi government to push forward an economic program aimed at weaning the country’s economy off oil.

PIF can easily afford to keep Lucid as long as the company has a clear path to profitability. Right now, that’s the case, as development of the future mid-range model is underway and there are plans to partner with more established automakers.

Is Lucid stock a buy?

The way I see it, there are three possible paths for Lucid from here.

1. The company receives gradual additional investments from the PIF as needed, executes its plan and becomes sustainably profitable within a few years.
2. It is being acquired by a major global automaker with interest in Lucid’s team and advanced EV technology.
3. The company receives additional investment from the PIF and survives for a while, but never reaches full profitability – and eventually the Saudis cut off the money and Lucid goes bankrupt.

All in all, I think this is a risky buy. If you invest in Lucid stock now, the first two paths will almost certainly pay off if you are patient.

Just keep in mind that the third way is a real possibility and measure your investment accordingly.