Lucid Motors faces a reality that can cloud a bullish perception

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On a day when the broader market soared over 500 points, Lucid Group, Inc. (NASDAQ: LCID) was a notable laggard. LCID shares fell less than one percent. But it continues the stock's downward trend, down 30% last month and more than 80% in 2022.

A sore point for investors is that the company recently completed a previously announced $1.5 billion stock offering. In a capital-intensive business like electric vehicles (EVs), investors expect startups to need to raise funds as they achieve scalability.

But when the company announced that one of the reasons given for the injection of cash was to strengthen its balance sheet, it raised concerns. Specifically because Lucid has had a few recent wins, one of which was a battery deal with Panasonic Holdings Corporation (OTCMKTS: PCRFY).

When an order is not an order

In 2020 and 2021, several electric vehicle companies, including Lucid, went public. These companies used one metric to spark investor interest: the number of bookings they had. This represented consumers who had posted a bond for one of the company's cars. It also gave companies like Lucid the ability to point to potential revenue.

But potential commands are not the same as actual commands. Lucid reports that it will fall far short of its annual goal of delivering 6,000 to 7,000 vehicles.

And consumers, for reasons that aren't entirely clear, are starting to cancel their orders. In the company's latest earnings report, reservations fell by 3,000 vehicles. While not all of them are cancellations, internal emails show the company is more than a little concerned that cancellations are becoming an issue.

Should this affect your decision to buy LCID stock? Think of it like this. When company insiders sell their company's shares, it is considered a negative sign. However, there are many reasons insiders might sell a stock, and most of them have nothing to do with their belief in the company's prospects.

It's possible (and I should put it in quotes) that the same logic applies here. Customers may have many reasons to cancel their order. Inflation remains high. Job losses are piling up. Depending on how you see it, the economy is already in a recession or soon will be. There are many reasons why customers may cancel a commitment for an EV that will cost north of $100,000.

But an undo is still an undo. And it may signal that the electric vehicle market is facing supply and demand issues.

Is EV adoption the Slam Dunk it seems?

Recent publicity suggests that mass adoption of electric vehicles is already here. This may be closer to reality in major metropolitan areas. I know that in my small town corner of the United States, this is not yet the case.

Of course, one of the reasons is the lack of available vehicles. But it also goes further. Aside from a Tesla charging location, there is no established charging infrastructure. And this is not an isolated reality in my little corner of the world.

Two news stories from December suggest automakers may also believe this is the case. First, Toyota Motor Corporation (NYSE: TM) President Akio Toyoda said there is a silent majority in the automotive industry that questions whether the industry should focus exclusively on electric vehicles.

Second, in its annual survey of 900 automotive executives, KPMG, the international consulting and accounting firm, revealed growing pessimism about the adoption of electric vehicles. This situation was reinforced by rising inflation and supply chain concerns.

However, the survey also found that 50% of executives were still confident that EV adoption would increase significantly by 2030. Toyoda, however, said Toyota still avoided making a firm commitment ...