Looking ahead, markets are expecting auto sales to return to growth in the fourth quarter with easing bottlenecks in the supply chain to support the narrative that the auto industry remains resilient if sales continue on a decline / flat, then chances are, cyclical headwinds are starting to hit the industry. Meanwhile, inventories are being replenished at an accelerating rate over the same period, stripping the weight of previous narratives that the auto industry remains a supply-constrained environment with no signs of demand destruction despite recession risks. auto sales are likely to have declined y/y - or at best, flat - during the third quarter. Analysts have also flocked to trim earnings estimates due to expectations for a double whammy on margins ahead of anticipations for both growth deceleration and rising input costs.ĭespite the growing sound of easing supply chain constraints that have hampered production volumes in the first half of the year, U.S. This has accordingly driven higher borrowing costs that risk stifling growth, causing valuations to contract across the board. DemandĪggressive rate hikes remain the key macro theme over coming months with major central banks fixed on reining in record-high inflation. The following analysis will discuss key considerations pertaining to Lucid's anticipated progress on maintaining demand, ramping up productions, and increasing delivery volumes ahead of its 3Q22 earnings release, and gauge their related implications on the stock's near-term performance as macro conditions continue to deteriorate. While production ramp-up remains a key focus area, investors are also increasing their attention to deliveries, which are crucial to sales realization needed to alleviate inflationary pressures on profit margins - especially after Lucid's price hikes implemented earlier in the summer. Turning to Lucid, although its revised guidance in 2Q22 was a tough pill to swallow, it might have done it some good by lower execution risks compared to peers as the axe drops further on valuations across the broader EV sector. For instance, Rivian's ( RIVN) rally on its reiterated production guidance earlier this week was short-lived, while Tesla's ( TSLA) elevated valuation also buckled on its 3Q22 delivery miss. And the market has also responded accordingly amid a risk-off environment for equities. While EV demand remains resilient, auto sales are starting to slip beyond what can be attributable to ongoing supply chain constraints. For premium EV maker Lucid ( NASDAQ: LCID), which has seen its shares lose 60% of their value this year, is already considered a resilient contender, hovering in the teens over the past six months despite shocking investors with a second slash to annual production guidance in early August due to protracted logistics and supply chain challenges.Īs Lucid's peers start to report preliminary 3Q22 delivery numbers - a metric that Lucid has not historically provided in advance of its earnings release - markets are starting to observe early signs of impact from softening consumer confidence amid a looming economic downturn. Electric vehicle ("EV") stocks have been subject to violent valuation corrections this year, with many upstarts having lost more than half of their values since the start of 2022.
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