AMDP Investment Proposal (Lucid Motors) Draft - Aiden Zarrinnam

 ADMP Investment Proposal (Lucid Motors)

____________________________________________________________________________

To: Clark Hansen, CEO

From: Aiden Zarrinnam, Research & Development Analyst at AMDP

Date: March 8th, 2024

Subject: Investment Proposal: Lucid Motors

As a Research & Development Analyst at AMDP, it is my responsibility to look deep into companies worth investing in to benefit the company. During this search for companies, I have found an investment opportunity in the electric car industry. This new competitor to Tesla is an American electric vehicle company, striving to be socially responsible, environmentally sustainable, and profitable. From further research delving into the company, I highly recommend investing in Lucid Motors and will explain the reasons why in this memo in the following order: 

• Summary of AMDP Standards

• Overview of the company, how it started, and what it offers

• Summarizing the electric car industry and market, and Lucid Motors' representation and financials

• Lucid Motors to sustainability

• Two expert opinions on Lucid's environmental impact

• Final recommendation

AMDP Standards

AMDP industry standards are to invest in companies committed to doing business in a socially responsible, environmentally sustainable, and profitable manner. 

Triple Bottom Line: The triple bottom line is a business concept that states firms should commit to measuring their social and environmental impact in addition to their financial performance rather than solely focusing on generating profit, or the standard “bottom line.” The triple bottom line can be broken down into “three P's”: profit, people, and the planet. 

• Profit: Financial performance, or the profit it generates for shareholders

• People: A social metric highlighting the impact on stakeholders affected by decisions

• Planet: An environmental metric indicating a firm impact on the planet (Miller 2020)

Corporate Social Responsibility (CSR): Describes how a company contributes to the well-being of communities and society through environmental and social measures.

CSR has 4 areas to measure positive societal impact

1. Environmental efforts: reducing any type of footprint for both the company and society

2. Philanthropy: Practice social responsibility by donating money, products or services to social causes and nonprofits.

3. Ethical Labor Practices: Treating employees fairly and ethically. 

4. Volunteering: Volunteering your time (and your staff’s time) to community events says a lot about your company's sincerity. (Reckmann 2023)

Social Enterprise: Specific social objectives that serve its primary purpose. (Estevez 2022)

Carbon Footprint: Amount of carbon dioxide (CO2) emissions associated with all the activities of a person or other entity (e.g. building, corporation, county, etc) (Selin 2024)

Overview of Lucid Motors

Background

Lucid Motors, previously known as Atieva, was created in 2007 and is headquartered in Newark, California, near Silicon Valley. Lucid, like Atieva, was initially focused on producing batteries and electric powertrains for other vehicle makers. Eventually, it obtained over 50 patents for its fundamental battery system in the United States alone. In 2018, Lucid, an electric vehicle (EV) company, received more than $1 billion in finance from the Public Investment Fund of Saudi Arabia (PIF) to assist in the development and production of their Lucid Air model. After closing the transaction in April 2019, Lucid used the funds for engineering, testing, production, and retail strategy. In February 2022, Lucid announced arrangements to build operations in Saudi Arabia's King Abdullah Economic City (KAEC), to reassemble Lucid Air vehicle "kits" from their Arizona factory and eventually produce up to 150,000 vehicles per year at the KAEC facility. The US administration hailed the move as part of Saudi Arabia's attempts to diversify its economy and address climate change. Construction at KAEC is scheduled to commence in early 2022.

What they offer

Lucid Motors now offers two cars called Air and Gravity. Their signature car is the Air. This car offers an estimated range of up to 516 miles with a charge rate of 200 miles in 12 minutes. Its max hp is 1,234 hp with a 0-60 in 1.89 seconds. The Air would beat a Tesla Model S head-to-head in a quarter-mile race, clocking in at 9.9 seconds. Lucids tri-motor Air then beat the Tesla Model S Plaids track record at Laguna Seca. (Barton 2024) From a starting price of $69,900 and up to $249,000. They also offer Gravity which is an SUV that has similar stats to the Air with a higher 0-60 at 3.5 sec and lower hp at 800. This is their flagship family car which explains their high 0-60 and lower horsepower but is still a great addition to the Lucid family. 

Financials

Taking a look at Lucid's Financial results for the full year in 2023 they seem to have had a very successful year compared to the previous year. In Q4 they delivered 1,734 vehicles and 6,001 vehicles in 2023, which is 37% higher than in 2022. They have produced 2,391 vehicles in Q4 and 8,428 vehicles in 2023 and have a Q4 revenue growth of $157.2 million and an annual revenue of $595.3 million. They have ended the quarter of 2023 with approximately $4.78 billion in total liquidity. Liquidity refers to the efficiency or ease with which an asset or security can be converted into ready cash without affecting its market price. (Hayes 2023)

Sustainable Practices

Carbon emissions reduction

Electric vehicles contribute to reducing greenhouse gas emissions from the transportation sector. Almost all research has shown that driving an electric vehicle produces fewer emissions compared to driving a gasoline-powered car even when accounting for electricity generation from fossil fuels.

Sustainable materials

Lucid Motors has explored the use of sustainable materials in its vehicle manufacturing process. This includes incorporating recycled materials and renewable resources where possible and reducing the environmental footprint of its products.

Expert Opinions

Automotive Logistics

A Lucid Approach to Sustainable Packaging," emphasizes the need for sustainable packaging in the automobile industry, notably for electric vehicles (EVs). The article underlines the need for sustainable packaging in developing a more environmentally friendly supply chain. While EVs are praised for their zero-emissions operation, their environmental impact extends beyond the vehicle itself. (Williams 2020) Lucid Motors, an electric vehicle startup, is constantly investigating ways to reduce packaging waste. Their strategies include employing lightweight and returnable packaging, reselling wooden pallets, recycling corrugated boards, and looking at foam-densifying devices. To summarize, sustainable packaging not only promotes environmental responsibility, but it also helps to create a more efficient and ecologically friendly automotive supply chain.

Torque News

Let's look deeper at Lucid Motors' commitment to sustainability and its involvement in the UN Global Compact for Sustainable Transportation. Joining this global campaign indicates Lucid's commitment to responsible business practices on a global basis. The UN Global Compact, with its vast network of over 22,000 companies from all backgrounds, serves as a platform for collaboration and knowledge sharing. Lucid's choice to align with the United Nations' Sustainable Development Goals demonstrates not only business accountability but also a vision for good transformation in the automobile sector. (Walker 2023) Furthermore, Lucid's current efforts, like as focusing on vehicle efficiency and investigating battery reuse, demonstrate its proactive attitude to reducing environmental effects. As they prepare to launch the Lucid Air, their devotion to sustainable methods sets an admirable precedent for the entire automotive industry.

Final Recommendation

Lucid Motors shows from its triple bottom line that its core belief is to reduce carbon emissions. From its overall carbon emissions reduction to the sustainable materials used when making the car, Lucid Motors demonstrates a strong commitment to sustainability. While investing in Lucid would be a formidable choice, it is unlikely that this investment would benefit AMDP in the far future. Since Lucid Motors is a new company in the automotive space with lots of potentials, the underlying issue is how the company compares to its competitors. Companies like Tesla, Ford, GM, and Porsche all make exceptional EV cars at affordable prices. These competitors are mature companies with lots of leverage backing their EV decisions. I recommend that AMDP does not invest in Lucid Motors because of how it will perform against its competitors in the future. 

Works Cited

Barton, Michael. “Lucid: The History and Future of the Luxury EV Manufacturer.” Electric Driver, 22 Jan. 2024, electricdriver.co/articles/lucid-the-history-and-future-of-the-luxury-ev-manufacturer/. 

Estevez, Eric. “Social Enterprise: What It Is, How It Works, and Examples.” Investopedia, Investopedia, 11 June 2022, www.investopedia.com/terms/s/social-enterprise.asp. 

Hayes, Adam. “Understanding Liquidity and How to Measure It.” Investopedia, Investopedia, 28 Sept. 2023, www.investopedia.com/terms/l/liquidity.asp. 

Miller, Kelsey. “The Triple Bottom Line: What It Is & Why It’s Important.” Business Insights Blog, 8 Dec. 2020, online.hbs.edu/blog/post/what-is-the-triple-bottom-line. 

Reckmann, Nadia. “What Is Corporate Social Responsibility (CSR)?” Business News Daily, 5 Sept. 2023, www.businessnewsdaily.com/4679-corporate-social-responsibility.html. 

Rawlinson, Peter. “Sustainability: Lucid Motors.” Sustainability | Lucid Motors, 31 Dec. 2023, lucidmotors.com/sustainability. 

Selin, Noelle. “Carbon Footprint.” Encyclopædia Britannica, Encyclopædia Britannica, inc., 15 Feb. 2024, www.britannica.com/science/carbon-footprint. 

Walker, James. “Lucid Commits to Sustainability with UN Global Compact Membership.” Torque News, 27 Apr. 2023, www.torquenews.com/15975/lucid-commits-sustainability-un-global-compact-membership. 

Williams2020-11-20T17:37:00+00:00, Marcus, et al. “A Lucid Approach to Sustainable Packaging.” Automotive Logistics, 20 Nov. 2020, www.automotivelogistics.media/packaging/a-lucid-approach-to-sustainable-packaging/41309.article.