Luxurious electrical automobile maker Lucid seems to have a requirement drawback.

The corporate stated throughout its fourth-quarter earnings report Wednesday that it had “over 28,000” reservations for its Air sedan as of Feb. 21. That was a shock, provided that the corporate had claimed “over 34,000” reservations in November and delivered fewer than 2,000 automobiles within the fourth quarter.

Much more shocking: Lucid stated it plans to construct simply 10,000 to 14,000 automobiles in 2023, far fewer than the roughly 27,000 Wall Avenue analysts had anticipated — and than the roughly 34,000 automobiles per yr that Lucid’s manufacturing unit is about as much as construct.

Shares of the corporate have fallen about 15% for the reason that Wednesday report.

Lucid confronted a tough highway getting the Air into manufacturing. The corporate spent a lot of the primary half of 2022 scrambling to safe key elements and untangling logistics snags. Now, with manufacturing working roughly easily, it appears to be dealing with a brand new drawback: Not sufficient of its reservations are changing to orders.

CEO Peter Rawlinson acknowledged as a lot through the earnings name when he reminded listeners that reservations aren’t binding.

“We have solved manufacturing. That’s not the gating concern right here now,” Rawlinson stated. “My focus is on gross sales. And here is the factor: We have got what I imagine to be the perfect product on this planet. … Too few persons are conscious of not simply the automobile, however even the corporate.”

Rawlinson went on to say he believes that to be an “completely solvable drawback” and plans to deal with “amplifying buyer consciousness” in 2023.

Extra advertising may assist. However clearly, demand for Lucid’s automobiles is not materializing as rapidly as the corporate anticipated, which raises some powerful questions for buyers.

First, how huge is Lucid’s potential market? Any estimate of how a lot Lucid may develop has to start out with an estimate of the “complete addressable market,” and it seems the corporate’s estimates on that entrance could have been too rosy, provided that its manufacturing unit is about as much as produce many extra automobiles than it is constructing now.

Working an auto manufacturing unit properly under capability is not precisely a path to profitability, as Chief Monetary Officer Sherry Home conceded throughout Lucid’s earnings name.

“As we produce automobiles at low volumes on manufacturing strains designed for larger volumes, we have now and we’ll proceed to expertise destructive gross revenue associated to labor and overhead prices,” Home stated.

That results in a second, associated query: How lengthy will Lucid must run its manufacturing unit at a loss? Or, put one other means, how lengthy will it take Lucid to get to profitability — and the way a lot cash will it have to lift between every now and then?

Financial institution of America analyst John Murphy has lengthy been bullish on Lucid, however in a notice to buyers following Lucid’s earnings report, he reduce the financial institution’s ranking on the inventory to carry, from purchase. Murphy wrote that he now thinks Lucid will not break even earlier than 2027, and that the corporate might want to elevate extra capital earlier than he had beforehand anticipated.

The excellent news is that Lucid has a deep-pocketed investor. Saudi Arabia’s Public Funding Fund owns about 62% of Lucid, and has proven — most just lately in December, when it invested an extra $915 million — that it is nonetheless keen to fund the corporate. So long as it has the Saudi fund’s backing, Lucid ought to be capable of maintain going.

However the highway to profitability — and to a giant payday for Lucid’s buyers — is now trying longer.