Lucid Motors‘ newly announced partnership with Uber and autonomous tech startup Nuro is a strategically meaningful step for the EV startup, but its financial impact remains limited in the near term, according to Morgan Stanley analyst Adam Jonas.
The EV maker said Thursday it is teaming up with Uber and privately held Nuro to launch a robotaxi service using its Gravity SUV as the base vehicle.
Jonas sees the deal as the first of many “strategic opportunities” the Newark-based EV maker can make in the future.
The companies aim to deploy 20,000 or more Lucid vehicles equipped with Nuro’s Level 4 autonomous driving technology on Uber’s platform over the next six years, starting with an initial launch in a — to be defined — major US city next year.
As part of the agreement, Uber will invest $300 million into Lucid, alongside a separate investment into Nuro.
The vehicles will be owned and operated by Uber or its third-party fleet partners, and available exclusively through the Uber app.
Jonas, who reaffirmed on Thursday an Equalweight rating and $3.00 price target on Lucid, characterized the announcement as a continuation of Lucid’s ambition to position itself at the center of the autonomy ecosystem.
“We’ve long viewed Lucid’s Gravity SUV as an important demonstration of the company’s 2nd generation software defined vehicle (SDV) architecture, increasing the opportunity for LCID to participate in AI-enabled autonomy via strategic partnerships,” the analyst wrote.
Following Thursday’s surge in Lucid shares, Morgan Stanley’s price target for the EV maker is now below current levels. The stock closed at $3.12 after having soared 36%.
The target implies a downside of nearly 4%. As of the time of writing, Lucid shares are trading are trading 4% higher on Friday’s pre-market session.
Jonas pointed to a common financial backer in Saudi Arabia’s Public Investment Fund (PIF), which owns about 64% of Lucid and holds a roughly 4% stake in Uber.
In September 2018, PIF committed $1 billion to Lucid to help finance the development of the Air sedan, construction of the Casa Grande factory in Arizona, and the launch of retail operations in North America.
“Our upgrade of LCID shares in March was driven by what we believed was the market underappreciating the strategic opportunities (autonomy, manufacturing, on-ramping China, etc.) facing the company which could be catalyzed by this controlling shareholder’s wide-reaching global connections,” he wrote.
Still, the analyst cautioned that while Uber’s $300 million capital infusion is notable, it represents less than one quarter of Lucid’s quarterly cash burn.
“While $300mn in new equity funding from Uber equates to <1 quarter of cash burn for LCID, the investment may help to better align incentives between the two companies while providing modest financial cushion as Lucid ramps production of Gravity,” Jonas noted.
Looking ahead, Jonas noted that the Uber-Nuro deal may be the “first of many” strategic moves for Lucid as the firms sees “a number of other strategic opportunities” for the company.
Detailing Morgan Stanley’s vision, Jonas mentioned as examples, the “licensing of EV technology to legacy OEMs and/or using unused EV capacity and assets, leveraging the company’s role in EV manufacturing to enable the rise in embodied AI outside of just autos, and acting as an ‘on-ramp’ for China EV’s in the US.”
Lucid‘s interim CEO, Marc Winterhoff, dismissed delisting concerns on Thursday, a few hours after the EV maker announced plans to execute a 1 to 10 reverse stock split.
