Stock Market

Why Lucid Stock Plunged Today

What happened

Luxury electric car maker Lucid Group (LCID -8.88%) stock is plunging Thursday. After starting the new year with a gain of as much as 20%, Lucid shares were lower by 8.5% as of 12:30 p.m. ET today. 

So what

It wasn’t news from a financial update that moved the stock today — that comes on Feb. 22 when the company reports its 2022 fourth-quarter results. Rather, it is news from a competitor that has investors anticipating trouble when Lucid does update investors next month. The latest price cut announcement from electric vehicle (EV) leader Tesla has sent stocks of other EV makers reeling. And a Barron’s report today on that fallout may have just kept the downward momentum going in names like Lucid. 

Lucid luxury EV in showroom.

Image source: Lucid Group.

Now what

The report highlights Tesla’s dominant position in the sector and mirrors other reports of spikes in demand for Tesla vehicles after it cut prices in the U.S. Lucid, which is led by ex-Tesla senior engineer Peter Rawlinson, offers luxury electric sedans that compete with the Tesla Model S that Rawlinson helped develop. 

Tesla’s price cuts focused on increasing sales of its Models Y and 3 vehicles. The performance versions of those models sold for about $70,000 and $63,000 prior to the price drop, which approaches the luxury end of the market. Tesla has now differentiated those models with more mainstream pricing that could narrow Lucid’s consumer market. 

But Lucid mostly caters to a much more wealthy consumer with its base model starting at nearly $90,000. So Tesla may be grabbing more market share with its price cuts, but it likely isn’t from Lucid’s core customer base. There is plenty of risk for Lucid investors without being involved in a price war. The company will need to provide a big boost in production volume estimates for 2023 when it offers this year’s guidance late next month, or the stock could drop to new lows. 

Howard Smith has positions in Lucid Group and Tesla. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.

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