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Why Lucid Stock Plummeted Today

By Rich Smith – Dec 17, 2021 at 10:54AM

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Rivian just lost money. Will Lucid lose more money?

What happened

Shares of electric car manufacturer Lucid Group (LCID -3.17%) took a tumble Friday morning. They're down 7.2% as of 9:50 a.m. ET in sympathy with a negative earnings report from fellow electric start-up Rivian Automotive (RIVN -2.35%) -- which is down 12.7%!

So what

So what's bugging electric car investors today? Basically, the story goes like this:

Everyone knew already that companies like Rivian and Lucid were start-ups. Everyone was prepared for the fact that it would take a few quarters -- or even a year or more -- before they would be able to begin producing significant numbers of electric cars for their customers. What seems to have slipped investors' minds, however, is the fact that while these companies are ramping up production and attempting to grow their top lines, they'll be losing money down on the bottom line.

Lots of money.

Case in point: Rivian just reported that it made only $1 million in revenue last quarter and lost $1.2 billion on those sales -- four times its year-ago loss.  

Big red arrow going down over a stock chart.

Image source: Getty Images.

Now what

In contrast, Lucid reported "only" a $524 million loss for its quarter last month. But more losses are certainly coming. Earlier this month, Lucid announced that it is raising as much as $2 billion in cash from a new debt offering -- not something you'd expect the company to need if it is anticipating earning profits anytime in the near future.

As investors begin to realize the scale of the losses these electric start-ups will incur as they attempt to compete with Tesla (TSLA -3.25%) and its $900 billion-plus market capitalization, its $6 billion in net cash, and its $3.5 billion-a-year profits machine, they should probably buckle up for more "down" days ahead.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns and recommends Tesla. The Motley Fool has a disclosure policy.

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