What happened

After a shaky start to the week, Lucid Group (LCID 2.57%) stock surged this morning after the electric vehicle (EV) manufacturer announced a deal that could play an important role in the its growth plans. With the announcement coming on a day of exuberance for the stock market overall on easing inflation, investors bid Lucid stock up as high as 8.2% as of 9:40 a.m. ET on Tuesday.

So what

Investors in Lucid got a rude shock in mid-2022 when the EV maker halved its expected production outlook for the full year and said it would be able to produce only 25,000 vehicles because of "extraordinary supply chain and logistics challenges." Although the company didn't put out too many details, EV makers across the globe have struggled with supply constraints this year, particularly a shortage of batteries and key parts.

Today, Lucid announced a deal with Panasonic Energy to source lithium-ion batteries for Lucid Air models and its upcoming luxury electric SUV, Gravity.

Japan-based Panasonic is one of the world's largest lithium-ion battery manufacturers, and it's a multiyear deal that Lucid believes will help it meet the growing demand for batteries as it ramps up production of its Lucid Air lineup in 2023 and starts producing Gravity SUV in 2024. For Panasonic, the deal is part of its plans to expand outside of Japan and start battery manufacturing in the U.S. at its recently announced plant in Kansas.

Now what

Lucid has been in the headlines for all the wrong reasons lately, including an unexpected drop in reservations in its third quarter, suggesting order cancellations. With it also reportedly doling out big incentives and discounts to prevent further cancellations, EV leader Tesla's CEO, Elon Musk, even forewarned that Lucid will not survive for long.

Given the backdrop, it's vital for the young EV maker to regain customers' faith, especially as it prepares to start taking reservations for Gravity SUV in early 2023. While that again depends a great deal on how fast Lucid can boost production and deliveries, its deal with Panasonic should at least reassure investors about its efforts to navigate supply chain challenges and secure key component supplies for the long term.