What happened
Shares of Lucid Group (LCID 0.71%) were falling last month in response to a broader sell-off in electric vehicle (EV) stocks, largely due to challenges with Tesla (TSLA 2.07%), both with the underlying business and Tesla CEO Elon Musk's foray as the new CEO of Twitter.
Though there was little company-specific news out on Lucid during the month, concern about bloated valuations in the electric vehicle sector pushed the stock lower, and it finished the month down 33%, according to data from S&P Global Market Intelligence.
As you can see from the chart below, the stock fell steadily over the course of the month alongside peers like Tesla and Rivian Automotive.
So what
Lucid stock started to fall sharply starting on Dec. 5 in line with a broad-market sell-off on rising fears of a recession and on speculation that Tesla was cutting production in China.
The stock declined again the following week as those rumors of a production cut were confirmed and as the Federal Reserve raised interest rates, forecasting more rate hikes next year. That increases the odds of a recession, which is likely to have an outsize impact on luxury automakers like Lucid, whose 2023 Lucid Air starts at $89,050.
The stock got a short-lived bump after it announced the completion of its previously announced "at-the-market" equity program, raising $1.515 billion, though considering the beaten-down stock price, investors may be skeptical of the timing of the equity raise as it sold shares for less than $11 each. The company also announced it had begun deliveries of the Lucid Air in Europe.
Finally, Lucid stock slumped again to close out December on reports of price cuts on some Tesla models, possibly indicating flagging demand in the EV sector.
NASDAQ: LCID
Key Data Points
Now what
Lucid is ramping up production quickly but had only forecast production of 6,000 to 7,000 vehicles for 2022.
Tesla is still the dominant luxury EV maker and it's had something of a halo effect on the industry, though as the stock has plunged in recent months, it's brought peers like Rivian and Lucid down as well. Considering that relationship, Tesla's performance in 2023 may be as influential on Lucid stock as the company's own results.
Lucid is also burning cash rapidly with nearly $900 million in negative free cash flow in its most recent quarter, which also puts it at risk of an economic downturn as demand for luxury EVs would likely fall in a recession.
While Lucid does seem to have one of the top EVs on the market with the Air, the business still has a long way to go before it can deliver solid profitability.
