What happened
Lucid Group (LCID 5.88%) shares popped nearly 5% early Wednesday. But the stock of the luxury electric sedan maker reversed course by late morning. As of 12:20 p.m. ET, Lucid shares were actually lower by 2.1%.
So what
The volatile moves started after U.S. Environmental Protection Agency (EPA) Administrator Michael Regan announced the proposal of new federal standards for vehicle emissions. On the surface the news seemed to be a boost for the future of electric vehicle (EV) sales in the U.S. But that optimism from EV investors faded somewhat with the details behind the proposal.
Image source: Lucid Group.
Now what
The proposed new emissions standards -- which apply to model year 2027 vehicles and beyond -- seek to eliminate carbon dioxide emissions through 2055 that would be the equivalent of twice the level generated in the U.S. in 2022.
While it does not dictate how automakers would accomplish the reductions, the EPA notes that it could be achieved if "EVs account for 67% of new light-duty vehicle sales and 46% of new medium-duty vehicle sales" in 2032. Regan stated, "These ambitious standards are readily achievable thanks to President Biden's Investing in America agenda, which is already driving historic progress to build more American-made electric cars and secure America's global competitiveness."
That could be a boon for Lucid as it expands its vehicle lineup to include an SUV along with its luxury sedans. Lucid reservation levels have declined and the company has offered incentives to compete with lower-priced models that will qualify for tax incentives outlined in the Inflation Reduction Act. Lucid's vehicles are beyond the price level for those incentives.
While the new rules would likely drive automakers to offer more EV models, that may not translate into an expanding market for Lucid. The list price of its sedans starts at over $87,000 and some models can cost as much as $250,000. That's a niche market and investors rightly recognized that after the initial jump in today's share price.
Lucid investors will want to watch how well its Gravity SUV attracts customers when it launches next year. Until then, the stock likely won't have a catalyst to advance unless Air sedan sales pick up.
