What happened
Shares of Lucid Group (LCID 0.41%) tumbled this week and were trading 11.5% lower through 11:20 a.m. ET Friday, according to data provided by S&P Global Market Intelligence. With this week's drop, the electric vehicle (EV) stock has now lost more than a quarter of its value since Aug. 1.
There have been no updates from Lucid in recent days, but something's brewing in a particular international market that's making investors in the EV maker jittery.
So what
Earlier this week, several media outlets from South Korea reported that the automotive giant Hyundai Motor is all set to build an EV assembly plant in Saudi Arabia to tap the growing opportunities in the country. Hyundai already signed a memorandum of understanding with Saudi Arabia earlier this year, and is now expected to finalize a deal as early as next month to set up the plant to mark its foray into EV production in the Middle East.
So why should investors in Lucid care about Hyundai's moves in Saudi Arabia? The thing is, Saudi Arabia's Public Investment Fund is a major stakeholder in Lucid, and the Saudi Arabian government has committed to purchasing 50,000 electric cars, with an option to purchase another 50,000 cars, from Lucid over the next decade.
During its second-quarter earnings conference call, Lucid revealed that it had already shipped a "significant" number of vehicles to Saudi Arabia and expects to ramp up deliveries as the year progresses. Meanwhile, Lucid is also about to open a manufacturing facility in Saudi Arabia this month, which will be its first international plant outside the U.S.
Given the backdrop, although the entry of more global automakers like Hyundai into Saudi Arabia reflects the growth potential in the EV market, it also means more competition for Lucid in a key market. Remember that the Saudi Arabian government has committed to buying only 50,000 cars from Lucid so far and may or may not choose to buy another 50,000 units.
Now what
Lucid is struggling to ramp up production and sales. It expects to produce only around 10,000 units this year and is making massive losses and burning through cash rapidly right now. With Tesla's price war also forcing Lucid to slash the prices of its EVs last month, investors are losing patience with the EV stock.
