Lucid Group's (LCID 4.89%) share price fell to a new record low this week due to concerning signs about demand in the electric vehicle (EV) market. The company's stock was down 12% from last week's market close heading into the start of this Friday's trading session, according to data from S&P Global Market Intelligence.
On Wednesday news hit that Tesla had cut the price of its Model Y vehicles in Germany by 5,000 euros -- roughly $5,430 based on the current exchange rate. The EV leader also slashed prices in France, the Netherlands, and Norway.
The price cuts signal that Tesla sees the need to reduce selling prices in order to boost sales growth. Demand for EVs appears to be softening, and that presents big challenges for Lucid.
NASDAQ: LCID
Key Data Points
Pumping the breaks on EV growth
While there isn't any business-specific news sending Lucid stock lower this week, the industry backdrop is shifting in unfavorable directions and causing investors to become more bearish. Tesla's price cuts this week come on the heels of price cuts that it rolled out for its Model 3 and Model Y EVs in China last week.
And price reductions implemented by CEO Elon Musk's company are far from the only concerning data points that EV investors have had to consider lately.
Late in 2023, both General Motors and Ford Motor Company announced that they would be dramatically scaling back planned EV productions. Earlier this month, rental specialist Hertz Global said that it would be shrinking its fleet of electric vehicles.
Growth for the EV industry looks poised to slow significantly in the near term, and that paints a challenging picture for Lucid and its stock.
What comes next for Lucid stock?
Lucid stock plunged to fresh lows last week after it published uninspiring production numbers and announced a recall that would affect more than 2,000 of its Lucid Air vehicles. In the third quarter, the company posted an operating loss of approximately $752.9 million on revenue of $137.8 million and delivered 1,457 vehicles.
With demand trends heading in unfavorable directions, Lucid may be forced to significantly reduce prices on its vehicles. Alternatively, the company may have to accept that its unit sales will be pressured. Both of these potential outcomes would be bearish developments for a company that is posting massive losses and that faces an uphill battle to achieve profitability.
In order to generate profits, Lucid needs to dramatically scale its vehicle production and deliveries while also maintaining relatively high average selling prices. The company's share price is now down approximately 95% from its high, but it still trades at roughly 4.5 times expected forward sales, and it could face powerful headwinds going forward.
