Shares of Lucid (LCID 3.52%) have fallen by 50% to under $13 over the past year as a broader pullback on some electric vehicle stocks has been underway. After such a substantial drop, some investors may be wondering whether now would be a good time to buy.
While that significant plunge may make it seem like a deal, there are some good reasons to avoid Lucid stock right now. Here are three of them.
Image source: Lucid.
1. Lucid's losses are still substantial
Among the biggest red flags about Lucid right now are its minimal revenue and high costs. It increased sales in the third quarter by 68% year over year to more than $336 million, but that's not as impressive as it might seem at first blush, considering its operating loss expanded from $770 million in the year-ago quarter to $942 million this time.
Lucid is a young company trying to carve out a niche in the EV industry, so it's not all that surprising that it's losing money. The problem is that its sales aren't growing fast enough to begin closing the gap between its sales and losses.
The company's rise in third-quarter revenue was partly due to customers taking advantage of federal EV tax credits, which the Big Beautiful Bill eliminated as of the end of September. While Lucid's vehicles were too expensive to technically qualify, its customers were able to take advantage of a leasing loophole to help lower the cost.
This all means that the company's Q3 sales gains aren't really that impressive, and it still has a long way to go to reach breakeven.
2. The company's rising deliveries are only part of the picture
Lucid produced 3,891 vehicles in the third quarter, a 116% increase from the year-ago quarter. It also delivered 4,078 vehicles, up 47% from the third quarter of 2024.
Unfortunately, the bigger picture here is that Lucid has been a publicly traded company for more than four years, and yet it's still only producing a few thousand vehicles per month. The company needs to significantly ramp up its production and deliveries to keep pace with rivals in an increasingly competitive EV market.
It's attempting to achieve this by expanding its vehicle lineup, with its new Gravity SUV and a sub-$50,000 model that is set to debut next year. The Gravity is still new, so it will take a little time before we see how much demand there actually is for it. And it remains unclear when Lucid's more affordable model will go on sale. All of which means that the company's production is still low, and it could be a while before that changes.
NASDAQ: LCID
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3. The electric vehicle market could be stagnant for a while
The general state of the broader EV market is one of the biggest hurdles for Lucid right now. President Donald Trump ended the EV tax credits several years before they were set to expire, and at the same time, car prices and borrowing costs have risen over the past several years.
Lucid's vehicles were never cheap. Most of its trims have starting prices above $70,000, but with federal incentives now eliminated, there's less motivation for buyers to choose EVs than before. Add to that the fact that U.S. layoffs are at their highest level in five years and that interest rates for auto loans are currently elevated, and the EV market may be entering an extended period of slower sales.
Plus, according to research by professional services giant EY, just 14% of potential car buyers globally recently said they'd prefer to buy an electric vehicle, down from 24% a year ago.
With all that in mind, I believe investors should avoid buying Lucid stock right now. The impressiveness of the company's EVs may eventually drive its sales higher, but until it starts reporting significantly higher production and deliveries, and substantially more sales, the outlook for the EV market and the company's rising losses make the stock too risky.
