Why the Early Gain in Lucid Stock Faded Today

Shares of electric vehicle (EV) maker Lucid Group (NASDAQ: LCID) jumped as much as 5% today. Those gains began to fade as the trading day progressed, and the stock was actually lower by 1% as of 1:20 p.m. ET on Thursday.

Two causes likely had the stock trending higher early today. First was the announcement that Lucid's luxury EVs will soon be equipped with the new Lucid Assistant, a hands-free system from artificial intelligence (AI) voice-recognition company SoundHound AI.

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The other reason for optimism today was the fourth-quarter update provided by EV leader Tesla earlier in the session. One aspect of its delivery data bodes well for the state of recent EV demand.

A crucial time for Lucid

Lucid has just opened the order book for its first electric SUV, and it needs that Lucid Gravity model to boost its sales volume. Management expects to report only about 9,000 vehicle shipments from 2024.

It was notable that Tesla's fourth-quarter delivery report showed that its inventories were shrinking -- a sign of stronger demand. The company delivered about 36,000 more vehicles than it produced in the fourth quarter, helping to draw down inventory.

Lucid's stock has been struggling as investors fear that demand for EVs in general has slowed. The company is still in start-up mode and needs strong demand to drive up sales volumes. Adding advanced technology from its Lucid Assistant to its EVs boosts the user experience, but the fact remains that it sells high-end vehicles that many car buyers won't be able to afford.

The reaction to its Gravity SUV may determine whether Lucid can succeed at all. That reality is why the stock's early gains faded today.

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Howard Smith has positions in Lucid Group and Tesla. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.