Why Lucid Stock Jumped 38% in December

Shares of the electric vehicle (EV) maker Lucid Group (NASDAQ: LCID) soared last month as investor optimism toward the stock increased after the company said it had begun production of its new Gravity SUV. Investors also pushed shares higher after Lucid's CEO said he's open to discussing a potential partnership with a traditional automaker.

As a result, Lucid's stock jumped 38.5% in December, according to data provided by S&P Global Market Intelligence.

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Weighing the impact of Gravity and a potential partnership

One of the first things that boosted investors' optimism in Lucid last month was that the company began production of its much-anticipated Gravity SUV. Until now, the company had only manufactured various trim levels of its Air sedan. Beginning Gravity production means that Lucid now makes two vehicles and spans two entirely different model segments.

Starting production of the Gravity is important because having an additional model in its lineup could help Lucid increase vehicle sales and eventually lower production costs as it shares parts across multiple models. Initial reviews of the Gravity were positive, with Edmunds noting that it's the "new benchmark for electric SUVs."

The news surrounding Gravity helped get Lucid's share price off the ground in December, but it was comments from CEO Peter Rawlinson about his openness to working with a traditional automaker that likely helped its share price really take off.

Rawlinson told Bloomberg TV that he's had a couple of conversations with automakers about a potential partnership, saying, "It would be lovely if we could supply technology to a traditional car company to help them on their way to sustainability, and perhaps we can leverage economies of scale with their parts bin and other aspects of the business."

Lucid is burning through cash right now as it tries to ramp up production of its vehicles, reporting a net loss of $992 million in the third quarter.

Starting a new automotive company is wildly expensive and partnering with another automaker could help lower parts costs, or increase revenue by selling some of its technology to partner. For example, fellow EV maker Rivian Automotive recently partnered with Volkswagen to provide some of its in-vehicle tech to the Volkswagen and will receive up to $5.8 billion in return.

There's uncertainty about what's around the corner

Lucid just reported its latest vehicle production and delivery results for 2024, with production increasing 7% to 9,029 vehicles and deliveries jumping 71% to 10,241 vehicles.

Those were good results, but the company is still spending tons of money and needs to dramatically increase sales and lower costs to begin narrowing its losses. Investors will get a clearer picture of the company's finances when it reports fourth-quarter results on Feb. 25.

The latest production and delivery numbers were a step in the right direction, but I think investors should be hoping that Rawlinson's comments about a potential partnership pan out so Lucid can lower costs.

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Chris Neiger has positions in Rivian Automotive. The Motley Fool recommends Volkswagen Ag. The Motley Fool has a disclosure policy.