Why Lucid Stock Is Falling Today

Lucid (NASDAQ: LCID) stock is falling in Tuesday's trading following President Donald Trump's inauguration on Monday. The company's share price was down 5.5% as of 10:30 a.m. ET. At the same point in time, the S&P 500 index was up 0.3%, and the Nasdaq Composite index was flat.

At the inauguration, Trump said that he intended to declare a national energy emergency and that he would remove the electric vehicle (EV) mandate put in place by the Biden administration. That mandate would have required that by 2032, 67% of new light vehicles and 46% of medium vehicles produced in the U.S. be electric.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. See the 10 stocks »

Political headwinds for the EV sector

With the new Trump administration, U.S. policy will likely take a stance that's broadly less supportive of the EV industry. In addition to removing the mandate, it's likely that the administration will eliminate the federal subsidies and tax rebates given for the purchase of electric vehicles.

New automotive, EV, and energy guidelines and incentives under the Trump administration could create headwinds for Lucid. While these same headwinds could also impact Tesla, its status as the EV market leader means that it could benefit over the long term, as its competitors will feel those challenges more acutely. Tesla's business is already highly scaled and profitable, while smaller players such as Lucid are still in the process of building their businesses toward suitable economies of scale and profitability.

What comes next for Lucid?

In the fourth-quarter update that it published at the beginning of this month, Lucid announced that it had produced 3,386 vehicles and delivered 3,099 vehicles. That marked a substantial uptick over the 2,391 vehicles produced and 1,734 vehicles delivered in the prior-year quarter, with the increases being driven largely by the launch of the Lucid Gravity SUV.

The Gravity represents the company's first foray into the SUV market, and will be the most important performance driver for Lucid this year. The new vehicle is broadly expected to outsell the company's Air models, but its launch is happening at a time when momentum in the broader EV industry is waning somewhat. Along with the removal of tax incentives to promote EV sales and shift energy consumption trends, Lucid could face an operating backdrop that will make it more difficult to quickly scale up its vehicle manufacturing and deliveries.

On the other hand, Lucid appears to have ample access to funding through Saudi Arabia's Public Investment Fund -- its majority stakeholder. So while Lucid may be facing some significant headwinds in the near term, it will likely have the financial foundation to weather these challenges and continue making a play for long-term success in the EV market.

Should you invest $1,000 in Lucid Group right now?

Before you buy stock in Lucid Group, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Lucid Group wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $843,960!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of January 21, 2025

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.