Today's downtrend in Lucid Stock could be attributed to various factors.
Shares of Lucid Group (LCID dipping by 14.83%), an electric vehicle firm, plummeted today possibly due to investors reacting to President-elect Donald Trump selecting Lee Zeldin to lead the Environmental Protection Agency (EPA).
Lucid's share price had fallen by 7.6% as of noon ET.
A less favourable outlook for EVs might be coming
Zeldin, the previous Congressman, was picked by Trump to run the EPA the previous day. This choice sparked some worry among Lucid investors as Zeldin has publicly expressed unfavourable opinions about green initiatives in the past.
Presently, the U.S. government awards a tax credit as high as $7,500 for certain new electric vehicle purchases. However, some people are worried that the EPA's stance towards electric vehicles might alter under the new administration. Trump had indicated back in August that he was open to abolishing the current EV tax credits.
Although it's hard to foresee how the new administration will influence the EV market, the uncertainty occurs at a time when Lucid and other electric vehicle start-ups are struggling to establish themselves. Any shift in the EPA's stance to discourage or lessen support for the EV market could negatively affect Lucid and similar companies.
Lucid revealed its third-quarter financial results last week, posting a net loss of $992 million. The company is attempting to boost production of its Air sedan and newly released Gravity SUV and recently sold 262 million additional shares to generate $1.67 billion.
Uncertain times for EV companies
Lucid and other EV manufacturers are currently under stress due to prolonged high inflation and climbing manufacturing costs impacting their businesses. Added to this, high interest rates have made purchasing a new EV more expensive for many potential buyers. Although I remain hopeful about EVs in the long term (and am an investor in fellow EV start-up Rivian), it's reasonable why Lucid investors may feel worried about an administration that might not be so enthusiastic about electric vehicles. For now, investors should exercise caution, observing and waiting before making any investment decisions based on potential government actions.
Given the uncertainty surrounding the EPA's stance on electric vehicles under the new administration, some investors might be hesitant to invest further in companies like Lucid Group. The potential abolition of EV tax credits, as suggested by President-elect Trump, could negatively impact Lucid and other electric vehicle start-ups, who are already grappling with high inflation, rising manufacturing costs, and increased borrowing costs.
