Should You Buy Lucid Stock While It's Below $3?

Key Points

• The electric vehicle industry is facing significant headwinds right now.

• Lucid's vehicles are expensive, and leadership stability is a big question mark.

• It's best to take a wait-and-see approach to Lucid stock rather than buying.

• 10 stocks we like better than Lucid Group ›

The electric vehicle industry is enticing because, despite some setbacks, many countries and customers around the world are shifting their attention to EVs. The gains in EV adoption are often attributed to both consumer interest and government incentives that spur industry growth.

The result is that in 2024, there were 1.3 million EVs sold, an increase of 7% compared to the previous year. Still, it's not all sunshine and rainbows in the EV industry. The high cost of electric vehicles and lagging EV infrastructure are cited by consumers as a significant barrier to buying an electric vehicle.

Lucid (NASDAQ: LCID) knows the struggle of getting EVs off the ground in the U.S. just as well as anyone. After years of slower-than-expected production and several changes in leadership, Lucid stock has plummeted. Shares are down about 50% from their 52-week high, putting its share price under $3 right now.

With the steep decline, is now a good time to buy Lucid stock at a discount? I think investors are better off waiting to see how things shake out for the company. Here's why it's better not to buy Lucid right now.

1. The next few years could be rough for the EV industry

Having a long-term perspective about the stocks you own is an important investment strategy, which is why it's troubling to see the U.S. backing away from some of its EV infrastructure investments and incentives.

First, the Trump administration has thrown cold water on the idea of keeping tax incentives for buying electric vehicles. The incentives were worth up to $7,500 for new vehicles, and while Lucid didn't qualify for them -- its EVs are too expensive -- the incentives still acted as a catalyst to boost the broader EV industry.

With those going away, there's less incentive for buyers to purchase EVs and less incentive for automakers to make bold transitions to electrified models. Additionally, the administration has walked back the government's previous commitment to invest billions of dollars in EV charging infrastructure. A legal battle over the funding is underway, but if the administration gets its way, states may not receive the $5 billion in funding to build EV chargers across the country.

Broad EV market conditions matter to Lucid because it's still a fledgling EV brand. In order to succeed, Lucid and its peers need high demand for their vehicles and a larger EV charging infrastructure in place. Unfortunately, that now looks less likely over the next few years.

2. Lucid's vehicles are too expensive for the average buyer

Of course, not all of Lucid's problems stem from outside forces. One problem Lucid is currently facing is that its vehicles are just too dang expensive for many American buyers. That's not only hurting Lucid's ability to expand its customer base, but it's also hurting its ability to scale its manufacturing more efficiently.

To make a profit in the auto industry, companies need to have economies of scale for their product lineups, sharing components across many vehicles. Lucid's cheapest Air sedan starts at nearly $70,000, and its Gravity SUV starts at about $80,000. The Gravity is still in low production, so any cost savings by sharing parts haven't had time to kick in yet.

More importantly, the Air and Gravity starting prices are expensive by even EV standards. The average transaction price for an EV in the U.S. in May was about $57,700. That makes the cheapest Air model 21% above the average EV price, and the Gravity 39% more expensive than the average.

Lucid is expected to launch its Earth EV, priced around $48,000, in 2027 or 2028. This will eventually help Lucid to achieve more efficient production costs and potentially widen its customer base, but how well the company will be able to deliver on this and when the Earth actually goes on sale are big unknowns.

3. Management is still in flux

It was just four months ago that Peter Rawlinson stepped down from the CEO position at Lucid. The company's COO, Marc Winterhoff, is now the interim CEO as the board searches for a permanent leader.

While it may have been the right move for Lucid to look for new leadership, the fact that the company is still in the process of finding a permanent replacement at such a difficult time for Lucid means investors should probably be cautious about jumping in with Lucid right now.

Leadership change can be normal, but Lucid is currently on its third CEO -- two permanent and one interim -- since 2019. I'd like to see more stability in the C-suite before I feel comfortable that Lucid is on the right track and able to deliver on its EV ambitions.

I'm rooting for Lucid just as I am for many EV companies, but that doesn't mean I'd feel comfortable buying its stock right now. For all the reasons above, I think it's best to take a wait-and-see approach with Lucid before buying shares.

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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Should You Buy Lucid Stock While It's Below $3? was originally published by The Motley Fool