Loyal investors of electric vehicle (EV) manufacturer Lucid Group (NASDAQ:LCID) have already been through the wringer. Yet, it’s probably only going to get worse for LCID stock. As we’ll see, May 8 will be an important, and possibly terrible, day for Lucid Group and its stakeholders. Moreover, competition from the likes of Tesla (NASDAQ:TSLA) will only create more problems for Lucid Group.
I’m certainly not suggesting that Lucid Group’s vehicles are substandard. Truthfully, Lucid’s EVs are sleek, powerful and luxurious. However, they’re also pricey, and that’s a problem during a time of elevated inflation.
When an automotive giant like Tesla is struggling amid high inflation, it’s difficult to envision an easy road ahead for Lucid Group. An upcoming earnings event could reveal just how bad Lucid’s problems actually are. So, it’s wise to prospective Lucid Group investors to think twice before hitting the “buy” button.
Competition From Tesla Will Weigh on Lucid Group
Lucid Group emphasizes luxury and the “cool” factor rather than affordability. For instance, the automaker recently touted its “Stealth Appearance” external design option for the Lucid Air.
That’s all fine and well, except Lucid Group’s EV prices are a major issue. Here’s a rundown of Lucid’s listed starting prices:
- Pure: $87,400
- Touring: $107,400
- Grand Touring: $138,000
- Sapphire: $249,000
If you’ve ever shopped for a new vehicle, you’ll understand that what you’ll actually end up paying is typically thousands of dollars above the advertised starting price of a vehicle. Thus, it’s fair to conclude that Lucid Group’s vehicles are very expensive.
Meanwhile, Tesla has demonstrated its responsiveness to inflationary pressures by aggressively lowering its EV prices. Granted, Tesla did recently raise the prices of its S and X models, which are the company’s most expensive vehicle models.
Still, if Tesla’s base Model X is around $97,500, and the base Model S is about $87,500, this means luxury Tesla cars are still a good deal compared to Lucid Group’s pricey vehicles. It’s a serious problem for Lucid Group as Tesla dominates the sector with its brand-name recognition and market share.
Expect LCID Stock to Drop on May 8
Lucid Group is set to release its financial results for 2023’s first quarter on May 8. No one’s expecting the company to post a profit, as Lucid has never reported an earnings-positive quarter.
Still, if financial traders hammered TSLA stock after Tesla reported its first-quarter earnings results (which really weren’t all that bad), consider what they might do to LCID stock. After all, Lucid Group isn’t beloved and revered on Wall Street like Tesla is.
Furthermore, Lucid Group’s EV delivery data doesn’t bode well for the company. During this year’s first quarter, Lucid Group only delivered 1,406 vehicles. That’s an alarmingly small number compared to the 2,314 vehicles that Lucid produced in Q1.
It’s also a drop from the 1,932 vehicles Lucid delivered in the fourth quarter of 2022. In addition, Lucid Group’s 1,406 delivered vehicles in Q1 2023 fell short of Wall Street’s expectation of around 2,000. All of this, most likely, adds up to highly disappointing earnings results on May 8.
Sell LCID Stock Before This Happens
If you’re currently invested in Lucid Group, it makes sense to divest your shares before the company reports its quarterly earnings results on May 8. It’s difficult to envision anything positive happening with Lucid Group and its shareholders on that day.
And if you’re not invested, there’s no need to buy LCID stock now. Tesla is having a tough time due to high inflation, so consider how much tougher it’s going to be for Lucid to succeed. The best policy, therefore, is to sit on the sidelines instead of holding shares of Lucid Group.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
