What happened
Shares of Clear group (NASDAQ: LCID) fell this week and was trading 11.5% lower as of 11:20 a.m. ET on Friday, according to data from S&P Global Market Intelligence. With this week’s decline, electric vehicle (EV) stock has lost more than a quarter of its value since August 1.
There have been no updates from Lucid in recent days, but something is brewing in a certain international market that is making investors in the EV maker nervous.
So
Earlier this week, various media from South Korea reported that the car giant Hyundai engine is all set to build an EV assembly plant in Saudi Arabia to tap into the growing opportunities in the country. Hyundai signed a Memorandum of Understanding with Saudi Arabia earlier this year and is now expected to finalize a deal to set up the factory as early as next month to mark its foray into electric vehicle production in the Middle East.
So why should Lucid investors be concerned about Hyundai’s moves in Saudi Arabia? The point is that Saudi Arabia’s Public Investment Fund is a major stakeholder in Lucid, and the Saudi Arabian government has committed to buying 50,000 electric cars from Lucid over the next ten years, with an option to buy an additional 50,000 cars to buy.
During its second-quarter earnings conference call, Lucid announced that the company has already shipped a “significant” number of vehicles to Saudi Arabia and expects to ramp up deliveries over the course of the year. Meanwhile, Lucid is also set to open a manufacturing facility in Saudi Arabia this month, which will be its first international factory outside the US.
Given the background, while the entry of more global automakers such as Hyundai into Saudi Arabia reflects the growth potential in the EV market, it also means more competition for Lucid in an important market. Remember, the Saudi Arabian government has committed to buying only 50,000 cars from Lucid so far and may or may not choose to buy an additional 50,000 cars.
What now
Lucid is struggling to ramp up production and sales. It expects to produce only about 10,000 units this year and is currently making huge losses and burning money quickly. Of TeslaAs the price war also forced Lucid to cut prices of its EVs last month, investors are losing patience with EV stocks.
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Neha Chamaria has no position in any of the stocks mentioned. The Motley Fool holds and recommends positions in Tesla. The Motley Fool has a disclosure policy.
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