24/7 Wall St. Insights
- The end of a $7,500 federal tax credit for buying an electric vehicle could be the end of EV maker Lucid Group Inc. (NASDAQ: LCID).
- Without this sales incentive, the company has little else going for it.
- Also: Dividend legends to hold forever.
Shares of electric vehicle (EV) maker Lucid Group Inc. (NASDAQ: LCID) sold off sharply on news that the Trump administration could end the $7,500 tax credit. That credit has been a major reason for EV purchases. Lucid stock is down 51% for the year, and yesterday it ended barely above the $2 level and near its 52-week low mark. Added to a national drop in EV demand, Lucid could finally end its run as an independent company.
The $7,500 federal tax credit is part of why the EV industry in the United States has not faltered more than it has. High prices have undermined EV sales. The tax credit brought many EV prices nearer the price of gasoline-powered vehicles, which sell for as much as $10,000 below EVs on average. The gulf is large when some customers already worry about driving range, the number of charging stations, tire wear, and low engine charge levels in cold weather.
Lucid, in particular, needs the credit. While its cheapest car sells for $70,00, the average price for its Lucid Air Touring model is $85,000. If EV customers worry about prices, Lucid has erected another high barrier.
Lucid’s production and shipments are shockingly low. In the third quarter, it only delivered 2,781 vehicles. Revenue, at $200 million, was also terribly low. Lucid lost $932 million in the period.
The Lucid Air recently scored a five-star safety rating from the National Highway Traffic Safety Administration’s (NHTSA’s) New Car Assessment. That is the highest score possible. However, the modest news will not save a flagging company that lost one of its most important sales incentives.
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