Why Lucid Motors (LCID) Just Dropped Money

A luxury manufacturer of high quality Lucid Motors (NASDAQ:LCID) – which focuses exclusively on electric vehicles (EVs) targeting Tesla (NASDAQ:TSLA) – has been struggling this week. Basically, the company and the underlying industry are facing two important emotions. With little relief, investors have steered clear of LCID shares.

First, Lucid is reeling from the price war that Tesla started. When a stupid move was aimed at undermining the competition, like InvestorPlace Louis Navellier said, the move also backfired. In Tesla’s fourth quarter, revenue fell 23% while gross margin fell 17.6%, missing the consensus estimate of 18.1%.

Unfortunately, LCID stock stakeholders are more confused because of the price war now it comes from another way: legacy manufacturers, who began to shift to EV production to counter Tesla’s market dominance. However, and demand for electric-powered mobility to dropcompanies have no choice but to implement price cuts on their slow-moving EVs.

Exacerbating the LCID’s stock situation with its direct peers is that legacy manufacturers are enjoying alternative production lines for sales, namely combustion-powered vehicles. For pure-play EV manufacturers, though, it’s all or nothing.

LCID Stock Faces Diversification Threat

Adding to the problems for LCID shares is a second threat to the business: the rise of hybrid cars. These platforms use an internal combustion engine and an electric motor for propulsion. In essence, hybrid vehicles take elements from both worlds, benefiting from high performance while improving the infrastructure that already exists.

Not only that, but a rare spot in the automotive ecosystem right now is focused on hybrids. According to The Wall Street Journal, Toyota (NYSE:TM) has generated a windfall for selling gasoline-electric vehicles. Earlier this year, the company forecast gross profit of $30.3 billion for its financial year ending March due to higher sales of hybrids in all its major markets.

More troubling for LCID stock and EV companies in general is that consumers may be eschewing pure EVs for hybrids. Earlier this week, the market pulled back when a key inflation reading rose more than expected. The culprit? High energy prices.

However, several EV manufacturers failed to rise above the news. LCID shares are down nearly 6% over the next week. Rivian Cars (NASDAQ:RIVN) fell by 10 percent during that period. While Tesla shares were able to move higher, it was only modest, more than 1%.

Why It Matters

Currently, Wall Street analysts rate LCID stock as a to hold the agreement. This assessment breaks down as one person buys, six holds and two sells. Overall, the average target price comes in at $3.21, implying more than 29% potential. However, the downside target of $1 is causing concern among investors.

At the date of publication, Josh Enomoto did not have (either directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, according to InvestorPlace.com Publication Guidelines.