Shares of Lucid Group (LCID -3.83%) dropped nearly 6% Monday morning even as the electric vehicle (EV) start-up gave investors more insight into its growth plans. As of 3:45 p.m. ET today, the stock was still 4.2% below Friday’s closing price.
Today, Lucid announced the opening of its first Middle East showroom, in Riyadh, Saudi Arabia. That isn’t what has the stock sinking, though. In fact, investors should be happy to hear that it continues to move forward with its global expansion plans. The stock dropped, however, in reaction to renewed fears that economic slowdowns around the world could hamper demand in the EV market.
Less than a week after Tesla CEO Elon Musk warned of possible recessions affecting its business in both China and Europe, that company said today it was lowering prices for its Models Y and 3 in China. If that pricing move was a reaction to slowing demand, it would be especially bad news for EV start-ups like Lucid that are fighting supply chain challenges while trying to ramp up production.
Even in the face of its production headwinds, Lucid is moving forward with its plans for expansion. The company announced earlier this year that it plans to build its second factory, which will be in Saudi Arabia (the first is in Arizona). The Saudi government has also agreed to buy 50,000 Lucid EVs over the next 10 years with the option to double that purchase. The opening of its Riyadh showroom is a natural extension of those plans.
Lucid ended the second quarter with $4.6 billion in cash, cash equivalents, and investments, which it expected to use to continue growing the business. But the stock has dropped more than 66% so far this year as it has faced problems ramping up its production. After initially saying it hoped to manufacture 20,000 vehicles in 2022, it has lowered that goal to just 6,000 to 7,000 due to supply chain issues and other struggles.
If demand becomes yet another headwind, many of the company’s growth plans could be thwarted. That helps explain the stock’s move today, despite Lucid’s announcement about the Riyadh showroom.