Why Lucid Group Stock Is Sinking Today

Shares of Lucid Group (NASDAQ: LCID) are falling on Wednesday. The stock dropped 3.3% as of 12:53 p.m. but was down as much as 7% earlier today. The move comes as the S&P 500 and Nasdaq Composite lost 0.9% and 1.4%, respectively.

The maker of luxury electric vehicles (EVs) is taking a hit after data was released showing the economy is struggling, which is intensifying fears of a recession that could see households tighten their belts and reduce spending.

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The economy slowed

The Commerce Department reported that the U.S. economy contracted by 0.3% in the first quarter of 2025, marking the first gross domestic product (GDP) decline since the first quarter of 2022. Until recently, economists had expected 0.4% growth, but uncertainty introduced by President Donald Trump's tariffs has changed the picture.

While some of the decline can be explained by the rush to import as much as possible ahead of the tariffs taking effect -- when imports rise relative to exports, GDP is negatively affected -- the economy appears to be slowing more broadly, as the economist Chris Rupkey explained to CNBC: "Maybe some of this negativity is due to a rush to bring in imports before the tariffs go up, but there is simply no way for policy advisors to sugarcoat this. Growth has simply vanished."

Consumer spending was mixed, with one report showing lower-than-expected spending and another showing it to be slightly elevated. While this muddies the waters at present, if the economy continues in the current direction, it's likely that consumer spending will retract.

When consumers rein in spending, luxury brands are often hit hardest. With its cheapest model starting at nearly $70,000, Lucid's lineup isn't exactly the most economical option.

Lucid could have a problem

It's a delicate time for the company, which has yet to turn a profit and has a massive negative free cash flow. Still, it has been growing its sales considerably, and with rival Tesla's recent woes, there is an opportunity for it to capture market share from the EV giant.

That being said, I would avoid the stock. It may be a long time before Lucid can turn a meaningful profit, and it might never get there.

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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.