Why Lucid Stock Is Falling Today

Shares of Lucid Group (NASDAQ: LCID), an electric vehicle marker, tumbled today likely as investors reacted to President-elect Donald Trump's choice to lead the Environmental Protection Agency (EPA).

Lucid's share price was down by 7.6% as of noon ET.

A less-favorable stance toward EVs could be on horizon

Former Congressman Lee Zeldin was chosen by Trump to head up the EPA yesterday, and that likely spooked some Lucid investors because Zeldin has voiced some less-than-favorable stances toward green projects in the past.

The U.S. government currently offers a tax credit up to $7,500 for some new EV purchases, but some people are concerned that EPA's stance toward electric vehicles could shift under the new administration. Trump said back in August that he is open to ending the current EV tax credits.

Of course, there's not telling exactly how the new administration might affect the EV market, but the uncertainty comes at a time when Lucid and other electric vehicle start-ups are trying to find their footing. Any shift in the EPA's stance away from promoting or assisting the EV market could have negative consequences for Lucid and its peers.

Lucid reported third-quarter financial results last week and had a net loss of $992 million. The company is trying to increase production of its Air sedan and its newly launched Gravity SUV and recently sold 262 million additional shares to raise $1.67 billion.

An uncertain time for EV companies

Lucid and other EV makers are already under pressure right now after years of high inflation and rising manufacturing costs have put pressure on their businesses. Additionally, high interest rates have made financing a new EV more expensive for many potential buyers.

I'm a long-term optimist when it comes to EVs (and an investor in fellow EV start-up Rivian), but it's understandable why Lucid investors may be concerned about an incoming administration that might be less enthusiastic about electric vehicles. For now, investors should take a wait-and-see approach before making any investment decision based on potential moves by the government.

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Chris Neiger has positions in Rivian Automotive. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.