Why Lucid Stock Keeps Falling

Table of Contents

What happened

Electric car stock Lucid Group ( LCID -4.06% ) fell for a third straight day on Tuesday, down 4.7% as of 1:45 p.m. ET.

It has only itself to blame.

So what

This morning, Lucid began contacting owners of its first batch of delivered Lucid Air luxury electric cars to advise them of an impending recall, reports Teslarati.

“Lucid has determined that a defect, which relates to motor vehicle safety, exists in certain 2022 Lucid Air vehicles,” said the company, and specifically, “front strut dampers that may have been manufactured by the supplier with the snap ring installed in the wrong orientation.” The defective parts “may result in sudden loss of ground clearance, vehicle vibration, and front brake line damage, increasing the risk of a crash.”

Glowing red arrow trending down on a stock chart.

Image source: Getty Images.

Now what

Lucid has only been delivering Airs for about four months, and it’s already run into its first recall. But how significant is it? The National Highway Traffic Safety Administration (NHTSA) hasn’t yet published a recall notice, but according to a report by Bloomberg, 203 Air sedans are subject to the recall — roughly 40% of the company’s first production run of 500-odd Air sedans.  

That sounds pretty bad, and unlike recent recalls seen at Tesla, this is a mechanical issue that cannot be fixed with a simple over-the-air software update. Still, Lucid estimates that no more than 1% of the cars recalled actually contain defective parts, according to Bloomberg. And 1% of 200 works out to a grand total of about…two cars.

Whatever other reasons you might have for thinking Lucid Group stock is overvalued, an announcement that two cars are going to need some mechanical work really doesn’t sound like a big deal to me.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.