LCID Stock Alert: Why Lucid Motors Is Suing Texas… And Why You Should Care

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Lucid (NASDAQ:LCID) stock is in full focus today after the electric vehicle (EV) maker filed a lawsuit against the state of Texas concerning its dealership regulations. Lucid stated that Texas requires its businesses to sell goods only through established dealerships, which the company has characterized as anti-competitive behavior and “economic protectionism.” As a result, EV startups like Lucid have faced difficulties in selling their vehicles in the Lone Star state.

Lucid isn’t the only EV company that has dealt with this problem. In the past, Tesla (NASDAQ:TSLA) has also lobbied to change Texas’ dealership regulations. Today, Tesla is still unable to sell its vehicles directly to consumers in the state.

LCID Stock: Lucid Sues Texas for Its Dealership Regulations

Lucid sells its vehicles online and through a network of proprietary stores. The company argues that its direct sales and in-house after-sales service — such as repairs and maintenance — are linked together. Because of this, using a dealership for sales “would not be economically viable and would harm the business.”

The company wrote in its plaintiff statement:

“That tight and fast feedback loop, and the benefits it brings to Lucid’s customers, would be impossible with third-party dealers interposed between Lucid and consumers.”

Tesla has dealt with a similar situation before, which may act as a precedent. In 2020, Michigan allowed the company to sell its EVs directly to consumers after years of litigation. However, the official sales paperwork still says the EVs are sold in another state. This loophole helped Tesla increase the conveniency and access of sales, as Michigan residents previously had to drive to Ohio to purchase a Tesla vehicle.

Lucid to Report Earnings Tomorrow

Lucid is working around the clock to ramp up its production and the addition of another state market would surely benefit sales. The company has been involved with a series of headwinds this year, such as supply-chain inefficiencies, inflation and a shortage of raw materials. Investors will receive a much-needed update on production when Lucid reports earnings tomorrow after the bell.

Full-year production is guided to be between 6,000 and 7,000 vehicles. In October, the company affirmed this production guidance, which had previously been lowered from between 12,000 and 14,000 vehicles. In the third quarter, Lucid manufactured 2,282 vehicles, bringing its year-to-date (YTD) production to almost 3,700 vehicles.

On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.

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