Shares of Lucid Group (LCID 2.58%) have been flying higher in recent weeks. That move continued in today’s holiday-shortened trading session. After jumping more than 10%, Lucid shares held on to some of that gain, higher by 4.2% as of 11:55 a.m. ET.
The stock has soared by nearly 60% in the past month. Some of that was due to the electric vehicle (EV) maker opening its order book for the new Gravity SUV. Today’s move, though, looks to be more related to other news from the company and in the automotive sector.
Merger mania
Earlier this month, Lucid CEO Peter Rawlinson said he was considering partnering with a traditional automaker to help lower capital costs, according to Bloomberg. Rawlinson stated, “It would be lovely if we could supply technology to a traditional car company to help them on their way to sustainability, and perhaps we can leverage economies of scale with their parts bin and other aspects of the business.”
Now a major merger between Honda and Nissan is being discussed, and that has Lucid investors thinking Rawlinson’s plan could be closer to reality. Honda and Nissan have begun talks to merge into what would be the world’s third-largest automaker. The two Japanese automakers say they hope to announce a merger deal by the end of next year.
While Lucid stock has been surging recently, it is still down by more than 20% year to date. Even with its new SUV hitting the market next year, the company still faces major hurdles to reach profitability. It only expects to produce about 9,000 vehicles this year, and volume is important to cover high manufacturing fixed costs.
A partnership with another automaker could help Lucid extend its cash runway. Fellow EV maker Rivian Automotive recently announced a partnership with Volkswagen Group that will help the start-up reduce its capital needs.
Investors are likely thinking that Lucid needs to take the same approach. With the CEO stating his desire to do so, and a potential new automotive merger in the news, Lucid stock is getting a boost today.
Howard Smith has positions in Lucid Group and Rivian Automotive. The Motley Fool recommends Volkswagen Ag. The Motley Fool has a disclosure policy.
