Lucid set to pay $7,500 credit to customers for high-end EV models

Yahoo Finance autos reporter Pras Subramanian joins Yahoo Finance Live to talk about Lucid and General Motors.

Video Transcript

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- Let's take a look at some of the top movers of the day. Our senior autos reporters, Pras Subramanian here, with a look at Lucid, because shares closing the day in the red. And let's take a look at where Lucid is closing. I believe they're closing in the red today as the company announces--

- Yeah. Quite a bit.

- Yeah. Quite a bit. As the company announces that it will provide electric vehicle discounts for two EV models that priced above the threshold for a government subsidy. Pras, when we talk about the strategy here, clearly, they're trying to boost demand. Now, these are for vehicles that don't even come close to what that federal subsidy would be, right?

- Yeah. I mean, they're giving you this-- if you can't get the credit, they'll give it to you, right? $7,500, but funded by Lucid themselves for two miles. The Lucid Touring and the Grand Touring, both starting over $100,000. So yeah, you're not going to get it for that, usually. But hey, they'll give it to you now because they want to boost sales, and they'll take the hit financially right now in order to get more-- the car in more people's hands.

But the thing ends end of March, which is interesting date because that's when the new battery requirements come into place potentially by Treasury. And there's thought that once those new requirements are in place, no car will be able to get that tax credit. So they're just going to go with the flow till March 31 and then take that hit, sell more cars. Then when it goes away for everybody, they'll be fine.

- I'm not sure on the top end. You're talking about the Touring and the Touring Grand, 107, 138. If you're spending that in a car, I'm not sure you care about 7 grand. But I'm just curious about the stock falling almost 11% on this should be good news. We saw it really benefited Tesla. What do you make of the stock drop?

- I mean, the problem is they don't make enough-- they don't make any money, really, on their cars so far. They're all negative-- it's all negative margins.

- So goodbye, margins. They're already gone.

- Whatever you had are going to be hit by 7,500 bucks each. I mean, that's like 8%, right? If not less. So it's not a good thing for them. But they're just willing to take the hit. They have money to burn for now, at least, and just trying to get more cars into the hands of owners.

- Well, Pras, another story that we are watching in the auto space is GM. They have a new chip-making partner. What is happening here? And how big of-- I guess, an improvement could this potentially be for GM's inventory?

- GM didn't suffer that badly last quarter with regard to chip prices, but now they're kind of taking matters into their own hands there with the exclusive deal with GlobalFoundries, chips made in the US in upstate New York. They're calling it the capacity corridor for GM's chips. Huge for GM here because they're getting these chips that they say they might need a double amount for in a couple of years because they want to reduce the complexity, use simpler chips, more of them in their products.

And it's also a big win for Joe Biden, right? President's Chips Act here. Also Senator Schumer. He's a co-sponsor of the bill. He also talked about touting the Empire State region as an area for chip building. A few couple details that we're not hearing about, the amount of money invested in the factory. They didn't say what that was going to be.

We didn't hear about chip capacity. But we do know that GlobalFoundries invested something like $15 billion in that upstate plant in New York. So really bringing home a lot of that chip building here as opposed to building it elsewhere.

- And Pras, do you also think that this might be the start of something more when you talk about some of the competitors out there who have also had some supply issues? Maybe they will be turning to more manufacturers inside the US.

- Yeah. Why isn't Ford doing this, right? Maybe they will. Maybe they will do it soon. Because they have a ton of cars built in the US coming online soon 2024, 2025. So why wouldn't you line up a chip deal with one of these manufacturers and then use the US incentives to build that factory here?

- What is the analyst reaction been so far just in terms of the fact that these automakers are still struggling with supply issues at this point? And we're almost three years since the start of the pandemic.

- It's funny. A lot of the analysts-- it seems to me the analyst chatter is that they take the automakers at their word, that they will be able to supply these 100,000, 500,000, even a million vehicles by 2025. But you have to wonder, A, where do you get the materials for the batteries and, B, are there enough chips there?

I think there are enough chips. I think it's more of a battery issue. So I think analysts are saying-- this is a good thing for GM. It's a good sign that they want to take it into their own hands, get their own chip supply direct from them, exclusive to them. So I think it's smart. I think you'll see more manufacturers do that potentially in the future.

- All right, Pras. Good stuff. Appreciate that.