As seen in recent headlines, investors have reacted unfavorably to Lucid Group’s (NASDAQ:LCID) plans to reduce the price of some of its vehicle models. To some, this may seem like a strange reaction, but a pullback for LCID stock due to this news appears to be appropriate. Unlike with the vehicle price cuts implemented by other companies in the electric vehicle (or EV) space, these cuts may do little to boost demand for Lucid’s vehicles. Rather than changing the story with this EV maker, existing issues are likely to continue. Sure, the market’s negative reaction has been relatively mild. However, that doesn’t mean the selloff is over. Pessimism for the stock could keep rising as a temporary booster for shares fades. Rather than stopping to recharge, after rallying last month, a further reversal for shares may be in store.

LCID Stock: The Real Reason for Recent Price Cuts

Since the start of the year, price slashing is becoming a trend in the EV industry. Tesla (NASDAQ:TSLA) and Ford (NYSE:F) have so far reduced vehicle price models, and now Lucid has hopped on the bandwagon. On Feb. 9, the company announced plans to offer buyers of select Lucid Air models what it calls a “$7,500 EV credit.” Calling its discount an “EV credit” is of course a reference to the new U.S. federal EV tax credit for this same amount. Lucid’s entire fleet (including the base model) retails for prices well above the price limit for the tax credit. Per management, offering its own $7,500 credit is a way to make up for this. However, while that may be a cute way to spin it, the real reason for this price cut promotion is obvious. Despite past hype about LCID stock, which hinged p as expected. That’s the takeaway from indicators such as falling reservation numbers. Put simply, this is a last-ditch effort to boost demand. Investors are correct to assume that it will not work.

All Downhill From Here

Again, the moderate pullback for LCID stock on the price cut news is only the start. Although shares may not be ready to make an immediate move to much lower prices, here’s how a steady slide could play out throughout the rest of 2023. First, the main driver behind LCID’s January rally is likely to fizzle out, resulting in a drop for shares. Many investors continue to hold Lucid in the hopes that the company’s largest shareholder, Saudi Arabia’s Public Investment Fund, will make an offer to take the company private. However, like I argued previously, the Public Investment Fund, or PIF for short, could instead participate in future capital raises to increase its position. In the months ahead, as a buyout offer fails to materialize, the stock could give back most of its takeover rumor gains. Then, as its appeal as a takeover target evaporates, Lucid’s fundamentals will again become the main focus. With Lucid’s aforementioned sales promotion only slightly decreasing the price of its niche luxury vehicles, chances are this move will do little to reverse current Lucid demand trends. The company will likely continue reporting poor results, driving a further move lower for the stock.

Sell Into (Relative) Strength

Recent takeover rumors have yet to be disproven. This factor could for now keep the stock steady at current prices (near $10 per share). However, takeover talk is more likely than not to fail to move beyond the rumor stage. It’s a matter of if, not when, Lucid’s fundamentals eventually come back into focus. A promising growth story in 2021, and a busted growth story in 2023, the story with Lucid is likely to continue unraveling. As the market is likely to become even more pessimistic about LCID stock in the coming months, sell now if you own it. On the date of publication, Thomas Niel 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 InvestorPlace.com Publishing Guidelines.