Lucid Motors (NASDAQ:LCID) stock has been one of the year’s most fascinating stories.

Lucid, then trading as Churchill Capital, shot up from $10 to $60 in a matter of weeks. Once the terms of Churchill’s special purpose acquisition company (SPAC) merger became clear, however, shares lost more than half their value virtually overnight.

This is because institutional investors put fresh capital into Lucid at a much lower valuation than the then-prevailing market price.

Since then, Churchill and Lucid completed their merger. However, LCID stock has not recovered to prior levels. Rather, shares have leveled off in a trading range between $20 and $30.

That’s quite good in the current environment. Remember, SPACs have been getting pounded. And any focused on electrical vehicles (EVs) are faring particularly poorly. So Lucid is doing well to remain at double its $10 SPAC offering price.

Still, shareholders expecting a return to the old $60 price may be in for a long wait. That’s particularly true given some unwelcome news coming from Washington D.C. recently.

Infrastructure Bill and LCID Stock

Traders had been buying up EV stocks since President Biden came into office in hopes of more favorable government policy toward green energy.

Biden’s infrastructure package was supposed to be a breakout moment for emission-free vehicles. However, it appears that this won’t work out as planned.

You see, there is currently a $7,500 tax credit for the first 200,000 EVs a manufacturer produced. After 200,000, the tax credit phased out. Up until now, only Tesla (NASDAQ:TSLA) and General Motors (NYSE:GM) had reached the limit.

So newer upstarts like Lucid were supposed to have a favorable tax credit path going forward. Analysts had hoped that this might become even more generous with the Biden infrastructure plan.

Instead, the Senate upended the status quo and actually made it worse, at least as far as Lucid goes. The Senate infrastructure bill would strike the 200,000 EV cap. This might sound good in theory, but that could give more of a boost to existing producers that have already sold EVs.

Giving firms like GM the ability to sell an unlimited number of EVs with the tax credit could actually make it more difficult for upstarts like Lucid.

Meanwhile, the legislation would make the tax credit only apply to EVs with a base price under $40,000. This would eliminate the current Lucid Air, which has a base price way up at $77,400.

Luxury vehicle-makers like Lucid would largely be left out altogether, and most Tesla models wouldn’t be eligible either. Additionally, only people with incomes under $100,000 per year would be allowed to receive the tax credit.

This would further limit any potential benefit to EV-makers such as Lucid. There is plenty of time for amendments before the infrastructure package is finalized. But this looks like a potentially huge blow to Lucid’s prospects.

LCID Stock Verdict

A bull can argue that the tax credit changes aren’t a major problem for Lucid. After all, it hasn’t even started selling a meaningful number of vehicles yet.

There are other obstacles that the company must overcome to get to the point where it worries about tax credits.

In the current environment, however, these sorts of negatives add up. Traders are already dumping both SPACs and EV stocks left and right. Folks may use any possible excuse to sell LCID stock.

Once the consequences of the infrastructure package become clear, it could lead to another sell-off in EV stocks, and luxury ones such as Lucid in particular.

There was the expectation that the Biden Administration would be a game-changer for companies like Lucid. Instead, the regulatory environment looks a lot less favorable. Political winds can change quickly, to be sure, but for now, it’s good to be cautious with LCID stock.

On the date of publication, Ian Bezek did not have (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.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.