Luminar Technologies Raised Potential Trade Security Today

Shares Luminar Technologies (NASDAQ: LAZR) rose 17.9% in trading Tuesday after news broke that the Biden administration had proposed new restrictions on Russian and Chinese car software. Shares were up 15.4% by the end of the trading day.

New security measures in the automotive industry

The U.S. Commerce Department has proposed banning car software from China or Russia, as well as hardware that could enable autonomous driving. That could provide protection not only for the U.S. auto industry but also for the software that enables autonomous driving.

There’s an arms race underway in autonomous driving, with Chinese companies in particular aggressively improving their capabilities. But security and economic concerns have prompted the U.S., Canada and Europe to impose steep tariffs on Chinese vehicles, and now the software could be affected as well.

Will Luminar Technologies be saved?

While this could potentially be good for U.S. self-driving car companies, it’s unclear whether Luminar will be one of them. The company isn’t generating significant revenue, and its losses are mounting.

LAZR Revenue Data (TTM) by YCharts

Investors had hoped the rise of autonomous driving would improve the company’s financial position, but falling LiDAR costs and an uncertain addressable market as new technologies develop could lead to lower revenue and profits than previously expected.

While a ban on foreign technologies would be a positive development, it would likely also reduce the overall market for Luminar’s products, and given its current weak financial performance, that’s not good news for the company’s stock in the long term.

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Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any stocks mentioned. The Motley Fool has a disclosure policy.