(Reuters) -Lucid Group's electric-vehicle production dropped and its deliveries in the second quarter remained flat compared to the previous three months amid competition from Tesla, sending its shares down 7% in premarket trading on Wednesday.

The company, which has started shipping cars to Saudi Arabia, delivered 1,404 vehicles in the quarter ended June 30, compared with 1,406 deliveries in the first quarter.

It made 2,173 vehicles during the quarter compared with 2,314 units in the previous three months.

Lucid has been operating in a challenging environment as demand takes a hit from dour economic outlook and a price war sparked by Tesla in January.

Its Air luxury sedans start at $87,400 compared with Tesla's Model S cars that cost $88,490.

It has also been battling supply-chain issues as well as cash crunch at a time when borrowing costs are higher.

The company said it would report financial results for the second quarter on August 7, after markets close.

(Reporting by Akash Sriram in Bengaluru; Editing by Arun Koyyur)