Comparing Electric Vehicle Stocks: Rivian vs. Lucid

The electric vehicle (EV) market has seen significant growth recently, with EVs representing 10% of all light-duty vehicle sales in October 2023, a rise from 6.8% at the end of 2022. However, factors such as increasing vehicle prices, uncertainty about EV tax credits, and growing competition have led to fluctuations in electric vehicle stocks.

This situation makes it challenging to identify which EV startups are worthwhile long-term investments. In this article, we will examine two prominent EV companies, Rivian Automotive and Lucid Group, to determine which one may be the better stock choice for investors.

Rivian's Progress

Rivian specializes in manufacturing electric vans, pickup trucks, and SUVs. The company has attracted attention from major tech and automotive players like Amazon and Volkswagen. Amazon invested early in Rivian, holding about 17% of the company, and has placed an order for at least 100,000 electric delivery vans, of which over 20,000 have already been delivered. The remaining vans are expected to be delivered by 2030.

Moreover, Volkswagen has formed a joint venture with Rivian to access its innovative in-vehicle technology, providing Rivian with up to $5.8 billion in funding over the coming years.

These agreements bolster Rivian's position in several ways. The funding from Volkswagen helps the company develop its upcoming R2 and R3 vehicles, while Amazon's significant order enhances Rivian's credibility and validates its capacity to meet large-scale production demands.

Crucially, Rivian is working to minimize its losses and is on the verge of achieving gross profitability. In the third quarter, Rivian reported a loss of $1.1 billion, which is an improvement compared to a $1.37 billion loss during the same period last year. Management has indicated that the company is expected to attain gross profitability by the end of the fourth quarter.

To support this goal, Rivian redesigned its vehicle production earlier this year. The company simplified its wiring harnesses, trimming 100 steps from the battery production process and reducing the number of components by 500, leading to a 35% reduction in material costs.

Such strategic adjustments inspire confidence in Rivian's commitment to profitability and its willingness to adapt its short-term strategies to achieve long-term success.

Lucid's Challenges

Lucid has also attracted attention since its public debut a few years ago. As a car enthusiast, it is recognized for crafting the visually impressive Air sedan, which has received multiple awards, and its anticipated Gravity SUV is expected to uphold the company's reputation for excellent vehicles.

However, when it comes to investments, Lucid presents more challenges. The company reported a widening loss of $992 million in the third quarter, compared to $631 million the previous year. Additionally, Lucid's recent move to raise capital through a public offering of 262 million shares has diluted shareholder value, which could raise concerns among investors.

A recent investment from Saudi Arabia's Public Investment Fund (PIF) of approximately $1.5 billion is positive, and management asserts that this funding extends the company's financial runway through 2026. While needing financial support for product development and production scaling is not inherently negative, it raises the question of how often Lucid may require further investment to maintain operations.

The Conclusion: Why Rivian Is the Preferred EV Stock

Considering the factors discussed, Rivian appears to be the better investment choice among the two EV stocks. The company is focused on reducing costs, narrowing its losses, and is nearing gross profitability. Furthermore, Rivian's stock currently has a lower price-to-sales ratio of 2.8, compared to Lucid's 7.2. While both stocks may face volatility as the EV market evolves, Rivian stands out as a more attractive purchasing option due to its lower cost and improving financial outlook.

Electric, Vehicles, Stocks