Comparing Outstanding Electric Vehicle (EV) Shares: Lucid versus Rivian
Comparing Outstanding Electric Vehicle (EV) Shares: Lucid versus Rivian
The electronic vehicle (e-vehicle) sector has experienced significant growth in recent years, with e-vehicles accounting for 10% of all light-duty vehicle sales in October, up from 6.8% at the end of 2022. Despite this growth, the market's instability is evident, driven by increasing vehicle prices, uncertainties around e-vehicle tax credits, and growing competition. This volatility makes it challenging to identify promising e-vehicle start-ups as long-term investments.
In an effort to assist with this decision-making process, let's examine two prominent e-vehicle companies, Rivian Automotive (RIVN) (-0.51%) and Lucid Group (LCID) (-1.56%), to determine which is the superior e-vehicle stock.
Current situations at Rivian
Rivian manufactures electrified vans, pickup trucks, and SUVs and has garnered attention from leading tech and automotive corporations, such as Amazon and Volkswagen. Amazon is an early investor in Rivian, holding approximately 17% of the company, as well as a substantial order for at least 100,000 e-delivery vans. Over 20,000 vans have already been delivered, with the remaining expected to roll out by 2030.
Volkswagen recently formed a joint venture with Rivian, securing some of its in-vehicle technology for an upfront investment of up to $5.8 billion. In return, Rivian will receive ongoing funding to develop its R2 and R3 vehicles. Additionally, Amazon's massive order bolsters Rivian's reputation as a reliable company capable of handling large orders and expanding vehicle production over time.
Beyond these strategic partnerships, Rivian is actively working to reduce its losses and approach gross profitability. Its third-quarter losses of $1.1 billion were lower than the loss experienced in the same quarter the previous year. Management also reaffirmed plans to achieve gross profitability by the end of the fourth quarter.
To reach this financial goal, Rivian re-engineered its vehicle production process earlier this year. This resulted in streamlined wiring harnesses, reducing manufacturing steps by 100 and eliminating 500 parts, consequently decreasing material costs by 35%. These prudent decisions give me faith in Rivian's ambition to increase profitability, even if it means altering short-term strategies to meet long-term objectives.
Updates on Lucid
As an automotive aficionado, I've followed Lucid's journey since its public debut. I'm impressed by its product offerings, such as the award-winning Air sedan, and believe the upcoming Gravity SUV will cement its commitments to building exceptional vehicles.
However, as an investment opportunity, I'm less enthused. Lucid's losses expanded in the third quarter, reaching $992 million compared to $631 million in the prior-year quarter. Additionally, Lucid raised more money through a public stock offering, diluting shareholder value.
The company received a significant investment from Saudi Arabia's Public Investment Fund (PIF) following the public offering, totaling approximately $1.5 billion. Lucid's management projects that its financial runway will extend beyond 2026.
While obtaining additional funding is common for companies introducing new models and scaling production, it raises concerns about potential future funding requirements from the PIF.
Conclusion: Rivian is the superior e-vehicle stock
Taking all factors into consideration, I believe Rivian is the more promising e-vehicle stock. The company's strategic partnerships have injected capital to aid in the development of new vehicles and build credibility, while its commitment to cost reduction and approaches to profitability give me confidence in the company's long-term vision. Furthermore, Rivian's shares are more affordable than those of Lucid. As of now, Rivian's price-to-sales ratio is 2.8, while Lucid's is 7.2. Keep in mind that both stocks may fluctuate in the short term as the e-vehicle market evolves, but at present, Rivian presents a more appealing investment opportunity with its lower price and shrinking deficits.
In terms of financial strategies, Rivian's focus on cost reduction and aim to achieve gross profitability by the end of the year is commendable, as demonstrated by their reduced manufacturing steps and material costs. This financial discipline may set Rivian apart from competitors in the long run.
Furthermore, investing in Rivian could be more financially prudent due to its lower price-to-sales ratio compared to Lucid, making it a potential more affordable option for investors.