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Here's Why Lucid Could Give Tesla Some Serious Competition

By Matthew Frankel, CFP® and John Rosevear – Oct 29, 2021 at 1:45PM

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Could Tesla finally face a serious threat to its EV dominance?

To say that investors have high hopes for Lucid Group (LCID -8.70%) would be an understatement. The company trades at a market cap of more than $40 billion and just started delivering its first vehicles to customers. In this Fool Live video clip, recorded on Oct. 18, contributor John Rosevear discusses whether Lucid could be the serious threat to Tesla (TSLA -6.32%) than many investors are hoping for. 

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John Rosevear: So yeah, Lucid has been around quite a while. In fact, I first met the CEO, Peter Rawlinson, I think in 2017 at the New York Auto Show, where I had intended to interview him for The Fool and I had a really lively, lengthy conversation with him in a very noisy spot where the recorder didn't pick up much of it. But I did get to know him some. He is a great example. If people who know the VC scene know Josh Wolf, New York-based venture capitalist, Josh has a great saying, "chips on shoulders put chips in pockets."

Now I'm going to tell you Peter Rawlinson was chief engineer of the Tesla Model S and then he left the company. He's had to one-up Elon in some ways, which is very good energy to have behind Lucid, but he is delivering on it so far. Four, five years into this plan of his, they're now shipping vehicles. Production of the air luxury sedan began in late September. The last update they gave was more than 13,000 reservations, which is a lot for a car that can go up to a $170,000. It doesn't sound like a lot, but you do a couple of thousand a month and you're in good shape.

Deliveries are to begin later this month. We talked earlier about battery technology. The thing about Lucid is that they are getting industry-leading efficiency out of existing lithium-ion batteries. They claim 4.8 miles of range per kilowatt hour, which is more than anybody gets. It enables, in their top-line highest-range model, 520 miles of range. You look at other companies in this space, whether Tesla or the best of the legacy automakers, they're talking 300 or a little more, give or take. This is where the battery pack size and cost that's similar to the long range packs from other manufacturers. What's interesting is that their approach to battery technology, which is not so much about the cells, as about the management of the cells, they can make a fairly unique claim.

They have proven this in racing. They have provided the battery packs to Formula E racing, which is a single-seat Formula car racing series that's all-electric. They stop in the middle of the race and swap battery packs out and so forth instead of having a pit stop where they put fuel in. It's still a niche following, but their battery packs have gotten some really good testing in there. Really the only electric vehicle maker, they can really make a significant claim. Race proven battery packs, which is something that sold cars in the auto business for a century now, you think it would do something here.

They have a factory in Arizona. Again, it's already putting out cars, but the idea was to build it in stages as their product line expanded, as demand wrapped up and so forth. They're doing a significant expansion underway right now that was enabled by the funds they raised in the SPAC deal. Their next model is a big luxury SUV called the Gravity. That's due in 2023. Going further out, they have plans for smaller, lower-cost vehicles. It's a lot like the famous Tesla secret masterplan where they started with the Model S and the Model X six-figure rides, then moved down to the 3 and the Y, and now they are talking about an even smaller car that will come in around $25,000 and so forth. With ancillaries, Lucid will also make its batteries available to other automakers and so forth.

There are multiple revenue streams they can get here. Also one that's increasingly popular among automakers, big and small, is these cars are all connected, they all have advanced driver assist systems that approach self-driving and so forth. We can sell them subscriptions to all products and services and maintain a revenue stream after the vehicle is sold. This isn't unique to Tesla, I heard at length a couple of weeks ago from General Motors (GM -4.37%), how they're doing it. But it's something else that will enable revenue and above and beyond we sold a car today, that kind of thing over time.

Matthew Frankel, CFP® owns shares of General Motors and Lucid Group, Inc. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.

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