Over the past year, many special purpose acquisition companies (SPACs) agreed to merge with electric vehicle (EV) companies. However, many of those EV companies are tiny, haven't generated any revenue yet, and rely heavily on extremely bullish market forecasts to attract investors.
At first glance, the SPAC-backed EV market might look like a speculative swamp filled with overvalued stocks. But some of those companies are already producing vehicles and generating real revenue.
Today we'll take a look at two of those better-run EV companies: Lucid Group (LCID 0.41%), which went public by merging with Churchill Capital IV Corp. earlier this year, and Gogoro, which plans to merge with Poema Global Holdings (PPGH) in the first quarter of 2022.
Image source: Lucid.
Lucid is aiming higher than Tesla
Lucid gained a lot of attention from investors because it's led by Peter Rawlinson, Tesla's (TSLA -1.11%) former chief of engineering.
Like Tesla, Lucid manufactures higher-end electric sedans. But its debut vehicle, the Lucid Air, can travel up to 520 miles on a single charge, beating out Tesla's longest-range vehicle (the Model S Long Range) by over 100 miles.
Lucid also targets a higher-end market than Tesla. Its entry-level Lucid Air costs $77,500 before deducting federal tax credits, while the customer-configured "Dream Edition" version costs $169,000.
Unlike Tesla, which is aggressively expanding its global network of over 25,000 Supercharger stations, Lucid plans to rely on third-party charging stations instead of building its own first-party charging network.
Gogoro is carving out a niche market with electric scooters
Gogoro, which is based in Taiwan, sells electric scooters and operates a nationwide network of more than 2,000 swappable battery stations.
Image source: Gogoro.
Instead of plugging in the scooter and waiting for it to recharge, its riders (who pay a monthly subscription fee) can simply swap the old battery for a new one within a few seconds. Gogoro has also signed partnerships with other electric scooter makers that enable their riders to swap out batteries at its stations.
Gogoro's newest scooters cost about $2,000, making them a bit pricier than gas-powered scooters, but they can travel more than 100 miles on a single charge. Gogoro currently generates most of its revenue from its scooter sales in Taiwan, but it expects its sales of overseas scooters, charging stations, and battery subscription fees to rise significantly over the next few years.
Prior to co-founding Gogoro with Matt Taylor, CEO Horace Luke served as the chief innovation officer at HTC, as well as the product ideation and brand development leader at Microsoft.
How fast are Lucid and Gogoro growing?
Lucid recently started shipping its first batch of 520 "Dream Edition" Lucid Air sedans, and it believes it can manufacture about 20,000 Lucid Air sedans in 2022 and generate $2.2 billion in annual revenue.
Lucid has the infrastructure and demand to hit that target: Its new plant in Arizona has a maximum annual production capacity of 53,000 vehicles, and it already surpassed 13,000 reservations back in September.
However, Lucid would still be dwarfed by Tesla, which has already delivered 627,350 vehicles in the first three quarters of 2021. Lucid is also deeply unprofitable: It racked up $3.18 billion in losses in the first half of 2021 without generating any revenue, and its losses will likely widen next year as it ramps up its production of thousands of new vehicles.
Gogoro's revenue fell 17% to $364 million in 2020 as its scooter sales slowed down during the pandemic, and it expects another 10% decline to $327 million this year. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) dipped 9% to $42.1 million in 2020, and it anticipates a 72% drop to $11.8 million this year as it expands its hardware business (scooters and charging stations) at a loss.
Those near-term growth rates look dismal, but Gogoro expects its annual revenue to skyrocket at a compound annual growth rate (CAGR) of 74% between 2021 and 2024 to hit $1.7 billion, and for its adjusted EBITDA to soar at a CAGR of 185% to reach $272 million.
It expects those explosive growth rates to be fueled by its expansion into India and China, and for its total number of subscribers to grow from 449,000 this year to 2.95 million by 2024. Those estimates are jaw-dropping, but they're also much more speculative than Lucid's shipment estimates for next year.
Which stock is the better value?
Lucid has an enterprise value of $68 billion, which values the company at 31 times its sales target for next year. Gogoro plans to go public with an enterprise value of $2.35 billion, which would value the company at less than five times its estimated sales of $500 million in 2022.
Lucid's valuation is rich, but it could be justified if it hits its sales target next year and continues to ramp up its production capabilities. Meanwhile, Gogoro seems cheap, but its long-term forecasts seem too high.
Both of these EV stocks are speculative. But if I had to pick one over the other, I'd probably stick with Lucid because it's setting more realistic near-term goals. Gogoro's goals might be achievable, but I'll need to see it reverse its recent declines before I believe its bullish narrative.
