Between the legacy automakers pivoting their businesses and start-ups looking to make a splash in the near future, the transportation sector will likely be significantly more electrified by the start of the next decade. That creates a $5 trillion market, even if electric vehicle (EV) penetration is still only 30% by 2030, according to Wedbush analyst Dan Ives.
Lucid Group (LCID 2.17%) CEO and chief technology officer Peter Rawlinson believes the winners in that market will be the leaders in EV technology. Considering Rawlinson was the lead engineer on the team that developed Tesla's first mass-market car, the luxury Model S, he carries credibility in that department. Now he runs a company he believes has better in-house technology than his former employer and leader in the space. It remains to be seen if he's right, but Lucid is off to a good start. His new venture, and Nio (NIO +7.08%), another EV tech leader overseas, would make two solid, yet diverse, options for investors looking to hold EV stocks for the long haul.
Lucid Air interior. Image source: Lucid Group.
1. Lucid: Accelerating off the start line
In just a matter of the past several weeks, Lucid delivered its first vehicles to customers and was lauded by MotorTrend with the 2022 Car of the Year award for those vehicles. The Lucid Air electric sedan will come in four model options, ranging from the $77,400 Pure to the top-of-the-line Dream Edition that sells for $169,000.
Lucid is initially working to fill out the 520 reservations for the Dream Edition, which also has been given an industry-high battery range rating of 520 miles by the U.S. Environmental Protection Agency (EPA). The company says it has six model trim variations that exceed a 450-mile range on a single battery charge. That's an important factor to address range anxiety for many potential customers who may be hesitant to transition from internal combustion to electric vehicles.
It's not just the battery the company believes sets it apart, as Lucid's entire tech platform was developed in-house. That also includes control and battery management software, the electric motors, transmission, and an onboard boost charger to increase charging rates. The company also plans to use that expertise to supply other original equipment manufacturers (OEMs) in the future. And Lucid intends to move beyond EVs into energy storage systems for residential, commercial, and utility-scale use.
Nio EV chargers and battery swap station. Image source: Nio.
2. Nio: Fighting for the biggest markets
Nio is trying to become a leader in EV technology in the world's biggest EV markets: China, and now Europe. Like Lucid, it is coming out with a new, high-tech luxury sedan offering. The ET7 will be offered in both Norway and Germany by the end of 2022, in addition to its early 2022 launch in China.
Nio began delivering vehicles more than three years ago, and it has worked to differentiate itself with its technology. A prime example is the battery swap stations the company has in China and soon will deploy in Norway and beyond. These allow customers to save money upfront on the battery and instead pay a subscription to enable three-minute battery exchanges to receive a fully charged unit. Nio has more than 550 power swap stations in China to support its battery-as-a-service subscription model.
Nio is also in the midst of expanding its capacity to more than double its current capabilities. That work, and supply chain constraints, put a dent in the company's recent delivery performance. While that should be temporary, it highlighted the coming competition in its home market, as fellow Chinese EV maker Xpeng delivered more of its EVs in the third quarter than Nio for the first time.
Not an easy road
Xpeng's third-quarter deliveries jumped 48% sequentially over the previous quarter, while Nio's grew by less than 12%. Xpeng is also challenging Nio with its technology, recently announcing new smart EV technologies for charging and autonomous driving. And Xpeng also just unveiled its new smart SUV at an auto show in China this week, which it will also offer internationally.
The road to long-term success for both Nio and Lucid won't be an easy one. But both have a good start with the technology and customer interest to make it work. Investors in the EV sector should be in for the long run since it's in such early innings, but Lucid and Nio may be two of the best to hold for the long haul.
