The electric vehicle industry is evolving at a rapid pace. Several new players are entering the market, and not all are likely to succeed. However, Lucid Group (NASDAQ:LCID) has been successful at establishing itself as a strong contender in this competitive space.

Let's look at how Lucid Group is challenging Tesla's (NASDAQ:TSLA) electric vehicle technology. More importantly, can it eventually challenge Tesla's dominance in the EV space?

Lucid's industry-leading EV technology

To understand why Lucid is grabbing headlines and awards lately, it is helpful to compare Lucid's technology with that of Tesla. To begin with, the Lucid Air Dream Edition offers a range of more than 500 miles. That's 100 miles more than Tesla's Model S, which was so far the longest-range EV model available. By comparison, Volkswagen's upcoming model ID.5 will offer a range of around 320 miles. Toyota Motor's all-electric SUV bZ4X, which will come to market in 2023, will have a range of around 310 miles. Clearly, Lucid Air is a winner in terms of range.

A lucid air driving on a highway through the desert.

Image source: Lucid Group.

However, there are other factors to consider. Longer range can be achieved by, say, using a bigger battery pack. But that isn't optimal or groundbreaking. A key measure of EV technology is battery efficiency, which tells how much electricity a vehicle uses to travel a specific distance. Lucid Air boasts a battery efficiency of more than 4.5 miles per kilowatt hour, higher than Model S' 4 miles/kWh. 

Notably, Lucid Air's top speed of 168 miles per hour is less than Model S Plaid's top speed of 200 mph. Similarly, Model S Plaid takes roughly 0.5 seconds less than Lucid Air to reach a speed of 60 mph after start. Still, Lucid Air offers much longer range without materially compromising on performance.

Is Lucid a threat for Tesla?

Frankly, Lucid will need a lot more than promising technology to challenge Tesla's EV dominance. From sourcing raw materials to producing cars that perform well in the real world over time -- and doing all that profitably -- Lucid has a lot to prove. Yet, its better technology could give it some edge.

Lucid's achievement is laudable considering that it has beaten legacy car companies in delivering a better product, even though these companies have been spending billions of dollars on their EV ambitions. It is also trying to challenge an established EV maker that has a reputation for innovation.

Young man over isolated background looking confused, thinking with hand on head.

Image source: Getty Images.

It's just the beginning

Based solely on the above, it might not be prudent to jump to the conclusion that Lucid can easily challenge Tesla. Tesla isn't sitting on its laurels, and it's working on improving its batteries continuously. At its Battery Day event last year, Tesla said that its own batteries could increase vehicle range by 54%, due to cell design as well as cell vehicle integration. On the company's third-quarter earnings call, management suggested that Tesla will start delivering vehicles with 4680 cells (developed by Panasonic) by early 2022. 

The company hasn't provided an update on how much range and efficiency improvement can be expected using the 4680 cells. But over time, Tesla is looking for 54% improvement in range through improvements in cell design and integration.

Moreover, Tesla's own massive battery production plans aim to reduce battery costs significantly. The company believes that this would help it deliver EVs for as little as $25,000. Overall, Tesla is targeting a much bigger market than Lucid right now. Lucid also eventually plans to tap the mass market, but that is still years away.

Lucid stock makes an interesting buy

Overall, Lucid could see its lead in range quickly erode unless it continues to improve its offerings. Lucid and Tesla could well be at the beginning of a long-term rivalry. That is surely good news for EV buyers. But what does it mean for you as an investor? To me, both Tesla and Lucid look like solid long-term buys. However, Tesla stock already looks priced for perfection, whereas Lucid seems to have more room to run.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.