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Lucid and Nio Are Falling; Is the EV Stock Boom Over?

By Daniel Foelber – Updated Dec 3, 2021 at 4:59PM

Key Points

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These two growth stocks are getting dragged down in a broader market sell-off.

Share prices of Lucid Group (LCID -7.25%) and Nio (NIO 3.02%) are down over 10% since Monday. The broader market sell-off is weighing on even hot industries like electric car companies.

Industry watchers are likely wondering if this is a sign that the boom in electric vehicle (EV) stocks is over. Let's dive into Lucid and Nio to see if each company has what it takes to endure today's short-term pain for a potential long-term gain.

A white Lucid Air sedan parked in front of a modern home.

Image source: Lucid Group.

Bringing the heat without missing a beat

Lacking meaningful revenue and years away from profitability, Lucid certainly stands out as a growth stock that could come under fire from the ripple effects we're seeing in the market. The Nasdaq sell-off has so far been concentrated in growth companies that lack meaningful cash flow and earnings. For example, consider that companies like Apple, Microsoft, and Adobe are still hovering around all-time highs while Square, Twitter, Uber, and others are getting taken to the cleaners.

The big question is whether Lucid's technological edge is a big enough factor to protect its stock from a major sell-off. The reality is that no one can predict Mr. Market's mood at any given time. But we can look at the playing field and assess whether a company has a good chance of sustaining growth for years to come.

Lucid has a lot of things going for it. Its goal is to produce 20,000 cars in 2022. It already has over 17,000 reservations, meaning the cars are largely selling themselves thanks to a ton of press surrounding Lucid's range achievements and its MotorTrend 2022 Car of The Year award. Lucid also has plenty of cash, and management is confident it can raise more if needed by diluting its stock or tapping into the debt markets. 

The challenge for Lucid will be ramping up production and rolling out lower-priced versions of its Lucid Air sedan that will access a larger addressable market. If Lucid can do that while maintaining its battery efficiency and range advantages, then it could very well be on its way to becoming a market leader in the luxury EV sedan space. Investors who believe in that mission should take Lucid stock's short-term ebbs and flows with a grain of salt.

Don't overlook Nio's record results 

Share prices of Nio are down a painful 45% from their high. But the company is reporting its best production numbers ever. From January to November 2021, Nio delivered 80,940 vehicles, which is four times higher than what Lucid plans to deliver in 2022. It also delivered 10,878 vehicles in November alone. However, there's concern that Nio is struggling to meet the full extent of its production capacity increases. Part of the issue is supply chain concerns. Another is that Nio hasn't released a new model since September 2020, but could unveil new ideas at Nio Day, which remains on schedule for Dec. 18. 

Despite the competitive Chinese EV industry and the rapidly growing U.S. EV industry, Nio is well positioned to become a relevant participant in what is expected to be an ever-growing total addressable market. Unlike Rivian and Lucid that hope to scale production over the next few years, Nio's third-quarter 2021 deliveries were double what it did in Q3 2020 and quintuple its Q3 2019 deliveries. In short, the company has a three-year runway ahead of today's up-and-coming EV companies, which should help it retain an edge even as new competition enters the fold.

On track to deliver over the long term

Omicron COVID-19 variant concerns could take a toll on in-person events and even potentially impact automaker supply chains. However, both Lucid and Nio are proving they can navigate the challenging existing business climate. Lucid is confident in its ability to increase production and expand to customers around the world. Nio hit some bumps over the summer but is proving it has mostly overcome its issues. Other EV stocks may be in trouble. But Lucid and Nio remain two of the best in the industry.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Daniel Foelber owns shares of Lucid Group, Inc. and has the following options: short December 2021 $20 calls on Lucid Group, Inc. and short February 2022 $20 calls on Lucid Group, Inc. The Motley Fool owns shares of and recommends Apple, Microsoft, NIO Inc., Square, and Twitter. The Motley Fool recommends Nasdaq, Adobe Inc., and Uber Technologies and recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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