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Lucid vs. Rivian – Which EV Stock Should You Buy, If Either?

By John Rosevear – Dec 22, 2021 at 8:46AM

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They're both strong contenders, but they're both still very expensive.

Astute electric-vehicle investors waited years for the opportunity to invest in Lucid Group (LCID 1.99%) and Rivian Automotive (RIVN 9.88%), long seen as two of the best-run start-ups in the space. Both went public in 2021 and surged to eye-watering highs.

While both stocks have since fallen back a bit, they are still very expensive by historical standards. Is either a good buy right now? If so, which is the better pick? In this Motley Fool Live video, recorded on Dec. 9, Industry Focus host Nick Sciple and Motley Fool senior auto industry specialist John Rosevear consider those questions -- and their conclusions might surprise you. 

A transcript follows the video.

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Nick Sciple: So when you think about the two big new, I guess, "next Tesla companies" or big new start-up EV makers, that everyone is talking about, it is Lucid and Rivian. So we have a question from Ryan. He asks: "Lucid versus Rivian, which is a better EV player to invest in given the current market valuations?"

John, so I'll just give you some context here, current market valuations. Rivian Automotive, according to Google Finance here: $102.05 billion market cap. Lucid, $65.70 billion market cap. Lucid down 10% today, Rivian down 2% today. Today, neither of these is selling a car really at scale that you can walk into a dealership and buy. Between these two, if you had to pick one, which would you pick?

John Rosevear: I'd pick Lucid, mostly on that valuation. But let me back up and say these are both very well-run companies. They're also very risky bets simply because all of the money that Ford and Volkswagen and General Motors and all of these other companies are spending. People are counting on these [new entrants] to get to millions-of-vehicles-a-year scale... we'll see. For me, it's a slam dunk that Ford is going to be selling millions of vehicles in five, 10 years -- a mix of EVs and internal combustion. It is not at all a slam dunk that either of these companies will get to anywhere near that kind of scale. I am mindful of what JB Straubel -- who was chief technology officer and a co-founder of Tesla, who left Tesla a little while ago to get into battery recycling -- what he said is that there isn't going to be another Tesla because the circumstances around Tesla's creation and entry were unique. To paraphrase what he said: They caught the auto industry sleeping.

The auto industry is no longer sleeping. Your list of competitors in this space, if you're Lucid, is not just Tesla and Rivian and NIO. It's also Mercedes and BMW and Ford and GM and Audi and Porsche and everybody else. Even Rolls-Royce has an EV coming. [laughs] It's all of that now. It's much bigger. I don't know that there's going to be a next Tesla. I honestly wouldn't bet on either of them. If I had to buy one today, I'd buy Lucid on valuation. They're both fine companies. They're both still very, very expensive.

Nick Sciple: Yeah, to your point, John, you've got on your bookshelf behind you, Zero to One, which is Peter Thiel's book, and one of his things is that each moment in business happens only once. I think the Tesla example is a perfect example that. Right now, there are these huge constraints on the battery supply chain, and chips, and all those things. Now, there were constraints on the battery supply chain when Tesla was on the come up, but they were the only one who was really trying to compete, to develop all that and build that, whereas today, you have all these big automakers trying to get to scale very quickly. And Tesla, by the way. They're all fighting to develop this supply chain and develop a brand. That's the other thing -- Tesla was able to build a brand when there wasn't a Pepsi to their Coke, and today all these other brands coming out today, there's a whole lot of them. There's Dr. Pepper and 7Up and all the other ones down the line. So it's just going to be much more challenging. I do think the fact that Rivian and Lucid have this valuation in the public markets helps them bootstrap. They have the infrastructure they need to become big companies, but it's going to be a heck of a lot harder. And it was really, really, really hard for Tesla.

John Rosevear owns Ford and General Motors. Nick Sciple has no position in any of the stocks mentioned. The Motley Fool owns and recommends NIO Inc., Tesla, and Volkswagen AG. The Motley Fool recommends BMW. The Motley Fool has a disclosure policy.

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