The electric vehicle (EV) industry has expanded by incredible leaps and bounds over the last decade, and its growth story is still just starting to unfold. On the heels of some massive sell-offs, Lucid Group (LCID -1.24%) and Nio (NIO -2.06%) stand out as intriguing players in the space that could potentially deliver explosive growth, and investors might be wondering which stock is the better buy at today's prices.

Read on to see why two Motley Fool contributors analyzing the question came away with very different conclusions. 

An electric vehicle being charged.

Image source: Getty Images.

The luxury niche

Howard Smith: Shares of Lucid Group would certainly qualify as having experienced a major bear market. The stock is down more than 50% this year, and almost 70% from November 2021 highs. And its recent operational and financial update didn't make investors more optimistic. The company reduced its 2022 production estimates for the second time this year, slashing them in half. Lucid now only expects to manufacture 6,000 to 7,000 of its luxury electric Air sedans this year. But the reaction from investors didn't indicate lost hope. Shares have dropped 15% since that report on Aug. 3, 2022. But there was good news as well. 

Right now, Lucid is focusing on the luxury consumer. Its vehicles range in price from $87,400 to over $150,000. Yet the company's reservation backlog has steadily increased this year. The chart below shows the growth in reservations along with the potential revenue those orders would bring should they all result in completed sales.

bar chart showing increasing Lucid Air reservations with potential sales overlaid.

Date source: Lucid Group. Chart by author.

Some of what customers are willing to pay for with a Lucid vehicle is its technology. The company was already the first EV maker to debut a vehicle with a battery range above 500 miles. Its Lucid Air Grand Touring model features an official EPA estimated 516 miles of range and 1,050 horsepower. The Air was also named MotorTrend's 2022 Car of the Year late last year. 

Lucid began trying to ramp up its production during a supply chain crisis that is affecting automakers globally. That has brought the stock down significantly, though the company still is valued with a market cap of roughly $31 billion. That level of valuation in itself is a risk as it already includes a successful ramp-up of the business.  

Lucid ended the second quarter with $4.6 billion cash, cash equivalents, and investments. But it also has plans to invest that money for expansion and growth. The company will need to bring in more meaningful revenue in 2023 with boosted production. But for those investors looking for an aggressive addition to a portfolio, Lucid might make sense now. 

Nio could have the superior risk-reward profile

Keith Noonan: Nio has already established itself as a leader in China's EV market, and it looks primed for long-term growth as it continues to tap into the expansion of the world's largest auto market. It's also just starting to expand in international territories and could become much more popular outside of its domestic market. 

Despite macroeconomic headwinds, pandemic-related lockdowns, and challenges stemming from the global semiconductor shortage, Nio has continued to post vehicle-deliveries growth. The company's most recent update showed 10,052 vehicles delivered in July, representing growth of 26.7% year over year. On the other hand, deliveries actually declined 22% on a sequential basis, and the annual growth posted in the period was down dramatically from the 124.5% year-over-year increase it posted in July 2021.

Both Nio and Lucid are facing significant challenges right now, but I think that the larger company is better positioned to weather these headwinds and looks more attractive from a valuation perspective. Nio has a market cap of roughly $35 billion, and Lucid is valued at approximately $31 billion. Meanwhile, the Chinese EV player is valued at roughly four times this year's expected sales, and Lucid has a forward price-to-sales multiple of roughly 42.

Both companies have yet to prove that they can shift into delivering consistent profits, and Lucid's focus on the luxury market may ultimately allow it post superior margins, but Nio's growth story looks less speculative.

With the stock trading down by roughly two-thirds from the high that it hit in February 2021, Nio has significant room for recovery as production headwinds ease. The EV market is becoming increasingly competitive, but the Chinese company is already showing it has what it takes to compete at scale. With today's stock market still in a volatile state and EV stocks being relatively high-risk in general, I think Nio offers a better risk-reward profile than Lucid at today's prices. 

Which of these EV stocks is the better buy?

For more risk-tolerant investors, Lucid's potential to establish itself as a long-term leader in the luxury EV space could lead to stock performance that beats Nio's. On the other hand, the fact that Nio is already generating much more revenue and has greater scale in terms of infrastructure and distribution could make it a more suitable play for investors who are seeking to avoid highly growth-dependent valuations right now. If you're extremely bullish on the overall EV industry, investing in both stocks could be the right move, but otherwise this is a case where it's probably best to pick the company that best aligns with your portfolio goals.