The current share prices of both Rivian Automotive (RIVN -3.39%) and Lucid Group (LCID -5.88%) are both far below their prices when they first went public in 2021. The price drops may be tempting investors who are looking to scoop up an electric vehicle (EV) stock right now.
While both companies are working to mass-produce impressive electric vehicles, only one of them looks like a good long-term investment at the moment. Let's take a closer look at each one to find out which one is the better buy.
Image source: Rivian.
What's happening with Lucid right now
Lucid created a very impressive EV that's caught the attention of customers and car enthusiasts alike. The company's Lucid Air sedan won Motor Trend's Car of the Year for 2022, and the company currently has 34,000 reservations for various versions of the sedan. Lucid delivered 1,398 vehicles in the third quarter -- nearly double the amount from the year-ago quarter -- and the company produced 2,282 vehicles in Q3, more than triple its production rate in Q2. The increase in vehicle production helped Lucid's sales rise from just $232,000 in the year-ago quarter to $195.5 million in Q3.
But while the company is increasing sales and ramping up vehicle production, it's also experiencing some significant setbacks. For one, Lucid had to revise its production goal for 2022. The company originally planned to produce up to 14,000 vehicles this year but cut that guidance in half as the company ran into supply chain issues. And the company appears to be losing some steam among potential customers as well, as reservations fell 8% from the previous quarter.
All EV companies have suffered some supply chain issues recently, but the problem for Lucid is that the company is also burning cash at a rapid pace. Lucid's net loss in Q3 widened to $670 million from a loss of $524 million in the year-ago quarter.
Lucid had to raise an additional $1.5 billion recently through a combination of a private offering and public stock. This will add to the $3.85 billion in cash that the company already had at the end of the quarter. While having more cash on hand is certainly helpful, the fact that Lucid needs additional cash so soon after going public should concern investors a bit.
Making matters worse for potential investors is the fact that even with the company's massive 82% share-price decline over the past year, its shares are still expensive. Lucid's price-to-sales (P/S) ratio is 29 right now, compared to EV leader Tesla's P/S ratio of just 5.8.
What's happening with Rivian right now
Like Lucid, Rivian is a young EV start-up that's trying to find its footing in the rapidly moving EV market. And it hasn't always been a smooth ride for the EV maker. For starters, the company is spending tons of money to continue its production ramp-up. In Q3, Rivian's net loss was $1.7 billion, up from $1.2 billion in the year-ago quarter. The company has also felt the pinch of rising EV material costs, which forced Rivian to raise the price of its quad-motor pickup truck by $12,000 this year and remove the entry-level versions of its pickup truck and SUV back in August.
But there are a couple of things that likely put Rivian in a better position than Lucid. For one, the company has more cash. Rivian ended Q3 with $14 billion in cash and cash equivalents, and its management said that it has enough money to fund the company's operations through at least 2025. Additionally, Rivian is doing a far better job of producing more vehicles than Lucid. Rivian's vehicle production increased 67% from Q2 to Q3 and totaled 7,363 vehicles -- more than 3 times Lucid's production total.
Further proof of Rivian's ability to manage new production comes from the fact that the company began delivering electric vans to Amazon this year. Amazon has a total order of 100,000 vehicles from Rivian, and the companies have said that the EV maker plans to complete the order by 2030. And while Lucid's vehicle reservations fell sequentially, Rivian's are going up. The company had 114,000 preorders at the end of Q3, up from 98,000 in Q2.
With a P/S ratio of 16, Rivian's shares aren't cheap. But they are significantly less expensive compared to Lucid's P/S ratio of 29.
Expect a few potholes along the way
With Rivian significantly increasing production and reservations, successfully starting deliveries of its vans to Amazon, having more cash on hand for funding its operations, and trading for less than Lucid's stock, I think Rivian looks like the better buy between the two stocks.
While I think Rivian could end up being a better buy than Lucid, investors need to know that the entire EV industry is volatile right now. Rising material costs and supply chain issues could continue to hurt EV stock growth, and a potential recession could end up curbing some customer demand.
So if you're buying Rivian or any other EV stock right now, you'll have to be patient as EV companies navigate a difficult economic time.
