Rivian Automotive (RIVN 6.10%) and Lucid Group (LCID 0.41%) were two of the most hyped stocks to debut in the U.S. stock markets in 2021. While Lucid created quite a buzz with its luxury electric cars that were touted to give Tesla a run for its money, Rivian beat Tesla and legacy automakers and became the first electric vehicle (EV) company to sell an all-electric pickup truck, called the R1T.
Shares of Lucid and Rivian, however, have crashed since, as neither EV maker has been able to meet investors' expectations so far. Both companies are now trying hard to turn things around, and are focused on ramping up production and sales. This could be a great time to buy these beaten-down EV stocks, but which one is a better buy? The investing thesis for each stock below should help you decide.
The right focus
Neha Chamaria (Rivian Automotive): Rivian hugely disappointed investors in 2022 when it produced fewer than 25,000 EVs against a capacity of 50,000 units. While the company blamed supply challenges for the shortfall, investors dumped the stock as Rivian's losses piled up and cash dwindled.
Rivian could finally be turning around now. In the second quarter, Rivian's production surged 50%, and deliveries jumped 60% sequentially, encouraging management to upgrade its production outlook for the full year by 2,000 units to 52,000 units.
Equally notable is Rivian's confidence in earning a positive gross profit by next year. For context, Rivian generated a gross loss of $947 million in just the six months ended June 30. The EV maker, however, cut down its gross loss sharply in the second quarter, thanks to its efforts to boost production and cut costs. Rivian said its gross profit per vehicle improved by roughly $35,000 per vehicle in the second quarter.
In yet another update from the quarter, Rivian produced a larger number of R1S SUVs compared with R1T pickup trucks for the first time ever. The R1S made up nearly 70% of Rivian's total R1 production in Q2 (the company also produces last-mile electric delivery vans, or EDVs). If Rivian can sell more R1S SUVs, it should make more money, since the R1S is both costlier and more profitable than the R1T.
Rivian also introduced its in-house Enduro motor unit in R1 vehicles last quarter after integrating them into EDVs earlier. Coupled with its lithium iron phosphate battery packs, these two crucial EV components should help Rivian save on costs, since they're being produced in-house now.
With so many encouraging updates coming out from one quarter alone, and with the company also ending Q2 with $10.2 billion in cash and cash equivalents, Rivian has given investors in EVs some good reasons to consider buying its stock now.
Don't count out the luxury option
Jeremy Bowman (Lucid Group): It's a dogfight in the electric vehicle industry these days, with prices coming down and start-up and legacy manufacturers ramping up production.
Lucid Group has struggled thus far, and its production target this year is modest at 10,000.
However, there are two main reasons why investors shouldn't count out the luxury EV maker and why it could outperform fellow cash-burning start-up Rivian over the long run.
First, Lucid's first vehicle, the Lucid Air, has received rave reviews. It's won a number of awards, including 2023 World Luxury Car at the World Car Awards. It was named one of the 2023 World's Greatest Auto Disruptors by Newsweek, and it won Best Luxury Electric Car in U.S. News & World Report.
While accolades alone don't make a business successful, that should help eliminate any doubts that Lucid is selling a top-quality product. Its management team also has an excellent pedigree, as CEO Peter Rawlinson joined Tesla in 2009 and was the chief of the Model S, Tesla's first mass-produced EV.
Lucid's EVs also beat the competition in arguably the most important metric for EV performance: Range. The Lucid Air offers a range of 516 miles, beating the Tesla Model S by nearly 30%, and making it the longest-range EV on the market. That also means that Lucid owners don't have to wait as long for an equivalent charge, a key time-saver.
Considering range anxiety is one of the top-cited reasons for not buying an EV, Lucid's range of over 500 miles clearly gives it an advantage over the competition, and that technology would likely be in demand by a potential acquirer.
The company will have to execute on its manufacturing plan and build demand for its high-priced vehicles. But its range technology and high-quality vehicles should put a floor on the stock, as its technology would be appealing to another EV manufacturer either in an acquisition or a strategic partnership.
The better EV stock to buy
While Rivian is trying to make a mark in the all-electric pick-up truck and SUV market, Lucid is going all out in the luxury electric car segment. Both companies, therefore, have something unique to offer to investors in EV stocks.
RIVN PS Ratio data by YCharts
That said, Rivian appears to be the more promising EV maker right now, given its production numbers and visibility to turn a positive gross profit in 2024. To top that, Rivian stock is also cheaper than Lucid in terms of price-to-sales ratio, making it more appealing for investors in EV stocks.
