The transition to battery-powered vehicles is well under way, with prominent automotive stalwarts shifting production and resources to making electric vehicles, and small EV start-ups developing their own models.
Despite this focus, EV stocks have been volatile over the past couple of years as vehicle and production costs have skyrocketed due to inflation and high interest rates.
That's likely left some investors hesitant to go all-in on EV stocks. But writing them all off could be a mistake. Here's why I think Rivian Automotive (RIVN 2.84%) can potentially become a long-term winner for investors, and why I have hesitations about Lucid Group (LCID +0.61%) right now.
Why Rivian is a buy
Rivian is a young EV company trying to elbow its way into a vast automotive market, facing competitors that are better funded and much more experienced. And yet, Rivian is already making a dent.
NASDAQ: RIVN
Key Data Points
The company's second-quarter vehicle deliveries of 13,790 beat analysts' consensus estimate of between 13,000 and 13,300. Revenue also jumped an impressive 82% in the quarter to $1.2 billion.
While it's true that Rivian isn't profitable yet, management has taken steps to lower vehicle production costs as Rivian moves toward its goal of becoming gross profit-positive this year. To help achieve this, Rivian recently retooled the production of its EV vans, R1T truck, and R1S SUV.
The result is fewer internal components and faster production. Rivian management says it achieved a 35% reduction in material costs of its vans and similar results for its truck and SUV.
And then there's the company's new joint venture with automotive giant Volkswagen. The two companies announced the deal last month, in which Rivian will share its in-vehicle technology with Volkswagen. In return, Rivian received an initial $1 billion investment and the potential of up to $5 billion.
The joint venture puts to rest some investors' previous concerns that Rivian would have enough cash to continue its operations in the next couple of years. Just as importantly, it shows that Rivian has already created a unique product in the automotive market established automakers want a piece of.
Finally, Rivian's vehicles are massively popular among customers. Consumer Reports ranks Rivian at the top of all automotive brands -- not just EV brands -- for customer satisfaction, and 86% of Rivian buyers said they'd be willing to purchase another vehicle from the company.
Image source: Rivian.
Avoid Lucid stock
Let me say this upfront: I like Lucid's cars. Its luxury Air sedan has won a long list of accolades for its superb design and praise for its engineering, including having the longest battery range (410 miles!) Car and Driver has ever tested.
But I think Lucid has two problems right now: It continues to burn through cash and its vehicle production continues to come up short.
Investors who've been following Lucid know that the company has received several rounds of funding from Saudi Arabia's Public Investment Fund (PIF). The most recent cash infusion came in March, to the tune of $1 billion. To date, the PIF has invested $6.4 billion.
NASDAQ: LCID
Key Data Points
The PIF has agreed to buy up to 100,000 Lucid vehicles over the next decade, but with its production still very low (more on that in just a moment), filing the large order is still a few years away.
Finally, Lucid's vehicle production has been disappointing. In 2023, production was just 8,428 vehicles, and the company expects to produce just 9,000 vehicles this year. That's a far cry from management's initial estimates made years ago when it said it would produce 90,000 vehicles in 2024.
Unfortunately, slow production has led to slow revenue growth. Sales were up just 15.5% in the first quarter to $172.7 million. That sales increase is unimpressive, and it's not nearly enough revenue for company with a net loss of $680.8 million in the quarter.
Rivian for the win, but be patient
If you're looking for the better EV stock, I'd choose Rivian over Lucid for all the above reasons. Additionally, Rivan's stock has a price-to-sales ratio of about 3.4 right now, which may be more expensive than some investors like, but it's still far cheaper than Lucid's 14.1.
Just know that you'll have to be patient as Rivian's long-term EV bet comes into focus. There will likely be a lot of volatility with its share price in the near term.
