Lucid Group (LCID 1.01%) is a company I track very closely. I believe in its business model over the long term. Last year, the company's former CEO revealed that Lucid plans to slowly evolve from a car manufacturer into a tech supplier, and I believe that approach would come with lower capital needs, higher margins, and greater stickiness with customers.
But there's a problem: This savvy approach to business strategy doesn't necessarily make the company a wise investment. And there's one obvious reason why.
Image source: Lucid Group.
Lucid isn't a compelling investment versus Rivian or Tesla
As mentioned, I'm a big fan of Lucid's strategy to focus more on technology versus manufacturing. The only issue is that competing EV stocks, including Rivian (RIVN 3.47%) and Tesla (TSLA 0.70%), are pursuing a similar strategy. And unfortunately for Lucid, both Rivian and Tesla are better financed with bright prospects for scaling their technological visions.
Tesla's vision is clear: Invest heavily in artificial intelligence (AI) and self-driving technologies to pursue gigantic opportunities like robotaxis, a market some experts predict will eventually be worth $5 trillion to $10 trillion. While it doesn't seem as if Tesla will be marketing its technology to other carmakers, it has the capital and name recognition to pursue this opportunity purely for its own needs.
Rivian is also investing heavily in AI to fuel its autonomous driving dreams. But its strategy explicitly involves commercializing its technology for other automakers, as evidenced by its multibillion-dollar partnership with Volkswagen. Volkswagen will be explicitly relying on Rivian for the software side of its vehicle strategy.
What about Lucid? Lucid did forge an impressive partnership with Uber Technologies last year to help power that company's robotaxi arm. Importantly, however, the deal was mostly struck to supply Uber with physical vehicles, as Uber doesn't have the capability to manufacture its own fleet. But Uber will be relying on another firm, Nuro Inc., for most of its autonomous software needs.
In an industry rife with failures, Lucid has successfully secured long-term financial partners, brought several luxury models to market, and attracted deep-pocketed customers like Uber. But when it comes to AI and autonomous driving investments, both Rivian and Tesla are arguably further ahead, both on paper and in terms of actual deployments.
Tesla's $1.2 trillion market cap may scare off some investors. But Rivian's $19 billion valuation is far more palatable. That's a premium compared to Lucid's $3.2 billion valuation. But Rivian's path to commercializing its autonomy technology is much clearer. From an investment standpoint, there's simply no room for Lucid when compared to Tesla's might and Rivian's promise.
