The recent stock market trends suggest a clear preference among Wall Street’s electric vehicle (EV) start-up selections. While Rivian Automotive’s stock has only declined by 1% this year, Lucid Group’s has plummeted by nearly 25% during the same period.
- Bullish analyst ratings:
- Lucid: About 25%
- Rivian: Over 50%
Production and Performance Insights
- Lucid is set to lose an estimated $338,000 for every vehicle produced this year, according to Bloomberg Intelligence. Despite this, the company remains optimistic, anticipating the manufacture of at least 10,000 cars by 2023. However, recent analytics show that Lucid’s sales estimates for 2023 have decreased by nearly 50% over the past half-year.
- On the contrary, Rivian’s loss stands at around $110,000 per vehicle, and it forecasts a production of 52,000 units in the coming year. Their 2023 sales projections have even increased by 5%.
- Jerry Braakman, CIO at First American Trust, highlights Lucid’s struggle, stating the firm is well below the necessary pace to meet its 10,000-car target this year, causing ongoing financial difficulties.
Capital Intensive Nature of Car Making
Both Lucid and Rivian have been beneficiaries of hefty investments.
- Lucid: Backed by Saudi Arabia’s Public Investment Fund.
- Rivian: Funded by Amazon.
This financial support allowed them to hold premium valuations over other budding electric vehicle producers. Nevertheless, the situation is challenging, especially when faced with the potential of persistent high interest rates and constricted liquidity.
- Rivian recently reported plans to issue $1.5 billion in convertible debt, causing a 23% drop in its shares.
- Lucid sourced capital earlier, gaining an investment from the Saudi fund. However, such infusion typically does not resonate well with investors, as expressed by Mr. Braakman.
- Lucid’s stock declined 2.3% following a stronger-than-anticipated US jobs report, whereas Rivian’s dipped by 3.4%.
Past Glories and Current Challenges
Both companies, once regarded as potential rivals to Tesla, had their stocks soar after their 2021 public listings. This trajectory soon changed in 2022, with Lucid and Rivian’s values dropping by 91% and 89% from their peak, respectively.
Their journey has been marred by issues like supply chain disruptions and rising costs for battery raw materials. Among the two, Lucid appears more troubled this year, having sold approximately 1,400 units in each of the first two quarters. In contrast, Rivian has experienced consistent quarterly sales growth.
Debt Concerns and Competition
Bloomberg Intelligence’s credit analyst, Joel Levington, sheds light on Lucid’s potential default risk on debt payments, which currently stands at a concerning 16% – almost quadruple the average for global automotive manufacturers. Though Lucid boasts a substantial $5.2 billion cash balance, its projected expenditure nearing $7 billion by 2024 offsets positive perceptions.
As Lucid attempts to gain market share in an industry dominated by Tesla, it faces intense competition. Their luxury electric sedan rivals not just Tesla’s Model S but also models from global automotive giants like Mercedes-Benz, BMW, Porsche, and Audi.
RBC Capital Markets analyst Tom Narayan points out Lucid’s strategic misstep of targeting a niche luxury market, whereas Rivian focuses on a more expansive, accessible market. However, Narayan also mentions Rivian’s continued challenges, despite its relatively better position.
Lucid’s Response and Future
Following Bloomberg’s concerning estimates, Lucid unveiled a slightly more affordable version of its Air sedan, priced at $77,400 – a mere $5,000 reduction from its existing model. This move did not significantly impact the market’s perception, with Lucid’s stock value continuing its downward trend.
Lucid’s primary focus remains on luxury. The recently introduced Lucid Air Sapphire, manufactured in its Arizona facility, offers impressive features, including a 427-mile range per charge and a top speed of 208 mph. This luxury vehicle comes with a hefty $249,000 price tag.
The company’s financial buoyancy is largely due to Saudi Arabia’s Public Investment Fund (PIF) support, holding 65% of the common stock. As a return on investment, Saudi Arabia is constructing its first-ever car plant, anticipated to produce 150,000 cars annually by mid-decade.
While Lucid’s financial existence is secure with Saudi Arabia’s consistent backing, investors are cautioned against expecting a complete Saudi buyout of the company. Both Lucid and Rivian’s journey in the competitive EV market will be intriguing to monitor, as they carve niches and face challenges in a Tesla-dominated landscape. For a more in-depth analysis of the electric vehicle market, you can visit Bloomberg.