Comparing Electric Vehicle Stocks: Lucid vs. Tesla

The electric vehicle (EV) market is currently facing some uncertainty. There is a possibility that federal EV tax credits may be canceled, and some consumers are opting for hybrids instead of fully electric cars.

The shift towards an EV-dominated automotive industry is taking longer than many anticipated. However, it would be a mistake to overlook the investment opportunities in this sector. If you're considering where to place your money, should it be in the well-established company Tesla (TSLA) or the newer entrant Lucid Motors (LCID)?

Challenges Facing Lucid Motors

Lucid has released third-quarter results that raised some concerns among investors. The company's losses soared to $992 million from $631 million during the same quarter last year. It is common for newer car manufacturers to experience losses as they ramp up production, but after three years in the market, Lucid's losses should ideally be decreasing, not increasing.

Production numbers were also disappointing, with Lucid producing only 1,805 vehicles in Q3, down from 2,110 in the previous quarter. Although this represents a modest 16% increase from last year, expectations for 2024 remain low, with projections of producing just 9,000 vehicles, which is less than a 7% increase from 2023.

In order to raise funds, Lucid issued nearly 263 million new shares in recent months. The company also sought additional funding from its largest investor, the Public Investment Fund of Saudi Arabia, selling 374.7 million shares. These moves generated about $1.67 billion, providing a financial cushion that could sustain operations until 2026.

While new companies often require financial support, Lucid’s significant cash burn—highlighted by a $992 million loss on only $200 million in sales—casts doubt on whether it might need more funding soon.

With lackluster production and increasing losses, there isn't much for investors to feel optimistic about regarding Lucid at this moment.

Tesla's Continued Dominance

Tesla has long been a top player in the electric vehicle sector, although it has seen increased competition recently. Companies from China and traditional American automakers are rolling out new EV models, forcing Tesla to fight harder for market share.

In the third quarter, Tesla's sales rose by 8% compared to the same period last year, amounting to $25.1 billion. Non-GAAP earnings per share also climbed by 9% to $0.72. While the revenue slightly missed analysts' predictions, earnings surpassed expectations.

Tesla produced a remarkable 469,796 vehicles, a 9% increase from last year's quarter, and delivered 462,890, representing a 6% rise. The slower growth rate compared to Lucid is understandable, as larger automakers typically experience diminishing production growth percentages over time.

There are reports that Tesla plans to introduce a lower-cost EV priced under $30,000 next year, which could further enhance its sales. Regardless, Tesla has multiple avenues for revenue growth, including its plans for a Robotaxi autonomous ride-hailing service and its Full Self-Driving Supervised system, which alone generated $326 million last quarter.

Conclusion: Tesla Appears to Be the Stronger Investment

While comparing Lucid to Tesla is challenging due to the significant difference in their growth trajectories, Tesla seems to be the more attractive investment. The company not only manages to produce a large number of electric vehicles but also remains profitable. In contrast, Lucid does not measure up on those fronts.

Tesla's stock comes with a high price-to-earnings ratio of 135, which is considerably more expensive than the average ratio of about 30.7 for the S&P 500. However, until Lucid stops incurring losses and increases its production capabilities, Tesla emerges as the preferred option for investors right now.

Electric, Vehicle, Stocks