Churchill Capital Corp IV Has an Addressable Market Issue Many Haven’t Considered

Churchill Capital Corp IV (NYSE:CCIV) stock really looked promising in the early stages of its publicly traded life.

A photo of the Lucid Motors Air EV from 2018.
Source: ggTravelDiary / Shutterstock.com

As a special purpose acquisition company (SPAC) identifying electric vehicle manufacturer Lucid Motors as a reverse-merger candidate, CCIV stock was on the up and up. But various challenges to the EV sector, as well as investors de-risking themselves away from SPACs, posed serious problems.

Now, CCIV stock finds itself in a less-than-enviable position. Sure, shares are up over 97% on a year-to-date basis, that’s always a positive. But Wall Street is a business where people ask, what have you done for me lately? That answer, at least from Lucid Motors’ perspective, isn’t encouraging.

Recently, InvestorPlace contributor Nicolas Chahine retorted that stakeholders should consider selling the rips in CCIV stock. As he put it, “The main reason it won’t make my buy list yet is the lack of fundamentals. I don’t normally mind expensive stocks but I do need actual fundamentals first.”

Specifically, Chahine notes, “CCIV stock is still pre-revenue, so there are absolutely no tangibles to use for bait. The entire stock price is of hope of future successes. That’s too many variables for me to quantify. When we run out of quantifiable risk elsewhere, I will venture into the dark horses like this one.”

Personally, I’ve written generally positive analyses about CCIV stock. Where Chahine and I agree is that Lucid Motors really hits the nail on the head when it comes to their physical product pipeline. Lucid Motors EVs are gorgeous.

They’re also a benchmark for the future viability of the EV market.

That’s why I’m bullish and anxious about CCIV stock. Fundamentally — pre-revenue aside — Lucid is doing the right thing: pandering exclusively toward the upper end of the income spectrum. Basically, if Lucid fails with the rich, no one realistically can compete in the middle-to-lower income tranches.

If CCIV Stock Can’t Make It, Very Few Can

Almost everyone these days loves saying EVs are the future. And darn you into perdition for all eternity if you think otherwise. Excuse me while I ramp up my fire insurance policy but the problem with EVs is that this sector is alarmingly geared toward the rich and privileged. But it’s also the reason why I like CCIV stock.

Let’s look at even the most mundane details. Several people love the fact that many EVs qualify for federal tax credits that can run up to $7,500. On paper, this sounds amazing. Some folks might view this as the government giving you one year’s worth of free EV ownership. Because Lucid Motors is a fresh-off-the-press manufacturer, CCIV stock will presumably benefit from this credit.

But the credit is not a rebate, meaning that you need a federal tax liability to offset it. Here, the situation gets complicated.

I’m not a tax advisor and most importantly, I’m not your tax advisor. This is not tax advice. With that caveat out of the way, the median household income in the U.S. is $68,703. According to this nifty tax calculator, the tax liability on this income comes out to approximately $4,834.

So, for the median household, if they buy an EV, the credit will go up to a maximum of $4,834, not $7,500.

But who are the ones that routinely can max out the credit? High income earners and successful business owners. Subsequently, these are the types that can comfortably buy EVs in the first place.

Let’s face it — EVs aren’t cheap. That’s why CCIV stock is so crucial as a benchmark. If Lucid Motors can’t credibly attract its core rich clientele, it’s unlikely that lower-priced EV competitors can achieve success with modest income earners.

As I just demonstrated, average households don’t make enough money to benefit fully from federal EV incentives.

EV Infrastructure Benefits the Rich

I’m probably going to get scorched for this but many (certainly not all) EV advocates are masters at misdirection. I saw one YouTuber claim that the time spent on charging an EV is zero.

In her reasoning, several EV drivers charge at home and therefore, they don’t spend any time waiting for a “fill up.”

You gottta admire the moxie. Either she’s a used car salesperson or a Washington lobbyist.

This is the equivalent of a woman asking her husband if she looks fat in this dress. Of course, the answer is always no, but there’s a contextual answer and a real answer.

Both answers can occupy the same reality temporarily based on plausible deniability. But when this theoretical woman steps into an elevator with a certain maximum load, it might be a problem depending on how committed the husband is.

Likewise, EVs are skinny little things under certain contexts. But when the context changes — you forgot to charge up the night before, your spouse has an emergency and you need to pick up the kid — suddenly, you realize that no, EVs do not take zero minutes to fully charge.

And that’s when the fat ugly truth crushes the EVs-for-everyone argument.

For the rich, it’s not a problem, which is why CCIV stock makes sense. They may have a stable of vehicles, from EVs to combustion cars. Worse comes to worst, they can order pickup service from a ride-sharing app — or get their chauffeur.

When you have money, you have options. When you don’t have money, you have fewer options. Frankly, until the infrastructure and the science of EV batteries change for the better, combustion cars offer more options for less money.

So, if Lucid can’t succeed with the rich, I just don’t see how anyone it can compete with the middle-income crowd.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.


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