Anyone expressing reservations that electric vehicles are the future of transportation will likely suffer, at minimum, an inbox full of nastygrams. Since I have trouble getting to the emails that matter, I’m not going to criticize EVs today, and certainly not Lucid (NASDAQ:LCID). While I’ve been hesitant on many EV players, LCID stock has always appealed to me.
I appreciate the underlying company’s lack of pretentiousness. I recall an interview with Lucid CEO Peter Rawlinson, who said he would love to serve the middle-income stratum one day. However, the current economics of EV batteries make it much more feasible to target the upper echelon of earners, because they are the ones who can comfortably afford EVs.
One of the common criticisms leveled against most EV manufacturing newcomers is that they are pre-revenue entities. What’s more, many would-be Tesla (NASDAQ:TSLA) rivals are pre-delivery entities, which makes it difficult to assess the value of LCID stock and similar investments. With the absence of data, prospective buyers have to place a lot of credence on corporate marketing materials.
This makes them risky. No reputable analyst would say otherwise. However, Lucid just took a huge step forward when the first deliveries of its Lucid Air Dream Edition model began on Oct. 30.
Lucid Targets the Rich
It often seems EV drivers have an insufferably smug air about them. Some of that hubris may be rooted in the fact that research has shown EV owners are “richer and smarter” than the general public. That headline is from 2012, but more recent studies seem to back up the narrative that EV owners tend to be more educated and have more money than the average American.
According to an EV Consumer Behavior Report released this year by the Fuels Institute, “The top demographic of 2019 EV owners are middle-aged white men earning more than $100,000 annually with a college degree or higher and at least one other vehicle in their household.”
It’s true that lithium-ion battery pack costs have been declining, contributing to more accessible pricing for EVs. But “more accessible” is a relative term.
Lucid isn’t making any pretenses about who it is targeting. Its Air Dream Edition costs $169,000, while the company’s cheapest EV starts at nearly $78,000. Even after getting a tax credit, buyers are looking at spending just under $70,000 for the basic model.
Many investors likely doubted the viability of a fledgling company charging well into the six digits for its initial offering. That’s much higher than the cost of Tesla’s Model S at $95,000. However, given the current EV market, this was the right move.
Charging times for EVs are rather onerous compared to combustion vehicles, and the country’s EV charging network is fragmented. Lower-income folks will find it harder to adjust to these issues than the rich who often have more than one vehicle.
Of course, all the right ideas don’t mean much if they don’t materialize into an actual product or service. With Lucid confirming its first deliveries of the Dream Edition over the weekend, the company’s story gains traction.
Lucid plans to build 520 Dream Editions — a play on the vehicle’s 520-mile range on a single charge. And it should begin production of its less-expensive model soon. The company says it has already received more than 13,000 reservations for its Lucid Air EVs.
The Botton Line on LCID Stock
To be fair, Lucid has many other hurdles to cross before it becomes a true competitor to Tesla. But here’s the thing: If you wait too long for confirmation, LCID stock will already be priced into the stratosphere. Those seeking a high reward will have to place a wager while skepticism still abounds.
With Lucid making its first deliveries, a core objection to LCID stock has faded away. Fortunately, you still have time to jump aboard the opportunity as management sets its sights on other criticisms dogging the company.
Pound for pound, I think LCID stock is the most-compelling EV play.
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.