In some ways, premium electric vehicle brand Lucid (NASDAQ:LCID) has become a tale of two cities. On one hand, 2021 was the year of LCID stock, with shares returning just a hair under 279%.
But on the other end of the scale, the equity unit’s performance over the trailing month – down nearly 26% – left prospective buyers scratching their heads.
If you fall into the latter camp, I think it’s a reasonable sentiment. It’s not just that EVs still represent a rather nascent industry with plenty of risk factors affecting it. Rather, it’s also because if LCID stock lost this much, it raises the prospect that a greater discount is in store.
While I’m not going to give price targets, it’s possible that if LCID stock can’t get above its 50-day moving average – a common gauge of nearer-term market strength – then weak-handed stakeholders could reduce their exposure. With the Federal Reserve signaling rate hikes in 2022 to address soaring consumer prices, it’s not out of the question for investors to rotate into safer, more reliable investments.
Such a circumstance could see LCID stock dip to its 200-day moving average, a common longer-term market health gauge. But if that were to pan out, I’d really be tempted to take a nibble. Unlike so many other EV-related competitors to Tesla (NASDAQ:TSLA), Lucid started its operations with a viable strategy.
I’d argue – given where EV technology is now – it was the only strategy to go up against a giant like Tesla.
Unique Approach to Positively Set Apart LCID Stock
With many other Tesla rivals – including the upstarts and the traditional automotive manufacturers – you get the impression that they’re reacting to the burgeoning EV sector rather than considering adding something distinct to its development.
That’s no knock against these competitors. If anything, Tesla should be praised for lighting a fire under the feet of the entire auto industry. Sometimes the best change happens under pressure.
However, what stands out for those willing to take a stab at LCID stock is the underlying ethos. According to a May 2017 article by TechCrunch, Lucid’s vice president of design Derek Jenkins envisioned how its EVs would integrate with another burgeoning sector, the sharing economy. Per the report:
That guided the design of the car from the very start, with Lucid aiming to create the first luxury car that was actually made from the ground-up with car-sharing in mind. It’s why when you sit in the backseat (the top trim back seat, at least), you feel like a first class passenger. But since it’s a car designed to span both the age of the driver and the age of driverless vehicles, with eventual plans to upgrade its software to offer full autonomy, the cockpit also feels comparable to luxury driver-focused vehicles.
But the harsh reality is that until it scales up significantly, the sharing economy largely benefits the well-to-do folks. I mean, people nowadays dial up ride-sharing services, I get that. However, those who take advantage of such rides frequently – along with other services like food deliveries – have the money to do so.
That’s why I can’t help but like LCID stock despite its challenges. The underlying company had the right idea from the get-go.
Struggles for the Average-Income Competitors
That’s not to say that Lucid won’t eventually compete for more budget-minded consumers. As well, I don’t want to outright impugn the viability of EV manufacturers vying for average-income households. However, the current cost and scale of EVs and battery technology has meant that the latter category faces tough challenges.
Arguably, the least of those challenges is competition. After all, if average-income consumers can’t afford EVs, it really wouldn’t matter how many similar-priced options are available.
But LCID stock also gains fortuitously from the coronavirus pandemic. As consumers panicked and basically bid up used car prices due to the global supply chain crunch, it’s possible that EV integration may have been delayed several years as a result.
After paying such outrageous prices, I doubt that most Americans will then transition to EVs. First, they’ll run their combustion vehicles they acquired at a premium to the ground (where it would then make sense to pay such a premium in the first place), then they’ll consider going electric.
But you know who doesn’t care about such problems? Rich people. And they’re exactly the category Lucid is targeting, which bodes well for LCID stock.
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.
