Lucid Group (NASDAQ:LCID) has suffered a punishing start to 2022. LCID stock has fallen more than 40% year-to-date amid the brutal selloff in speculative tech stocks and upstart electric vehicle (EV) companies.
However, Lucid Group isn’t just another run-of-the-mill untested EV company with a slide deck and a special purpose acquisition company (SPAC). Rather, Lucid has a real, serious and highly competitive vehicle starting its commercial run that could make major waves in the industry.
This week, Lucid arguably got some of the best validation possible. That’s because according to Teslarati, Tesla (NASDAQ:TSLA) was seen testing out a Lucid Air at the Fremont factory’s test track.
Despite the flood of competition in the EV market, few automakers have directly gone after Tesla’s core business. And, to be fair, there are significant differences between the Lucid Air and the Tesla Model S.
However, with the Lucid Air exceeding Tesla’s vehicle on some key metrics such as operating range from a charge, it could significantly eat into Tesla’s dominant market position. And, judging by the arrival of a Lucid Air at Tesla’s test track, Tesla appears to be taking the competition seriously. Investors probably should as well.
InvestorPlace contributor Faisal Humayun recently made the case for being patient with LCID stock. He sees a long road ahead given its recently cut production forecast and expectations that the company won’t generate positive free cash flow within the next three years.
That’s all well and true. And, as he highlights, there is a significant risk of stock dilution, as Lucid will likely have to secure additional funding to go about its growth strategy.
Humayun’s cautious outlook is warranted. That’s especially true given how dreadfully electric vehicle stocks have been trading in recent months. So many EV SPACs are now selling well below their initial offering prices. With that in mind, LCID stock is certainly a speculative pick with a price around $23 today.
That said, it might just be a risk worth taking. It seems clear that Tesla, for one, is concerned about incoming competition from Lucid. Over the next few years, it seems likely the EV industry will consolidate dramatically, with many weaker players leaving the arena.
Lucid, by contrast, appears to be in it for the long-haul. That could make it worth taking a small position in LCID stock even though it is still far from profitability.
On the date of publication, Ian Bezek 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.