- Lucid Group (LCID) is focused on addressing affluent consumers’ needs, which is more important than many people realize.
- Essentially, the transition to EVs will likely take much longer than analysts expect, cynically boding well for LCID stock.
- To be fair, Lucid is super-risky but that’s always a theme for paradigm shifts.
While electric vehicles are all the rage for their purported ability to change the future of transportation, relatively few companies will likely be standing on the podium. Arguably, upstart EV manufacturer Lucid Group (NASDAQ:LCID) will be one of them. True, LCID stock is off to a very rough start this year but the key fundamental factor — focusing on affluent consumers — may be the difference maker.
That’s not to suggest that Lucid isn’t without risks because this isn’t the case at all. On a year-to-date (YTD) basis, LCID stock has plunged over 52%. Even worse, it’s been a steady bleed, meaning that Lucid didn’t plummet based on a single event, such as a poor earnings report. This dynamic suggests that the industry itself is suspect.
For instance, sector king Tesla (NASDAQ:TSLA) is down 16% YTD, while infrastructure play Blink Charging (NASDAQ:BLNK) is down over 19% during the same period. For all the talk about EVs being the future, it seems Wall Street isn’t ready to plunk down funds on this supposedly no-brainer development. In the near term, that’s problematic for LCID stock.
Yet if you have the patience, Lucid might be worth considering. Based on its business profile — again, focusing on affluent consumers — it could have all the time in the world.
The EV Transition Will Take Longer Than You Think
Over the past several years, EV proponents have done a great job deflecting criticism of the sector. For instance, while consumers considering the vehicular transition may still be worried about range anxiety, industry advocates have noted that contemporary EVs enjoy range that’s almost on par with combustion cars.
Besides, if you have an EV that can do over 200 miles on a single charge, that’s plenty for most people, since home charging and an increasing number of public charging stations make “refueling” more convenient than it’s ever been.
Point taken. However, the one criticism that arguably few people talk about — and which I believe EV proponents have no adequate answer to — is the time component. As I’ve previously argued, the adoption rate of combustion cars and EVs are roughly the same. You wouldn’t think it considering the myriad advanced technologies we have. But the data so far suggests that full EV integration is a long ways away.
How long? If we were to extrapolate present integration rates, to reach the same saturation point for EVs that combustion cars enjoy today might take multiple decades, to the point where most of the people reading this article won’t be alive.
LCID Stock Does Not Need to Speak to the Manager
To summarize the above, most EV competitors must abandon their five-year plans in favor of 20 or 30-year plans, if not longer. As the integration rate for combustion cars demonstrated, it took about a half century from their retail introduction to the point where favorable financial dynamics and economies of scale allowed regular folks to purchase them.
But I don’t think that stakeholders of LCID stock will have to worry much. You see, Lucid can start selling their products right away once the units roll out of the factory. Lucid caters to the wealthy, who can afford whatever they want.
Indeed, the case for LCID stock is analogous to the nascent days of the automobile. You think the middle class were lining up to trade their horses for horsepower? No, it was affluent consumers who can enjoy the privilege of combustion-powered transportation. Again, it took decades for the high-volume competitors to make a dent in terms of mass integration, where almost every household could have a car.
Basically, LCID stock is the antithesis of people who want to speak to the manager. Lucid is popular on the consumer front because it caters only to those who can afford its vehicles. And since true EV affordability will take many, many years, Lucid has the luxury of time that many of its rivals do not.
Still a Challenging Buy
Of course, the consumer-focused narrative doesn’t mean that LCID stock is an easy acquisition. It’s not. Outside circumstances, such as geopolitical rumblings, economic concerns, rising inflation and aggravated supply-chain woes have hurt the entire automotive industry, including EVs.
But if you have the patience, it’s possible that LCID stock today represents an intriguing discount. Since Lucid has already captured the attention of the high-net-worth crowd, eventually aiming down the income spectrum — once technologies and economies of scale justify it — will be relatively easy. Thus, it’s worth keeping on your radar.
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.