Lucid Cuts Through the Chatter as the Only Legit Anti-Tesla Play

  • Lucid (LCID) brings home some excellent news, confirming yet again that it can realistically stand up to its top rival.
  • While myriad electric vehicle competitors have come out of the woodwork, LCID stock may be the most viable upstart opportunity.
  • It all comes down to the realities of our current economic profile, which benefits Lucid at the expense of many other companies.
Someone is viewing a red Lucid Air car on a computer screen while holding a phone that says Lucid

Source: T. Schneider / Shutterstock

While electric vehicles (EVs) may be the future of transportation, arguably few have the power to take on the giant of the sector. This brings us to Lucid (NASDAQ:LCID), an unapologetic company geared toward the most affluent of consumers. Lucid approaches EVs with a business-first ethos. That is the main reason why I speak positively about LCID stock.

From an EV perspective, there’s absolutely nothing wrong with being automotive-woke, so to speak. As Lucid Chief Executive Officer Peter Rawlinson once stated, he would love for Lucid to eventually reach the average-household-income crowd, as it would logically entail that EV integration has gone mainstream. However, Rawlinson also recognizes economic realities. And the latest news to jumpstart LCID stock — the Saudi Arabia deal — reflects this mindset.

The Saudi government “agreed to buy up to 100,000 Lucid EVs over the next 10 years,” per a CNBC report. Further, the “deal is for at least 50,000 vehicles over that time, with Saudi Arabia’s Ministry of Finance having an option to purchase up to 50,000 more.” According to a Lucid press release, deliveries will begin next year.

Now, let me gently address the giant pink elephant in the room: Saudi Arabia, though it’s gradually warming to at least 20th century norms like letting women drive, is not exactly a bastion of freedom and democracy. But it’s got the money to spend.

LCID Lucid Group, Inc. $18.32

LCID Stock and the Focus at the Top

While I do like LCID stock from a long-term perspective, on a year-to-date basis, it’s down 51.6%. In other words, my words about Lucid being a good idea has, in 2022, been utterly wrong. Nevertheless, I’m not in a mood to capitulate. If anything, I might start thinking about putting my money where my mouth is.

You see, a lot of EV competitors talk about Tesla (NASDAQ:TSLA), the undisputed king of the EV sector. It has Elon Musk, who can essentially walk on water at this point. More importantly, Tesla is a brand with serious social cachet.

To address this dynamic, other competitors — both upstarts and legacy auto manufacturers making the e-pivot — have focused on relatively reasonably priced EVs. A few of them will succeed, in my opinion. But for now, the EV sector is still in the very early stages of integration based on an analysis I conducted for InvestorPlace. Early stage equates to “unrefined” economies of scale, ultimately posing huge consumer pricing challenges.

This circumstance means that average-income households won’t reasonably be able to afford EVs. But with LCID stock, the situation solves itself due to the underlying business profile.

Upwind First, Then Downwind

As much as Lucid would love to go economically woke — that is, to be a frontrunner in the mainstream integration of EVs — it will only do so if the underlying circumstances make sense. Right now, they don’t. Therefore, the only people that can make the transition to electric are the households privileged enough to do so.

Frankly, that suits LCID stock just fine.

Based on information from Dot.LA, the “average transaction price for a new EV climbed to $60,054 in February, according to Edmunds—more than $1,800 above the average MSRP (manufacturer’s suggested retail price).”

Most families will likely balk at the $60,000 price tag, considering that the U.S. median household income is $67,521. Do you know any financial advisor that recommends you pay 89% of your annual income on a car? If so, you should probably report that person to the authorities.

Here’s the thing: Lucid’s cheapest model starts — yes, starts — at close to $80,000. If you’re balking at $60,000, you’re not even in the realm of anything to think about $80,000. Which again, suits LCID stock just fine. Lucid isn’t marketing to households making $67,000. Instead, it’s probably aiming for consumers who make at least three times that amount.

It’s Nothing Personal, it’s Just Business

I don’t doubt that as soon as the market is ready for it, Lucid can transition to lower-priced models. In that scenario, it may establish a fighter brand, similar to what Toyota (NYSE:TM) does with its Lexus luxury lineup versus its “regular” namesake identity.

But for now, Lucid is targeting the richest consumer bases because of economic realities. That’s it. It may not be the most pleasant ethos considering societal awakenings toward structural inequities. But structural inequities don’t pay the bills.

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 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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