While electric vehicle manufacturers like Lucid (NASDAQ:LCID) theoretically support environmentally responsible initiatives, the acceleration of this narrative brought on by Russia’s invasion of Ukraine presents a double-edged sword.
True, LCID stock cynically benefits from much greater interest in alternatively “fueled” cars. On the other hand, the suddenly spiked demand profile pressures lithium supply chains, which isn’t a good development for the long haul.
In the time before the “special military operation,” Russia had a somewhat stable relationship with its western partners. For instance, the landmark Nord Stream 2 pipeline, which would have connected Russian natural gas directly with German infrastructure, enabled myriad countries to have a lax attitude toward energy security and independence. Surely, the Kremlin wouldn’t be as reckless to abandon such lucrative partnerships?
Alas, the Russians eschewed sound economic networks for territorial ambitions, leaving the modern global order in disarray. At the same time, Moscow’s actions have spiked fears among western nations, thus causing a fast-tracking of clean and renewable energy initiatives. Part of this broader effort will involve transitioning away from combustion-powered cars (which invariably benefits the Russian economy) to EVs.
But the problem here is that too much demand for EVs will necessarily increase demand for lithium, which undergirds EV battery technology. Unfortunately, lithium mining is water intensive — and the world may be running out of the most precious resource, or at least the clean, usable variety. Therefore, LCID risks getting caught in the geopolitical crossfire.
Essentially, too much demand for EVs isn’t good for the planet, particularly with current-generation technology. But western nations are committed to suffocating Russia’s economy by attacking its hydrocarbon exports. Well, enacting such an ambitious geopolitical goal can’t happen without implementing energy alternatives, which then raises questions about planetary wellbeing.
Fortunately for LCID stock, the underlying company focuses exclusively on ultra-premium luxury EVs. Therefore, the company is more geared toward quality than quantity — thus mitigating its contribution to lithium-mining-based environmental damage. So, once again, Lucid finds itself as one of the most relevant ideas in the EV space.
That’s not to say that LCID stock is an easy buy because clearly, that’s not the case. Further, the volatile conditions in the market suggests that investors have adopted a risk-off attitude. However, the fundamental profile for Lucid hasn’t really changed much.
Again, the company is focused on quality over quantity. Thus, even when stacked up against the environmental impact angle, Lucid arguably comes out better than most.
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.