Wall Street Loves This EV Stock. Here's Why I'm Not Buying.
Key Points
Lucid still lacks an affordable model for consumers or robotaxi operators.
Future EV sales will rely on lowering the cost of production.
- 10 stocks we like better than Lucid Group ›
Tesla (NASDAQ: TSLA) CEO Elon Musk recently shared that the upcoming Tesla Roadster will be the last new Tesla model you can drive yourself. Afterward, Tesla's newer models will be designed for completely autonomous driving.
Robotaxis are now expected to reach scale in large metro markets by 2030. "Overall, experts expect that robo-taxis will be the first commercial application for L4 in mobility -- not privately owned cars," concludes McKinsey & Co.
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Selling EVs in the future requires not only attracting consumers but also enticing robotaxi operators to buy your vehicles en masse to power their robotaxi fleets. On this front, Lucid Group (NASDAQ: LCID) is at a particular disadvantage versus the competition.
This is why I'm avoiding Lucid Group stock
According to some experts, robotaxis could become a $10 trillion global market. Robotaxi operators like Tesla can manufacture their own vehicles, reducing cost and improving their ability to scale quickly. Robotaxi peers such as Uber Technologies, however, lack internal manufacturing capacities. They will need to source vehicles from third parties to power their autonomous vehicle networks.
Similar to Tesla, these robotaxi operators will want to keep costs as low as possible to scale as quickly as possible. That requires suppliers of robotaxi vehicles to build economies of scale and lower their own production costs in order to provide these vehicles to robotaxi operators at attractive prices.
Image source: Getty Images.
Tesla, of course, can already produce vehicles for itself cheaply. Rivian, meanwhile, recently launched its first model priced under $50,000. Lucid, however, still lacks an affordable model. And its production capacities severely lag those of Tesla and Rivian, reducing the company's ability to hit economies of scale.
Lucid's lack of scale and affordable models hasn't stopped robotaxi operators, including Uber, from signing deals with the company. But when it comes to becoming a critical supplier to the robotaxi industry, an EV stock like Rivian is far ahead of Lucid. This alone is enough to prevent me from investing, even though several Wall Street analysts remain bullish on the company's future.
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Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends Uber Technologies. The Motley Fool has a disclosure policy.
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