The share of electric vehicles in total automotive sales in the U.S. increased sharply in recent years, supported by favorable government policies and the steady improvement in the efficiency of battery-powered vehicles. It is an undeniable fact that Tesla, Inc. (NASDAQ: TSLA) has played a key role in popularizing electric cars, thanks to its cutting-edge technology and business strategy that brought EVs to the mainstream.
As Tesla’s CEO Elon Musk continues to expand his empire, new players like Lucid Group, Inc. (NASDAQ: LCID) and Rivian Automotive, Inc. (NASDAQ: RIVN) are making inroads into the market that remains largely untapped. Currently, the EV industry seems to be at the threshold of a big leap, thanks to the growing demand and subsidies offered by the government to promote the green cause. Interestingly, most of the legacy automakers have also ventured into the EV space, adding to the competition.
Tesla, Inc. Q3 2021 Earnings Call Transcript
The market will be keenly watching the performance of the upcoming EV comapnies this year, considering the need for more vehicle models across categories to meet the high demand. While curbing Tesla’s dominance, the new players have the bigger responsibility of bringing out vehicles that are more innovative and affordable. It is estimated that EVs would account for about 14% of the auto market in the next four years.
Capacity Expansion
In the coming months, the industry is likely to witness a sharp increase in manufacturing capacity as the transition to electric vehicles picks up pace. With its growing manufacturing footprint, especially in Europe and China, and extensive charging network, Tesla would continue to be the preferred EV brand in the near future.
But competitors are aggressively scaling up and some of them will be in a position to grab a part of Tesla’s market share as early as next year. Tesla’s stock entered the new year on a positive note but continued to trade below last year’s peak. The recent slowdown has eased concerns that TSLA is overvalued, rather the stock has become more affordable. Despite the volatility, it remains a good long-term bet. The stock has gained 66% in the past six months.
Rivian Automotive
For Rivian, which made its stock market debut recently, the main priority is to ramp up production. Despite a strong order book, the company recently lowered its full-year guidance to reflect the capacity crunch, especially in the complex battery segment. Releasing its maiden quarterly report as a public company, the EV start-up last month said it incurred a loss of $766 million on an adjusted basis in the third quarter of 2021, as operating expenses more than doubled to $695 million. Total revenue for the three-month period was $1 million.
Investors responded negatively to the cautious outlook and the stock slid soon after the announcement. After an impressive debut, the stock has been on a downward spiral since early November. RIVN traded lower throughout Friday’s regular session. It would be a good idea to keep the stock on the watchlist until a clearer picture emerges.
As of December 15, 2021, the company had around 71,000 pre-orders for its electric pickup R1T in the U.S. and Canada. R1T, R1S, and EDV — for which Amazon.com Inc. (NASDAQ: AMZN) ordered an initial volume of 100,000 units — have been certified for sale in the U.S. Currently, Rivian is building its second domestic manufacturing facility in Georgia, which is expected to be online by 2024 with a targeted annual production capacity of around 400,000 units.
Lucid Motors
Meanwhile, Lucid Motors is just starting to deliver vehicles and generated less than $1 million in revenues in the most recent quarter. In the third quarter, customer reservations rose to 13,000, driving up the order book to $1.3 billion. It is already a richly valued company with a market capitalization of more than $65 billion. The management’s highly optimistic production target (50,000 units by 2030) has raised speculation that Lucid could become the next Tesla.
Earlier, the first look of Lucid’s EV sedan had triggered a buzz in the market for its unique design and features. The Air Dream Edition, which boasts of a higher range than the longest-range Model S, is priced above its competitors. The company has started phase-II expansion of its Arizona plant, with the aim of raising the annual capacity to about 90,000 units. Overall, things look promising from an investment perspective, but LCID is not a risk-free stock.