Lucid Motors (LCID) vs. Fisker (FSR): Which Electric Vehicle Stock is the Better Buy?
The electric vehicle (EV) market is seeing robust growth as start-ups and legacy companies boost their investments in developing EV lineups. The total market for EVs is estimated to be about $281 billion in 2021 and as user growth rises that figure is expected to soar to more than $1.3 trillion by 2028, according to Fortune Business Insights.
Indeed, many developed countries have announced plans to phase out fossil fuel cars, as well as some of the legacy companies like General Motors, which have announced plans to become full-electric vehicles manufacturers in the next decade.
As a result, most publicly-traded EV companies have performed relatively well. Indeed, the thinly-traded Kraneshare Electric Vehicles & Future Mobility ETF (KARS) has rallied by more than 30% this year, jumping to an all-time high. This growth has been driven by a company like Tesla (TSLA), whose $1.1 trillion market cap, which topped the nine largest automakers combined.
Lucid Motors is an electric car company that was launched by an ex-engineer at Tesla Motors. The company raised more than $5.8 billion from investors as it then went public in 2021 by merging with a special purpose acquisition company (SPAC) known as Churchill Capital. Saudi Arabia’s Public Investment Fund (PIC) is its biggest shareholder of LCID stock.
Lucid’s strategy is similar to that of Tesla with the company starting manufacturing of the relatively expensive Lucid Air, which costs $169,000. After sales of this luxury model build, the company then intends to use these funds to launch relatively cheaper sedans in the coming years.
Lucid started delivering the Lucid Air in the final week of October. The model received generally positive feedback from reviewers, who love it for its power, comfort, and long-range. It offers about 520 miles of range and has a whopping 1,111 horsepower, making it one of the most powerful sedans in the world.
Lucid went public without any significant earnings, therefore, analysts will be anxiously awaiting its earnings that are scheduled for November 15th. Analysts expect that the company will report revenue of $1.25 million and a loss per share of about 25 cents.
I believe that Lucid is a good investment for several reasons. First, it has a team of excellent engineers who have worked and gained invaluable experience at Tesla and they will undoubtedly use this expertise to grow the company. Second, the company has already started deliveries and the first car has received quality reviews, which should help the company as it battles other EV companies.
Third, the firm is backed by PIC, which has billions of dollars in assets under management and there is a possibility the fund will help it expand in the Middle East. This is notable since the region is well-known for its demand for luxury cars.
Finally, analysts believe that it stands a chance in its battle with other EV companies. For example, analysts at Citigroup and Bank of America are long the company as LCID stock has more than doubled since September, bringing its market cap to more than $59 billion.
Fisker Automotive is a relatively small EV company that is valued at about $4.7 billion. Unlike Lucid, Fisker has not yet started delivering cars. It is building its model, Ocean, a car it expects will hit the road in the fourth quarter of 2022. It is also building another car program known as PEAR.
Another difference between Lucid and Fisker is that the latter’s business model includes a subscription model where the company will offer consumers early access to the Fisker Ocean, an all-electric luxury SUV, via subscription for $379 a month.
Fisker has seen thousands of reservations in the past few months and in its most recent quarter, management said that the company had more than 17,500 reservations for the product. This is notable since customers have to pay a reservation fee of about $250. The company keeps 10% of these funds for customers who cancel their orders. Notably, the firm has generated these orders without spending any money on marketing.
Another positive for Fisker is that it recently entered a deal with Contemporary Amperex Technology (CATL) that will see it deliver batteries until 2025.
The Bottom Line
I believe that Lucid is currently a better buy than Fisker because of the timing of their releases. For one, Lucid is already selling cars and ramping up production. This means that the company will have gained a substantial market share by Q4 of 2022 when Fisker will begin to release its model.
Also, Lucid’s management has strong backing in Saudi Arabia, which will not only lend its financial assets but perhaps also help the company break into new markets in the region. It also has an experienced management team, with executives from companies like Tesla proving they have extensive experience in both production and marketing.
Most importantly, Lucid’s brand name is known better than that of Fisker. For example, several YouTube videos on its cars have attracted more than 1 million views as more people compare it to Tesla, lending more credibility and brand recognition to LCID.