Obviously, it’s not financial advice, I’m just a guy on the Internet sharing my thoughts. I have my personal stake in Tesla, so I’m following the EV news with interest. Recently two new American car manufacturers made their way to the stock market – Lucid Motors (LCID) and Rivian Automotive Inc (RIVN). Let’s see how they compare to Tesla – at least in my mind.
At the time of writing Tesla is a trillion-dollar company. The stock price is just over 1000USD. A few financial analysts say that Elon Musk’s company is severely overpriced (Tesla’s valuation is more than most of the legacy automakers combined), while others have their price cap set at 3000USD.
I personally think that Tesla would be overpriced if it would have been only a carmaker, but it’s not. Tesla is a software and hardware company. Yes, current revenues aren’t comparable to the market cap – here it’s fair to say investors are setting their minds on the future, and a lot of things could still go wrong.
Let’s first check a few things that are going Tesla’s way: they are a profitable company, production numbers are growing (Tesla is set to reach one million cars in 2021), two new factories (Berlin and Texas) are almost set for production and a future ‘cheap’ model is on the way.
What does draw concerns for the stock price are all the promises Elon Musk and his developers make. For example, Tesla Semi is on its way, but there are notions that the production is slowed down on purpose: remember that we’re in the battery and semiconductor crisis? And a big truck definitely takes a lot of electronics that could go on profitable Model 3 fleets.
A lot of the valuation rests on the shoulders of autonomous driving technologies, if engineers succeed and provide a revolutionary product if robotaxis start leaving drivers without a job – then a 3000USD valuation is not a fictional story.
Peter Pawlinson, CEO of Lucid Motors was an engineer at Tesla once and the Model S was created under his guidance. In short – he knows how to make an electric vehicle.
There is little doubt that the new Lucid Air is a better car than a Tesla on paper. It has a bigger range, it’s more luxurious, arguably it has better battery and engine technologies that are tested in Formula E championship.
Furthermore, it has realistic financials and business plan. When I started writing my thoughts a couple of days ago, the market cap was about 35 billion USD, now it’s getting closer to 90 billion after the first earnings call for the company.
And you know what, the earnings were really bad. Expected revenue was 1.25 million, but the reality was more than 80% less – only 232k (revenue from delivered vehicles will be recorded in Q4). What got investors buying were the fresh orders that jumped from 13k to 17k in a very short while. Now Lucid only needs to deliver them. Can they?
Their current factory is estimated to produce up to 35k vehicles a year, but so far their numbers are not even in the thousands. Reportedly, a lot of the process is still done by hand and is not yet fully automated. The CEO is confident that delivering 20k Lucid Air models won’t be a problem, though.
And problems there could be many: mechanical failure of the vehicles, scaling up production hurdles, supply chain issues, the lot.
My reasonable stock price for Lucid is at 42USD for the near future. If Lucid actually delivers its promises for 2022 and will still have money on hand, then I will actually be interested in investing in it for the long term and believe that the company could go 10x the moon.
Rivian’s loud entrance to the stock market was the trigger I made this post in the first place. Is it normal that a company without a mass product becomes the fourth valued car manufacturer in the World (second in the US after Tesla) in a single day on the public market? I don’t think so.
I understand the arguments about the future and the changing mobility technology climate, also Rivian’s involvement with Amazon (Amazon owns 1/5 of the company and has a 100k delivery van order from them), but I think a lot of young investors got a bit lost with all the meme stocks hype.
Reading the trends is great, but hard facts and numbers are important. Was there ever a company worth on the right side of 100 billion that didn’t have any meaningful revenue? Nope. When Tesla had the IPO, its valuation was just 1.7 billion and already hundreds of roadsters were moving around the Globe. Tesla did 93 million in revenue in year one. Looks like thinking critically is actually important.
Rivian’s S1 filing is a thing in itself: they suggest that they will be able to produce their 55k order list of R1 vehicles by the end of 2023. On the other hand, their facility is capable of producing 150k vehicles a year, if operated at full scale and in multiple shifts. So why do they plan to fill the 55k order only in two years (and a bit) time? Why are they writing these big numbers if the reality is looking to be different?
This is a point I remind that you have to make your own research, but in my best unrealistic estimates by 2030 Rivian would make 11 billion, that is if they scale really fast, will grow by 50% every year, and so on. Very unlikely and even then the company is overvalued by at least a half – most probably more.
The current stock price is a staggering 172USD, while I would be comfortable investing in Rivian let’s say at the similar 42USD I have set for Lucid. Something suggests that I would actually have this opportunity later.
As a bonus let’s drop a Chinese company named Nio in the mix? Their stock price is hovering around the same 42USD mark, but while the two new American companies have almost nothing to show, NIO is successfully producing 25k cars every quarter.
Yes, it’s incredibly dangerous to invest in Chinese stocks for the rest of the World (you can Google why if you don’t know), and this issue definitely brings the price of NIO down. I would safely assume that NIO could be successfully trending at a three-times higher price.
And it’s actually the same for every Chinese carmaker – BYD, Nio, Xpeng (naming the big EV ones) – what I believe will push the price of their stocks up significantly is to start successfully delivering cars to European and US clients.
Chinese carmakers have the same stigma on their cars, like South Korean cars faced a decade ago – and now look at them.