Investing in electric vehicle (EV) stocks has become increasingly appealing as the automotive industry undergoes a transformative shift. While growth in EV sales often garners attention, a significant part of the current investor sentiment is tied to the burgeoning concept of robotaxis, a potential market valued at $5 trillion to $10 trillion globally. This article dives into one EV stock that investors should consider buying hand over fist—Rivian Automotive (RIVN)—and two others, Tesla (TSLA) and Lucid Group (LCID), that may be better left avoided like the plague.
Understanding the EV Landscape
The market for electric vehicles is still developing, with EVs representing less than 15% of total vehicle sales in the U.S. However, the rise of driverless vehicles presents an entirely new opportunity that has significant implications for automakers. Companies like Tesla and Lucid are heavily investing in developing robotaxi services, while Rivian appears focused on creating and launching new vehicle models.
Recent Developments in the Robotaxi Sphere
Tesla’s Robotaxi Launch: Earlier this year, Tesla rolled out its robotaxi service in Austin, Texas, following several years of high expectations surrounding this innovation. While Elon Musk has consistently made ambitious predictions about Tesla’s autonomy capabilities, historical trends suggest that achieving full self-driving may take longer than anticipated.
- Lucid’s Partnership with Uber: In a notable move, Lucid Group announced a partnership with Uber to supply over 20,000 vehicles over the next six years for its robotaxi operation. This collaboration aims to leverage Uber’s existing infrastructure to accelerate the rollout of autonomous vehicles into the market.
Although these developments have sparked excitement and led to spikes in respective stock prices, a closer examination reveals significant uncertainties involved.
Evaluating Stock Valuations
Despite the excitement surrounding robotaxis, investor sentiment should be tempered with reality.
Tesla’s Valuation: Tesla currently trades at around 15.4 times its sales, despite experiencing a decline in revenue this year. This high valuation reflects the premium placed on the company’s potential to dominate the robotaxi market, which may not materialize in the short term.
Lucid Group’s Valuation: Lucid trades at approximately 7.6 times its sales, indicating investors also have high expectations for its autonomous vehicle capabilities.
- Rivian’s Advantageous Position: Rivian stands out as it trades at much lower valuation multiples, around 3.6 times sales. This valuation suggests that the market is currently undervaluing Rivian’s growth potential, particularly as it gears up to launch more affordable vehicle models.
Rivian: The Stock to Buy Hand Over Fist
Rivian is positioned uniquely in the EV market. Unlike Tesla and Lucid, which are heavily marketed on their robotaxi capabilities, Rivian is focusing on a well-defined growth strategy that emphasizes building a solid vehicle lineup. The company plans to launch three new models, all priced under $50,000, early next year. Since a significant percentage of prospective car buyers lean toward less expensive options, Rivian’s strategy aligns well with market demand.
Quality Focus: Rivian has aimed to build luxury vehicles initially to create a reputation for quality. This strategy allows the company to build a loyal customer base that could later transition to more affordable vehicles.
Future Growth Potential: As Rivian prepares to roll out these new models, it seems well-positioned to capture a larger market share, particularly as consumer preferences lean toward value-oriented options. Tesla has not introduced a new affordable model in over five years, indicating a delay in expanding its offerings.
- Execution of Core Strategy: Rivian’s focus on executing its established strategy bodes well for the future. It appears that the market has not yet fully appreciated Rivian’s potential, making it a compelling buy.
Tesla and Lucid: Risks Outweighing Rewards
While both Tesla and Lucid present exciting possibilities, specific factors suggest these stocks may not be the best investments at this time.
High Valuations: Both companies’ stocks are trading at high multiples that reflect investor expectations for robotaxi gains. If these gains do not materialize as expected, stocks could face significant downward adjustments.
Technological and Regulatory Hurdles: The robotaxi concept may take several years to mature. Current regulations may not be conducive to a rapid rollout, and technological advancements in autonomous driving are still catching up to market expectations.
- Competitive Landscape: Rivian’s focused approach to producing affordable models may enable it to gain traction more rapidly than rivals who are concentrating resources on uncertain robotaxi ventures.
Conclusion
As the electric vehicle market continues to evolve, the appeal of robotaxis cannot be understated. However, the current excitement often overshadows the practical realities of the automotive sector’s timeline for advancements and full automation.
For investors considering which EV stocks to buy or avoid, Rivian stands out as a more stable choice focused on growth through affordability and quality. Conversely, Tesla and Lucid carry risks tied to high valuations and questionable timelines for achieving significant milestones in their robotaxi initiatives.
As the market continues to evolve, it will be crucial to monitor these companies closely. But as of now, one confidently can say that Rivian is indeed the stock to buy hand over fist, while Tesla and Lucid may be best left alone for the time being.
