NIO vs. Lucid Motors: Which Electric Vehicle Stock is a Better Choice?

The electric vehicle (EV) space has experienced a volatile 2021, after gaining massive momentum last year. Further, EV stocks based out of China have experienced a higher degree of volatility, as the country continues to crack down on its publicly traded companies, making investors all around the globe extremely nervous.

However, the pullback could provide investors a chance to buy quality growth stocks that are part of a market expanding at a rapid clip. As several countries around the globe are supporting infrastructure investments for EV players, these stocks have a chance to deliver market-beating returns to investors in the upcoming decade. 

Keeping these factors in mind, let's compare two EV stocks in NIO (NIO) and Lucid Motors (LCID). 

NIO stock is down 30% from all-time highs

After gaining over 1,000% in 2020, NIO stock is now down 30% from record highs. In the second quarter of 2021, NIO deliveries stood at almost 22,000 which was a growth of 100% year over year.

NIO has a long-standing partnership with state-owned Jianghuai Automobile that has a production capacity of 120,000 units. This collaboration has offered multiple cost benefits for NIO over the years. The EV leader has increased sales from $770 million in 2018 to $2.55 billion in 2020.

Wall Street now forecasts sales to double again in 2021 to $5.41 billion in 2021 and rise by 65% to $8.91 billion in 2022. This spectacular growth in the top-line will allow NIO to narrow its losses from $0.73 per share in 2020 to $0.08 in 2021.

NIO’s vehicle sales surged close to 500% year over year to $1.13 billion in Q1. Comparatively, total sales were up 482% at $1.21 billion. The company’s gross profit in Q1 improved to $237.3 million, compared to a gross loss of $26 million in the year-ago period. The improvement in gross margins allowed NIO to narrow its operating loss by 81.2% year over year to $45.2 million.

NIO is already a domestic giant and has now trained its guns to gain traction in other international markets such as Europe which will be a key driver of revenue growth in the upcoming decade. Wall Street has a 12-month average price target of $56 for NIO stock which is 20% above its current trading price.

Lucid Motors stock is down 60% from record highs

Another EV stock, Lucid Motors, is trading 60% below its record highs. Despite the pullback, Lucid Motors stock is up 133% year to date. The company is still pre-revenue and is expected to ship its first luxury EV called the Lucid Air by the end of this year. It has claimed to have received 10,000 pre-orders for this EV which will generate millions of dollars in sales.

Lucid Motors forecasts to allocate $350 million in capital expenditures between 2021 and 2023 to enhance manufacturing capabilities. It aims to expand CAPEX at an annual rate of 7% post-2023. These investments will allow Lucid Motors to end 2023 with a manufacturing capacity of 53,000 units each year.

Lucid Motors has claimed the Lucid Air EV has a range of over 500 miles on a single charge which is on par with peers.

The verdict

It’s difficult to compare the valuations of NIO with Lucid Motors, due to the latter’s lack of revenue and earnings. However, if Lucid Motors can race towards profitability while growing top-line at a stellar pace, expand its portfolio and enter other markets, its stock can crush the broader indexes and derive multifold returns in this decade. However, it also carries substantial risk given the stock is already valued at a market cap of $38 billion without a dollar in sales.

Therefore, for the more conservative investors like myself, I like NIO more at this time, as the company also offers the potential to outpace its peers and the stock has recently taken a dip, which allows cheaper entry points.

NIO shares were trading at $44.68 per share on Tuesday afternoon, down $0.53 (-1.17%). Year-to-date, NIO has declined -8.33%, versus a 19.22% rise in the benchmark S&P 500 index during the same period.

Aditya Raghunath is a financial journalist who writes about business, public equities, and personal finance. His work has been published on several digital platforms in the U.S. and Canada, including The Motley Fool, Finscreener, and Market Realist.

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