Better Electric Vehicle (EV) Stock: Lucid vs. Tesla

The electric vehicle (EV) market is uncertain right now, with the potential for federal EV tax credits to be canceled and some consumers choosing hybrids over electric cars.

While the transition toward an EV-centric future is taking a little longer than expected, ignoring the stocks in this sector could be a mistake. If you want to increase your portfolio's exposure to the space, would it be better to put your money toward established leader Tesla (NASDAQ: TSLA) or EV start-up Lucid (NASDAQ: LCID)?

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Lucid is hitting some potholes

Lucid recently reported third-quarter results that were less than impressive. Its losses increased to $992 million, compared to $631 million in the prior-year quarter. It's not unusual for young car companies to be unprofitable while they're building up their production, but after three years of making cars, Lucid's losses should be narrowing, not widening.

Lucid's vehicle production fell on a sequential basis. It made just 1,805 vehicles in Q3, down from 2,110 in Q2. Production increased by 16% from the year-ago quarter, but that was only a modest increase, and it won't get much better this year. Lucid's management estimates its total production for 2024 will be 9,000 vehicles, up less than 7% from 2023.

Making matters worse, Lucid sold nearly 263 million shares of new common stock on the public market a few months ago to raise capital. It also tapped its largest investor, Saudi Arabia's Public Investment Fund, for additional cash, directly selling an additional 374.7 million shares. Those secondary stock sales grossed the EV maker about $1.67 billion, giving it enough cash to keep its operations running until 2026.

It's not shocking when a fledgling start-up needs to raise money, but with Lucid burning through so much cash -- a $992 million loss in the third quarter on just $200 million in sales -- the question of whether Lucid will need yet another financial lifeline in the near future remains open.

With unimpressive production rates and widening losses, Lucid isn't offering investors much to get excited about right now.

Tesla is still taking advantage of its early EV lead

Tesla has long been a dominant force in EVs, though it has lost some ground lately. Rising competition from Chinese automakers and new EV models from traditional carmakers in the U.S. means it has to fight a little harder these days for sales, but it's nowhere near out of the competition.

In the third quarter, Tesla's sales rose 8% from the year-ago quarter to $25.1 billion, and non-GAAP earnings per share rose 9% to $0.72. While revenue was slightly below analysts' consensus estimate, earnings beat Wall Street's expectations.

The company manufactured 469,796 vehicles, up 9% from the year-ago quarter, and delivered ​​462,890, an increase of 6%. While that production increase was lower on a percentage basis than Lucid's, it's natural that as automakers grow and produce more vehicles, their production growth rates will slow.

There have been reports that Tesla plans to roll out a lower-cost EV with a base price under $30,00 next year. If it does, that could give its vehicle sales a boost. But even if it doesn't, Tesla has opportunities for additional revenue growth, including its plan to launch a Robotaxi autonomous ride-hailing service, and to expand its services like the company's Full Self-Driving Supervised system, which generated $326 million in the third quarter.

Verdict: Tesla is the better electric vehicle stock

Comparing Lucid and Tesla is difficult because Tesla is much further along in its growth story than Lucid. Still, I think Tesla is a better stock because the company continues to produce impressive quantities of electric vehicles and is profitable. Lucid can't compete on either front right now.

Tesla's stock trades at a high premium -- its forward price-to-earnings ratio is 135. That's quite expensive considering the S&P 500's average P/E ratio is about 30.7. But until Lucid stops losing money and ramps up vehicle production,​​ Tesla wins this match-up hands down.

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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.