Final Project
Battle of the EV’s
Paul Brotz
Lakeland University
BA 780 Managerial Finance
Dr. Mitchell Miller
Fall semester 2022
Battle of the EV’s
Introduction
Electric vehicles are here, and they are here to stay. Governments all over the world are
encouraging electric vehicle makers through subsidies and regulations, and consumer demand
is backing these initiatives. When electric vehicles were first manufactured, the limitations of
high initial costs, low battery range, and less environmental concerns stagnated the market.
However, in the last decade, many original manufacturing equipment companies have begun
making substantial investments into electric vehicle manufacturing and battery technology.
There is no question that electric vehicles (EVs) are the way of the future for
transportation, and while advancements in battery chemistry and new materials may continue,
the trend is unstoppable. Many traditional automobile manufacturers such as General Motors,
Ford, and Volkswagen have all introduced fully electric vehicles into their lineups, and some
manufacturers plan to go fully electric within five to ten years. Consumers do not have to wait
that long however, as there are already a variety of electric automobiles offered by many
companies. The boldest of these companies are pinning their entire success around electric
vehicles and have never manufactured a traditional gasoline engine vehicle. The most obvious
example is Tesla, but there are now other competitors who have entered the market. Namely,
Rivian Automotive, Inc. and Lucid Group, Inc.
Rivian Automotive, Inc. History
Rivian was founded in 2009 by CEO RJ Scaringe who is an MIT graduate and was
originally named Mainstream Motors. Scaringe has been an avid outdoorsman his whole life,
and early on he knew that he wanted to make a difference in the world in terms of
environmental sustainability. This thought process is directly adopted by Rivian, who places a
focus on the environment and sustainability and its goal to make a difference, over everything
else (Lambert et al., 2022).
Right from the start Rivian was heavily invested in both electric vehicles as well as
autonomous driving technologies. In 2011, Rivian unveiled a small electric coupe that was a
working prototype, but for unknown reasons the entire project was scrapped. Most likely this
decision was based on market demand for certain types of vehicles, as well as what other
electric vehicle manufacturers were planning to offer, as the next project to come from Rivian
was an SUV (Lambert et al., 2022).
By the time 2015 rolled around Rivian had secured enough financing to begin running
research facilities in the Bay Area of California, as well as in Michigan. Rivian thought it a good
idea to locate their headquarters close to suppliers who are in the Midwest and established
their headquarters in Michigan (Lambert et al., 2022).
Then in 2017 the company purchased a Mitsubishi manufacturing facility for $16 million
in Normal, Illinois, which was to become their North American manufacturing hub. Doing this
came with some benefits granted by the state government in the form of tax abatement and
grants. This was done due to Rivian bringing jobs to Illinois, even though at the time the
company employed less than 200 people. Around this same time Rivian decided to move their
headquarters and research facilities to Irvine, California. These actions seem to signal a slow
departure from the Midwest and concentrating the majority of efforts in California. It was also
at this time that Rivian’s first two prototypes, the R1T pickup and the R1S SUV, were
completed. These vehicles were put on display at the LA Auto Show with the company telling
enthused onlookers that production would begin in 2020 (Ferria, 2022).
Two years later in 2019 is when Rivian began seeing large investments come in from
influential groups such as Amazon and Ford Motor Company. By this time, the company had
grown to over 1,000 employees and had facilities in Michigan, Illinois, California, and the UK.
The first to invest in Rivian was Amazon, with a substantial $700 million. On top of that,
Amazon ordered 100,000 electric vans from Rivian as well. Not long after, Ford Motor Co.
infused Rivian with a healthy investment of $500 million, pledging to work with Rivian in
developing vehicles and owning about 13% of the company. Once the pandemic took hold, Ford
terminated the contract and took back their $500 million investment and brought its own
production back in house. Regardless, the two companies remain amiable and plan to work
together in the future (Ferria, 2022).
Since then, Rivian has continued to see massive investments from outside groups.
Including $350 million from Cox Automotive, as well as a massive $3 billion from T. Rowe Price.
This has helped Rivian to grow to a value of nearly $28 billion by this point (Lambert, 2022).
The year is now 2021 and Rivian has began delivering on the 100,000-order amazon has
placed, with fully electric delivery trucks first being seen in Los Angeles, and then in San
Francisco some time after. In total, 16 cities are planned for the first 10,000 truck deliveries to
Amazon. Over 1,000 R1T trucks have been delivered to non-employee customers in 2021, with
production to increase rapidly into 2022. This was a huge success for Rivian, as they were the
first automobile manufacturer of any kind to offer a fully electric truck to the public. (Hawkins,
2022).
Rivian today is a company that is racing towards expansion and not slowing down at all.
Facing the pandemic head on, Rivian went public in November 2021, raising $13.5 billion, and
reaching a company valuation of $66.5 billion (Ferria, 2022).
Lucid Group, Inc. History
Lucid Motors, formerly known as Atieva, was founded in 2007 and bases its operations
out of Newark, California, which happens to be near Silicon Valley. In its inception, Lucid was
focused not on producing whole electric vehicles, but rather on components of electric vehicles
such as batteries and electric powertrains which would then be used by other auto
manufacturers. Lucid achieved over 50 patents pertaining to its core battery system, and in this
regard, they were successful (Lambert et al., 2022).
By 2013, Lucid was a successful and highly capable manufacturer of connected battery
packs and electric powertrains. This was when they began considering the idea of developing
and producing an electric vehicle totally in-house. Peter Rawlinson joined the team as Chief
Technology Officer at that time. Previously, Rawlinson served as Tesla's Vice President of
Vehicle Engineering and Chief Engineer for the Model S (Lambert et al., 2022).
Starting in 2014, Lucid received a nine-figure round of funding to develop its own
complete electric vehicle. This included investments from companies such as Venrock, Mitsui,
and JAFCO, all of which are still shareholders today. Lucid then built a custom, 900 HP
powertrain test vehicle, according to their website. Its exterior was purposely unremarkable to
keep it undercover, but it could reach 60 mph in 3 seconds and has "a driving range that far
exceeds today's range limitations" (Lambert et al, 2022).
It wasn’t until 2016 that the company officially rebranded themselves as Lucid Motors
and were no longer recognized as Atieva. This was in combination with the announcement of
plans to produce an all-electric luxury vehicle and to begin building a first-of-its-kind 590-acre,
$700 million purpose-built manufacturing facility in Casa Grande, Arizona. This plant is known
as AMP-1, Advanced Manufacturing Plant 1. This is where the Lucid Air, the company’s flagship
vehicle will be produced, along with other future vehicles. It is a special plant, as it was
designed and built with future growth in mind (Mijatović, 2022). Peter Hochholdinger, the VP of
manufacturing for Lucid states:
“As we add new platforms and vehicles to our lineup, the planning that went into this
facility ensures that we will always be able to keep up with growing customer demand for
advanced electric vehicles.”
In reviewing Lucid’s manufacturing plant and hearing about the company’s ambitious
plans, the potential for growth is evident. The Lucid Air luxury sedan is in phase 1 of production
at this time, with Lucid planning to manufacture 34,000 vehicles per year by November 2021. In
addition to this plant, Lucid also has a nearby powertrain factory which manufactures modules,
battery packs, inverters, drive units, and Lucid’s charging unit named the wunderbox. After
manufacturing, these components are then shipped 6 miles to AMP-1 for final assembly
(Lambert et al, 2022).
Lucid Motors intends to build its Casa Grande facility in four phases, totaling an
estimated 5.1 million square feet and eventually producing 400,000 vehicles per year. Phase 2
of the AMP-1 facility is set to provide the necessary room to produce Lucid’s upcoming Gravity
SUV. With this expansion, vehicle production is expected to reach 90,000 units. Importantly,
this phase should also help Lucid break into the European market (Mijatović, 2022).
In 2019, Lucid Motors named Peter Rawlinson CEO, while retaining his previous position
as CTO. In February 2021, Lucid confirmed rumors that a SPAC merger with Churchill Capital
Group lV had taken place. This deal brought in a needed $4.4 billion in cash and gave Lucid a
$24 billion valuation. Up until this point, Lucid has yet to deliver a finished vehicle to any
customers (Lambert et al., 2022).
The Lucid Air was first supposed to begin deliveries in spring of 2021, but it took until
October until Lucid Airs were rolling off the assembly line. This delay was to ensure the first
round of Airs were of top quality. While Lucid entered the market with a product that other
companies had already done, it did so with some key advantages. The Lucid Air was now the
fastest production electric vehicle ever produced, with the longest range at 520 miles. As the
Air is planned to continue being mass produced at Lucid’s AMP-1 factory, the company also has
plans to expand the Air with four variations to be released soon (Lambert et al,. 2022).
Compare & Contrast
Both companies are pioneers of electric vehicles in their own rights, with exhibited
performance and lofty goals. Looking at the hard numbers can shed light on the situation in a
way that carefully constructed company statements do not.
Return On Equity (ROE): ROE is calculated by taking income and dividing it by average
shareholder equity. You can find income on the Income Statement, and you can find
shareholder equity (the difference between Total Assets and Total Liabilities) on the Balance
Sheet.
Lucid Motors: The most recent valuation of Lucid Group shows a ROE of -39.146. This is worse
than the industry average which sees companies like GM at roughly 11.66% ROE, BMW Group
at 14.8%, and Daimler at 17.9%.
Rivian Automotive: The most recent valuation of Rivian Motors shows a ROE of -76.34%. This is
significantly worse than the industry average which sees companies like GM at roughly 11.66%
ROE, BMW Group at 14.8%, and Daimler at 17.9%.
Simply looking at the most recent ROE numbers, Lucid would appear to have a healthier
standing. However, looking at historical ROE numbers, Rivian typically has faired better and the
recent jump up to over -76% demands further investigation.
Total Debt: This is ascertained by combining your current and long-term liabilities.
Lucid Motors: Has a current total debt in the amount of $2.34 billion. Lucid’s 10-k shows Net
loss and comprehensive loss in 2019 as (277,357), 2020 as (719,568), and 2021 as (2,579,761) in
thousands.
Rivian Automotive: Has a current total debt in the amount of $1.76 billion. Total debt as an
industry averages around $114.2 million. Both companies are substantially higher than the
industry average, with Lucid motors having 1.33 times the debt of Rivian. Rivian’s 10-k shows a
Net loss in 2019 as (426), 2020 as (1,018), and 2021 as (4,688) in millions.
P/E Ratio: The P/E Ratio is ascertained by taking the current share price and dividing it
by its most recent earnings per share (EPS).
Lucid Motors: Had a 2021 actual P/E ratio of -1.86, which is significantly lower than the industry
average of 4.31. Lucid’s projected 2022 P/E ratio is -8.14, with a 2024 projection dropping to 12.47.
Rivian Automotive: Had a 2021 actual P/E ratio of -1.94, which is significantly lower than the
industry average of 4.31. Rivian’s projected 2022 P/E ratio is -3.84, with a 2024 projection
dropping all the way to -9.58.
Neither of these companies produce P/E ratios that would entice traditional investors,
and the numbers displayed require further investigation and consideration before determining
if the company has good prospective future growth. The negative P/E ratios displayed mean
that these companies had negative earnings or are losing money. With further investigation
investors will find that both companies are in their infancy and just started offering products for
sale, so these poor numbers are understandable and maybe even expected.
Further evaluations:
The most recent revenue reports state that Rivian surpassed $1.05 billion, and Lucid
yielded over $376 million. Rivian having almost three times the revenue as Lucid could signal
that they are further along in growth and are closer to being a profitable company. With both
companies being so new, these numbers will change, but for now Rivian has the clear
advantage. Gross profit for both companies is relatively even when compared to their
revenues. With Rivian coming in at -$465 million, and Lucid at -$127.79 million. Both companies
have strong volume, with Rivian coming in at a 10-day average of 12.17 million, and Lucid at a
more significant 21.14 million. The volume of shares traded by both companies is enough to
give investors confidence that the movements are true and not manipulated easily.
Shorted shares tell a little more about investor attitudes towards the companies.
Investors of Lucid have shorted 22.45% of the float, which is considered very high. Investors of
Rivian have shorted 12.23% of the float, which is considerably less than Lucid. It is clear that
investors have less faith in Lucid becoming a successful company compared to Rivian, although
both are very risky ventures.
Lastly, the book value of one company looks much better than the other. The book
value per share is the ratio of equity available to common shareholders divided by the number
of outstanding shares. Lucid comes in at a somewhat acceptable 1.92, with Rivian coming in at
a concerning 16.65. These statistics show that Lucid stock could be considered undervalued
compared to Rivian’s, or that Rivian’s is simply overvalued.
Conclusion:
In the end, neither company is one I would recommend investing in, however Rivian is
the company I would feel more confident in. They are further along than Lucid in both
establishing their manufacturing processes, as well as mitigating issues and actually delivering
vehicles to customers. Rivian has proven to be more effective than Lucid in expanding its
business, and also has the full support of Amazon, who helped them through the pandemic
with financial support and have placed a large order that will surely boost revenue as soon as
possible. Lucid does have 37,000 vehicle reservations worth $3.5 billion. What this signifies is
that Lucid does not have a demand problem, but rather a production execution problem.
Sorting this problem out will see Lucid grow in a favorable way. Even the tone from
management is favorable at Rivian, with executives reaffirming production numbers for the
year. While at Lucid, executives had to forecast a cut of 50% in production in the coming year.
With one company meeting their production projections, and the other woefully not, there is
only one lucid option, and that is Rivian.
Citations
Lambert, F., Altland, R., Toll, M., Johnson, P., Doll, S., Potuck, M., Hall, Z., Post, S., Kahn, J.,
Smith, A., Bradshaw, K., Wilde, D., Romero, A., Dow, J., Crumley, B., Singh, I.,
Weintraub, S., & Lewis, M. (2022, November 27). Rivian: History, features, pricing,Specs,
more. Electrek. Retrieved November 28, 2022, from https://electrek.co/guides/rivian/
Ferria, K. (2022, September 5). History of the Rivian logo and the company. Hatchwise.
Retrieved November 28, 2022, from https://www.hatchwise.com/resources/history-of-therivian-logo-and-the-company
Hawkins, A. J. (2022, March 10). Rivian says it delivered nearly 1,000 electric trucks in 2021.
The Verge. Retrieved November 28, 2022, from
https://www.theverge.com/2022/3/10/22971092/rivian-electric-truck-deliveries-earningsq4-2021
Lambert, F., Altland, R., Toll, M., Doll, S., Espósito, F., Hall, Z., Potuck, M., Post, S.,
Campanale, P., Smith, A., Romero, A., Li, A., Kahn, J., Bradshaw, K., Crumley, B., Singh,
I., & Dow, J. (2022, November 27). Lucid Motors: Models, Specs, Price, release dates,
more. Electrek. Retrieved November 28, 2022, from https://electrek.co/guides/lucidmotors/
Mijatović, S. (2022, January 16). A brief history of the lucid air. HotCars. Retrieved November
28, 2022, from https://www.hotcars.com/lucid-air-car-brief-history/
Meindl, L. (2022, August 16). Better EV stock right now: Rivian or lucid group? The Motley
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Rivian Automotive, Inc. / De Annual Report 10-K. (n.d.). Retrieved November 29, 2022, from
https://sec.report/Document/0001874178-22-000008/
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