Fortune favors the bold. Let’s hope fortune favors me when I say that it may be time to bet against Tesla (NASDAQ:TSLA) and go all-in with Lucid Motors (NYSE:CCIV) stock.
Full disclosure: We own Tesla in Innovation Investor. How could we not?
Elon Musk & Co. are at the forefront of three of the most disruptive technological shifts in the world today – EVs, solar, and battery storage.
But I’ve been putting some serious thought into a very big change in our focused portfolio, where the entire idea is to find innovative, disruptive tech companies with the potential for 2X, 5X, or 10X-plus gains.
While Tesla still has the potential for upside, we think there’s a much, much bigger opportunity elsewhere.
That change I mentioned? Selling Tesla stock entirely and going all-in with Lucid Motors (CCIV).
The idea has been nagging me for some time.
I’m growing more and more bullish on this idea that Lucid Motors is about to eat Tesla’s lunch, and that as a result, Tesla stock will struggle in the coming years while Lucid Motors stock will roar higher.
It’s a bold claim. I know. I also know the dangers of betting against someone as visionary as Elon Musk, or a company with as much talent as Tesla, or a stock with as much momentum and support as TSLA stock.
The short-seller graveyard is full of some very smart and capable folks that got suckered into betting against Elon and Tesla, and who got absolutely burned along the way.
As we always say in my business, however, past performance does not guarantee future results.
While the shorts have been dead wrong for years on Tesla stock, it may finally be their time to shine.
You see, I’ve been a huge bull on Tesla stock for years, and I have scored my readers 2,000%-plus returns in the name. So, my sudden bearish stance on TSLA does not come from a place of eternal hate for Tesla (as it does for many of the short sellers who lost big betting against Tesla).
Rather, it comes from a handful of unbiased observations that Tesla’s brand equity and perception has been diluted, while its technology advantages have been narrowed. All of which sets the stage for Tesla to lose significant market share to a new entrant.
Here’s the story
For years, the bull thesis on Tesla has hinged on three critical competitive advantages:
- Talent. As an influential visionary who everyone in the technology space looks up to, Elon Musk is a top-tech talent magnet. Historically, the smartest engineers on the planet have wanted to work for him, and at Tesla. That gave Tesla an unrivaled confluence of talent to build EVs.
- Technology. Thanks to its unrivaled confluence of talent and huge head-start in the space, Tesla cars have historically been the best-performing cars in the market, due to their market-leading battery technology which unlocked longer ranges and faster recharge times.
- Brand. Tesla is the only “cool,” sub-$100,000 price-point auto brand in the world, and the company got to that point by developing an aura of exclusivity and uniqueness that made everyone want their cars.
On the talent front, Tesla has actually lost a bunch of talent over the past few years. Some of that talent has gone on to work at other auto companies. But most of it has actually churned to start their own EV startups, on the idea that they can build cars to rival Tesla cars.
The best-of-the-best of these Tesla-inspired startups is Lucid Motors. The company is led by Peter Rawlinson, the former Chief Engineer of the Tesla Model S. Yes. This is the guy who was the engineering brain behind Tesla’s flagship car – the one that started it all.
Supporting him is an impressive team of former Tesla, Audi, Apple, Samsung, Ford, Intel, and GM execs. This is the most impressive confluence of talent in the EV industry outside of Tesla – and it’s not even close. Relative to Tesla, Lucid Motor’s management team stacks up equally.
Before 2021, you couldn’t say that about any other EV company. Tesla had an unrivaled talent advantage over everyone else in the space. That’s no longer true, because of Lucid Motors.
Now, because Lucid Motors has amassed an impressive engineering and design team to create a new class of premium EVs to rival Tesla cars, the company has developed, tested, and fine-tuned some of the industry’s most impressive technology.
To answer your question, yes, this technology rivals Tesla’s EV tech on every key performance indicator.
Over the past 10 years, Lucid has created an entirely in-house Lucid Electric Advanced Platform (or LEAP, for short), which comprises key competitive technological advantages including:
- A low-floor, wide-base skateboard EV platform which enables the company’s ultra-spacious “Space Concept” interior design and allows for more interior cabin space per square foot of vehicle platform than a Tesla car.
- An incredibly power dense drive unit that yields the most efficient battery in the EV industry with 4.5 miles / kWh (versus ~4 miles / kWh for Tesla Model S), and therefore unlocks farther driving ranges of over 500 miles (that’s on par with Tesla’s new super-premium Model S Plaid version), without compromising on performance.
- An onboard boost-charge technology dubbed “Wunderbox” that enables ultra-fast charge rates and bi-directional power delivery, which includes vehicle-to-grid and vehicle-to-vehicle charging.
This world-class technology platform is backed by 403 patents – over 80% of which are already issued.
In other words, Tesla’s tech no longer stands alone as the best in the industry. Lucid Motors features a technology portfolio that, pound for pound, rivals Tesla’s tech portfolio.
Last, but not least, there is the simple reality that Tesla is diluting its brand equity on its quest to make cars that everyone can afford.
Here’s the thing about cars: We don’t all want to drive the same car. Of particular relevance to Tesla, high-income folks want to drive nicer cars, because it’s a status symbol of their wealth.
There’s a reason Porsche, Maserati, and Lamborghini don’t make $20,000 cars everyone can afford – they want to maintain their premium brand equity. But Tesla has a dream of democratizing of EV ownership, and as a part of that dream, the company is working tirelessly to drive the price of its cars down to $20,000.
On one hand, that’s great, because it means Tesla will unlock mainstream EV demand.
But, on the other hand, it’s bad, because it means Tesla is diluting its premium brand equity.
After all, there are tons of millionaires out there who simply won’t buy a car that a just-out-of-college kid could afford as their first car.
Sure, there’s a difference between the Model 3 and the Model S – but the ostensible difference isn’t that big (I have to look extra close to discern whether that’s a Model 3 or Model S on the road with me), and it certainly isn’t big enough to save Tesla from inevitable premium brand equity erosion as its cars get cheaper, and cheaper, and cheaper.
Yet, EV demand in the premium channel isn’t going anywhere anytime soon. If anything, it’s only going to increase – meaning there is a unique and compelling opportunity over the next few years for a new EV brand to eat Tesla’s lunch in the premium channel.
Enter Lucid Motors.
Lucid Motors is positioning itself as a so-called “post-luxury” brand that focuses on elegance and modernity, over the traditional legacy focus-points of opulence and indulgence. The company has designed its car with this post-luxury vibe in mind. Earthy tones. Sustainable materials. Simple controls. Connected ecosystem. End-to-end customer experience. Tech forward. Peaceful ambience. These are attributes which consumers place a high value on today – and Lucid Motors knocks all of them out of the park. It’s the dream car.
And, importantly, it’s going to retail for over $70,000 for the foreseeable future. It will, for the next few years at the least, be a car which only the rich can afford – and, as such, the Lucid Air will be the most in-demand premium EV in the early 2020s…
To recap, Lucid Motors has the talent, technology, and brand to not just rival Tesla in the premium EV market, but to actually beat Tesla at its own game.
Does that mean Tesla is dead? No. Far from it.
Tesla is going to grow like wildfire over the next few years, as the company sells a bunch of Model 3 and Y cars all across the globe, expands its solar business, and makes a successful push into the energy storage world.
But, at its current valuation, Tesla stock is priced for perfection, and then some. I’m growing skeptical that will happen. If it doesn’t, Tesla stock could be stuck treading water for the next few years.
The investment implication?
It may be time to forget Tesla stock, and buy stock in the companies stealing market share from Tesla – like Lucid Motors.