If History Is a Guide, Lucid Has Years of Upside Remaining

Peruse the opinions of Lucid (NASDAQ:LCID) stock just at InvestorPlace alone and you’ll find a diversity of opinions. As a pre-revenue firm, Lucid attracts plenty of criticism, with some of my colleagues questioning the underlying company’s valuation.

On the other hand, there are those who see the potential for Lucid to be a true rival to Tesla (NASDAQ:TSLA).

Both sides have strong arguments to support their position. For instance, as a pre-revenue company, LCID stock is a genuine aspirational play. At the same time, many analysts rightfully question its rich valuation relative to TSLA. After all, Tesla has production – healthy production at that – along with a ravenous consumer base.

It’s a proven player. On the other hand, Lucid is not – simple as that.

Nevertheless, the bulls have reason to be optimistic. Primarily, I’ve generally been on the bullish camp because of the nature of electric vehicles. Frankly, they’re expensive. From information compiled by Car and Driver magazine, the average EV is still priced at a lofty $55,600, despite significant cost reductions.

For context, the average U.S. household income was $68,703 in 2019. Like I said, EVs are too expensive.

Of course, with declining battery costs, manufacturers are aiming for a day when economical EVs will become, well, economically viable. But until that day arrives, electric personal transportation companies are largely forced to cater to higher-end customers.

That’s not the case with Lucid. While management would one day like to feed the middle-income segment, the company makes no bones about pandering to wealthy buyers now. Call it cynical, call it opportunistic, I think that’s brilliant news for LCID stock.

We can skip the useless talk about equity in transportation and just get on with what will work. But there’s another angle to Lucid that has yet to be explored: the historical argument.

How the Dawn of Automobiles Bodes Well for LCID Stock

History? While early automotive innovators explored multiple catalysts, including electric power, it wasn’t until relatively recently that the energy density and capacity of lithium-ion batteries could make EVs feasible at scale. So how can history have anything to do with Lucid and LCID stock?

Actually, it can teach us plenty. Back in the turn of the 20th century – yes, we’re going a ways back – several automakers began churning out passenger vehicles. We’re talking names like Columbia, Winton and Packard. Back in the olden days, production was in the thousands, then tens of thousands of units.

But on a percentage basis relative to the U.S. population at the time, the rate at which early combustion-based automobiles grew was similar – almost identical actually – to the growth of global EV unit sales relative to the world population. For instance, consider the following stats:

• In 1902, U.S. auto production relative to the population was 0.0098%. In 2015, global EV unit sales were 0.0079% of the world’s population.
• In 1904, U.S. auto production relative to population was 0.0169%, whereas in 2017, global EV unit sales relative to world population was 0.0168%.
• In 1907, U.S. auto production against population was 0.042% while the same comparison for global EVs was 0.04%.

What’s more, even with legacy auto production skyrocketing off Ford (NYSE:F) and its assembly line innovation, only a very small percentage of the U.S. population at the time could afford such luxuries. Similarly, despite many innovations in battery technology and production streamlining mechanisms, EVs are only accessible to the world’s wealth (barring exceptions like Norway where the government helps subsidize EV purchases).

By the numbers, then, we’re in the very early stages of the electric transportation rollout, a phase where the EV equivalent of a Winton or a Packard can make its mark. Until a disruptive paradigm shift occurs, Lucid likely has a long upside pathway ahead.

But How Long Can Lucid Stay Relevant?

Of course, cars made by Winton and Packard are highly desirable but for reasons which these automakers didn’t intend when they first ventured into the burgeoning mobility market. It begs the question, a century from now, would a Lucid EV be a collectable for the wrong reason?

Obviously, I can’t look that far ahead. But what I can say is that even in 1916, when domestic auto production first broke above the million-unit mark (1.3 million to be more precise), this metric only represented about 1.3% of the U.S. population at the time.

Therefore, just the mere development of a solid-state battery might not be enough to disrupt LCID stock. Instead, we need a profound wealth expansion in this country combined with extraordinary declines in EV costs.

That might happen but it’s going to take years, perhaps even decades. In the meantime, you have LCID stock, which is relevant to the EV consumer market right now.

On the date of publication, Josh Enomoto held a LONG position in F. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.