Last week, we sent shockwaves throughout the financial community and Tesla (NASDAQ:TSLA) stock holders, when we wrote that electric vehicle startup Lucid Motors, which is going public through a SPAC merger with Churchill Capital Corp IV (NYSE:CCIV), was going to eat Tesla’s lunch in the premium EV category.
Apparently, we even caught the attention of Tesla CEO Elon Musk himself, who apparently doesn’t agree with our thesis (shocker).
🤣
— Elon Musk (@elonmusk) June 3, 2021
Since that article published, though, CCIV stock has risen about 11%, while TSLA stock has treaded water for a gain of 0.2%.
One week does not make a trend. But we do think that the fundamentals underlying the premium EV market have noticeably shifted in favor of our thesis over the past few days.
Of particular importance: Tesla cancelled production of its most premium car, the Model S Plaid+, which was going to be the only car to rival the Lucid Air Dream Edition in terms of range, power, and performance.
That’s big news.
To be clear, we continue to believe Tesla will grow very, very quickly in the coming months and years — and that this will remain one of the most important and influential tech companies on the planet. We respect and admire the company, its engineers, and its purpose. But we simultaneously believe that Tesla has left the door for open for a competitor to steal significant market share in the premium EV channel.
And Lucid Motors will do just that over the next few years.
That’s why we believe long CCIV stock is the best trade to make today in the EV sector.
Here’s a deeper look.
CCIV Stock: Opportunity Is Knocking
To quickly recap, our thesis on CCIV stock is very simple.
For years, Tesla enjoyed unprecedented first-mover, talent, technology and branding advantages in the EV market. Those advantages are now narrowing. Every auto company is making EVs these days — and some of them are making pretty good EVs that, at least, come close to rivaling Tesla’s cars in terms of range and performance. A lot of Tesla’s talent has churned to work for other auto makers or to start their own EV startups. And Tesla is diluting its brand equity in the premium channel by making $35,000 cars that, to the naked eye, look a lot like its $100,000-plus cars.
In other words, there is now an opportunity for another auto maker — whether it be an incumbent or a startup — to steal significant market share from Tesla in the premium EV category.
Lucid Motors will be that other auto maker.
The Bull Thesis in a Nutshell
Outside of Tesla, Lucid Motors has the most impressive confluence of talent in the EV space.
The exec team includes former Tesla, Audi, Apple, Samsung, Ford, Intel, and GM execs. This talent has developed proprietary, industry-leading technology, which is being brought to life in the company’s first car, the Lucid Air — which will feature driving ranges in excess of 500 miles (above anything offered by Tesla) and whose top-tier Dream edition will have 1,080 horsepower (also above anything offered by Tesla).
The brand is designed to attract affluent buyers, is new (which, as we’ve seen with Tesla, can be a huge advantage since new EV brands have no gas-powered branding “baggage”), and has zero risk of dilution since the company’s cars will retail for $70,000 and up for at the least the next few years.
We believe the Lucid Air will sell like wildfire over the next few years, and that Tesla’s Model S line of vehicles will struggle to compete. On that assumption, we think Lucid Motors will steal significant market share from Tesla in the premium EV category in North America in 2022+.
If that happens, we believe that — given the current valuations — CCIV stock will roar higher and TSLA stock will struggle.
Model S Plaid+ Cancellation Is Big News
A big “win” for this thesis was news that Tesla cancelled its Model S Plaid+ car.
The Model S Plaid+ car was the only car being made by Tesla that was going to rival the Lucid Air Dream Edition on a specs basis. The Lucid Air Dream Edition features 500+ miles of driving range and 1,080 horsepower. Tesla’s Model S Plaid+ was supposed to also feature 500+ miles of driving range and around 1,100 horsepower — so even more powerful.
But that car is now cancelled.
Instead, Tesla will rely exclusively on the Model S Plaid because it is “just so good”, according to Elon Musk. And while it might be “so good”, it’s not as good as the Lucid Air Dream. It will have slightly less horsepower (1,020 HP) and much less range (390 miles).
In other words, the Lucid Air Dream will — for the foreseeable future — stand alone as the highest-performance luxury EV in the market.
That’s important, mostly for branding reasons. As the Dream rolls out, Lucid Motors will become know as “the EV brand that’s even nicer than Tesla”. That chatter will circulate for months among consumers, creating a brand equity for Lucid Motors that Tesla had a few years back.
Tesla used that unrivaled brand equity to drum up unrivaled demand for its cars as they became more and more affordable. Same will happen with Lucid Motors. So, when Lucid Motors rolls out more affordable EVs in the $70,o00 and $90,000 price ranges in 2022/23, demand for those vehicles will be significant.
Significant demand will spark significant gains in CCIV stock.
Bottom Line on CCIV Stock
Lucid Motors is the next Tesla, and Lucid Motors is priced for minimal success, while Tesla is priced for global domination.
So, you could either invest in TSLA stock at a $600 billion valuation, and require perfection for the stock to rise by 10% to 20% per year into 2025. Or, you could invest in CCIV stock at a $40 billion valuation, and require that the company simply nab ~5% market share for the stock to rise 20% or more per year into 2025.
The latter is a far better investment decision if you’re looking to maximize returns.
That’s why, in our Innovation Investor portfolio, we’ve bought CCIV stock and are already up 26% on that position in just a month. Maybe it’s time you join us and invest in what’s coming next, not what has already happened.
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On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
By uncovering early investments in hypergrowth industries, Luke Lango puts you on the ground-floor of world-changing megatrends. It’s the theme of his premiere technology-focused service, Innovation Investor. To see Luke’s entire lineup of innovative next-generation technology stocks, become a subscriber of Innovation Investor today.
