Will electric vehicle (EV) manufacturer Lucid Group (NASDAQ:LCID) be able to compete successfully against automotive giants like Tesla (NASDAQ:TSLA)? This is a tough question that prospective LCID stock investors should carefully consider. Granted, Lucid has some well-heeled financial backers, but this doesn’t mean you have to jump into the trade.
Let’s face the facts: Inflation isn’t transitory in 2023. The Consumer Price Index (CPI) for January was 6.4%, a higher reading than the 6.2% that economists expected and not much different from December 2022’s CPI of 6.5%.
That’s bad news for a high-end automaker like Lucid Group. In a highly competitive EV industry, investors really need to think about whether Lucid can compete successfully over the next few years.
BlackRock and a Saudi Arabian Fund Invest in LCID Stock
Don’t get the wrong impression. There are some reasons to be bullish on Lucid Group. For instance, Tesla will make 7,500 of its charging stations available to other electric car brands by the end of 2024. This should benefit people who drive Lucid’s EVs.
Another reason for investors to stay the course with Lucid Group is that the company has big-money backers. Not long ago, Saudi Arabia’s Public Investment Fund (PIF) bought nearly 200 million more LCID stock shares.
That brings the PIF’s total position in Lucid Group to 1.1 billion shares. Amazingly, the fund’s stake in the Lucid Group recently stood at 62%.
Moreover, as of Dec. 31, 2022, investment firm BlackRock (NYSE:BLK) reportedly owned 31.45 million shares of LCID stock. So, if you’re interested in following the trades of a “whale” like BlackRock, Lucid Group should be on your radar.
Even After a $7,500 Credit, Lucid Group’s EVs Are Still Expensive
On the other hand, cautious investors shouldn’t just mimic the trades of BlackRock and Saudi Arabia’s PIF. You should consider all of the facts and circumstances and make your own decision. For example, think about whether Lucid Group can compete against much bigger EV makers like Tesla and Ford (NYSE:F).
Tesla has implemented price cuts for some of its EVs, and so has Ford. It’s a smart move to make during a time of sticky inflation.
Meanwhile, Lucid Group’s EVs are so expensive that they don’t qualify for government-backed credits. So, Lucid announced a $7,500 company-funded “credit” on some of its Air Touring and Air Grand Touring models.
Thus, Tesla and Ford will benefit from government-funded credits while Lucid Group won’t. Besides, even after a $7,500 price reduction, Lucid’s EVs are still expensive. The Touring models start at $107,400, while Lucid Group’s Grand Touring models start at $138,000. Even if we subtract $7,500 from those figures, the high price tags will likely discourage some prospective EV buyers.
So, Here’s My LCID Stock Price Prediction for 2025
If the EV industry grows during the next few years, Lucid Group should be able to sell a decent number of vehicles. However, it will still be challenging for Lucid to compete against the likes of Tesla and Ford.
So, even while BlackRock and Saudi Arabia’s PIF might be bullish on LCID stock, I only expect it to reach $15 in 2025. That would represent a pretty decent return on investment, but there may be more favorable growth prospects for bigger competitors like Tesla and Ford.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.