The electric vehicle (EV) industry is on full alert after it was announced that Volkswagen (OTCMKTS:VWAGY) would invest up to $5 billion into Rivian (NASDAQ:RIVN) while also a forming a joint venture with the company based on vehicle software.
The news caused Lucid (NASDAQ:LCID) to rise as much as 12% following yesterday’s close, although more than half of those gains have been erased since then.
Ultimately, LCID stockholders shouldn’t be excited about the news, as it doesn’t concern the company at all. In fact, the news should be viewed as an EV competitor receiving a major investment, providing it with much-needed capital and a competitive advantage.
Interestingly enough, Lucid announced exactly one year ago that it had signed a deal with British luxury automaker Aston Martin (OTCMKTS:ARGGY). The deal, worth over $450 million, provided Aston with access to Lucid’s powertrain and battery systems. It also gave Lucid a 3.7% stake in Aston.
LCID Stock Rises Following Rivian-Volkswagen Partnership
While Lucid’s deal pertains to hardware, Rivian’s deal focuses on software. The EV truck company’s deal is also much more lucrative.
However, both deals were made with much older automotive companies, signaling interest in new EV technology. On Lucid’s end, it is a bit concerning that it hasn’t signed any major hardware deals since its arrangement with Aston Martin.
Rivian now boasts Amazon (NASDAQ:AMZN) and Volkswagen as major partners while Lucid has the support of Saudi Arabia’s Public Investment Fund (PIF) and its subsidiary, Ayar Third Investment. In March, Ayar agreed to invest $1 billion into Lucid through newly issued convertible preferred stock. That brought PIF’s total amount invested into Lucid to $5.4 billion. The sovereign wealth fund owns a 60% stake in the company.
However, PIF and Aston will be unable to provide the automotive expertise that Volkswagen can provide to Rivian. Last year, Volkswagen had a 6% market share in the global automotive industry, second only to Toyota (NYSE:TM) at 10.7%. Aston didn’t even make the top 10.
With LCID stock down more than 35% so far this year and guiding for the 2024 production of 9,000 vehicles compared to 8,428 vehicles in 2023, it’s clear that the company needs a major catalyst in order to provide market-beating returns.
On the date of publication, Eddie Pan did not hold (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.
