This week, Rivian (RIVN) and Lucid Group (LCID) – both among the few credible, well-funded, and quality startup electric vehicle (EV) plays  – released their latest quarterly earnings. While LCID stock fell over 14% after the report, Rivian erased its early losses to end flat.

The earnings reports highlight the divergent paths these two companies – which otherwise have a lot in common – have been pursuing.

Both RIVN and LCID went public in 2021 at eye-popping valuations, and raised billions of dollars of (since-depleted) cash from investors. While Lucid became the biggest special purpose acquisition company (SPAC) merger up until that point, Rivian’s IPO was the biggest since Facebook’s - now Meta Platforms (META) - 2012 listing.

Another similarity between Rivian and Lucid Motors is their product quality, which has received accolades from auto analysts. Finally, they are both backed by entities with deep pockets – Amazon (AMZN), in Rivian’s case, and Saudi Arabia’s Public Investment Fund (PIF) in Lucid's case.

While their stock prices have taken similar paths and fell to record lows earlier this year, I see a palpable difference in the business strategies that these two companies are pursuing. Let’s discuss these in perspective.

Rivian Gets Defensive, While Lucid Is on the Offense

While both Rivian and Lucid are expanding their production capacity and coming up with newer models to scale output, RIVN has taken a somewhat defensive approach, and is also looking to conserve capital. It has paused the construction of its upcoming plant in Georgia, where it intended to produce the low-cost R2 models, and has instead retooled its existing factory in Normal.

Lucid, on the other hand, is building its next plant in Saudi Arabia - which, unsurprisingly, is home to its biggest shareholder. The country sees EVs as a key part of its strategic goals, and a hedge against the expected fall in oil demand amid the EV transition. 

The Saudi-backed automaker expects its capex to be $1.5 billion in 2024, which is higher than what it spent in the previous year. Rivian, on the other hand, cut its 2024 capex guidance to $1.2 billion, which is $500 million lower than its previous guidance.

Lucid has also been quite aggressive in raising cash, and PIF has looked more than willing to fund its burgeoning losses and cash burn. PIF invested in two rounds of Lucid’s capital raise in 2022 and 2023, pouring in over $3 billion between the two tranches. Earlier this year, an affiliate of PIF invested $1 billion in a newly created series of Lucid's convertible preferred stock. Rivian does not have the privilege of a “backstop” of the kind that Lucid has with Saudi money, which somewhat explains its conservative stance.

Rivian Expects Gross Profit in Q4

Rivian expects to post a gross profit in Q4, while Lucid does not expect to churn a gross profit anytime soon - and, if anything, expects  margins to deteriorate in the back half of 2024.

During the Q1 earnings call, Lucid Motors CEO Peter Rawlinson said that the comments about Lucid's massive loss per car delivered ($348,124 to be precise, and nearly 10x that of Rivian) “reflect a lack of knowledge about our costs and our scale of intentions.” He added, “We have a more ambitious goal to provide affordable, long-range EVs for mainstream mass-market consumers.”

Later, in response to a question from a retail shareholder about the company’s path towards profitability, Rawlinson linked it to growth in volumes, which would then lead to a more efficient distribution of fixed costs.

How Do The Product Strategies of Rivian and Lucid Motors Stack Up?

Both Rivian and Lucid Group started with premium and pricier models – something which Tesla (TSLA) also did before it pivoted to the mass-market Model 3 and Model Y. Rivian’s upcoming R2 platform will be priced at around $45,000, and deliveries are expected to commence in the first half of 2026. The company then plans to start delivering vehicles based on the R3 platform, which will be priced even below R2. 

Lucid also plans to launch an affordable car to compete with Tesla, and expects to produce a midsize car in the $50,000 price range by late 2026. However, Rivian’s transition to mass-market vehicles is moving much faster than Lucid's. It also has a more diversified portfolio, with a van, an SUV, and a pickup truck in its arsenal.

In terms of branding, Lucid has positioned itself as a luxury brand, and has tried to benchmark itself against Tesla (Rawlinson, incidentally, is a former Tesla engineer). The word “Tesla” featured five times during Lucid’s Q1 earnings call – three times by Rawlinson, and twice by analysts. Rawlinson even compared Lucid stock's YTD price action with that of Tesla and Rivian, and said that the company is already competing with the Elon Musk-run company.

In Rivian’s case, only one analyst referred to Tesla during the Q1 earnings call, on the topic of autonomous driving and Tesla’s use of Nvidia (NVDA)GPUs for autonomous driving.

To sum it up, both Rivian and Lucid are pursuing somewhat divergent business strategies. While one is trying to readjust its capex and is looking to transition to profitability in a hurry, the other is still playing offense despite the EV industry turmoil. While there could be other reasons driving the divergence, I believe a lot has to do with the money flowing into Lucid’s coffers from PIF. 

As for markets, given the macro environment and EV price war, investors seem to prefer companies with a clearer path toward sustainable profitability and positive free cash flows - unlike a couple of years back, when growth overshadowed practically everything.