Teslaone of the world’s largest companies with a market capitalization of more than $1 trillion, remains a viable investment opportunity. But investors who correctly identify the next Tesla could reap the biggest gains by investing in electric vehicle (EV) stocks.

Many metrics suggest Lucid Group (NASDAQ: LCID) it might just be the rough diamond you’re looking for, even if you only have $200 to invest right now. Why? Because the entire business is still valued at under $10 billion, although it doesn’t take much imagination to see the electric vehicle company one day being worth at least $100 billion.

But before you jump in, make sure you understand two things about the company.

Despite a big increase in sales from 2021, most of Lucid’s growth path lies ahead. This is mostly because E.V US sales are still only a fraction of total auto sales.

According to data compiled by the US Energy Information Agency, only 7% of car sales in the US are currently electric models. This is down from the peak of 8% in 2024, but still up considerably from 1% in 2018.

Where do electric vehicle sales go from here? Analyst expectations are all over the place, but almost all forecast trends point in the same direction: up.

S&P Globalfor example, he believes that despite some struggles in 2024, the next few years should prove seismic for both production and demand for electric vehicles. “The auto industry’s transition to electric vehicles is accelerating,” says a recent report from the organization.

This report predicts that 2026 will be a tipping point for electric vehicle demand, making 25% of cars sold in the US electric by 2030. So if S&P Global is correct, vehicle sales electricity should triple over the next five years.

In many ways, Lucid is in the right place at the right time. The failures of a long list of electric vehicle manufacturers were largely attempts to compete in a world where demand was minimal, below 1% of total car sales.

Electric vehicles have a place in the market today and most people know someone who owns one, if they don’t own one. And as most forecasts predict, this support point will only strengthen over time. We’re no longer waiting for the electric vehicle market to take shape: it’s already here, with a lot of growth still ahead.

Lucid has done a commendable job of keeping up with demand. Its sales grew about 70% year-over-year last quarter after growing about 90% in the previous quarter.

By 2024, analysts expect company-wide sales of $778 million. For this year, however, they anticipate an increase in sales of 118%, up to 1.69 billion dollars.

The story continues

Fueling this growth is its Air sedan and its new Gravity SUV, which just started production a few months ago. Both of these models are priced between $70,000 and $100,000, depending on options.

So while the company can’t yet tap into the mass market, it has proven capable of producing high-end luxury models with enough buyer appeal to generate more than $1 billion in sales in a single year.

Lucid is on a promising trajectory. It now has two luxury electric vehicle models in production, and its sales base is expected to grow significantly by 2025 along with increasing demand for electric vehicles in general, a trend that won’t stop for several decades. But there’s one number I’ll be paying close attention to on February 25, when Lucid next reports quarterly earnings: gross margins.

Due to Lucid’s rapid sales growth, the market has assigned it a premium valuation of 10 times sales. Tesla, for example, trades at more than 14 times sales, while another EV maker Rivian it trades at just 3.3 times sales.

There are many differences between these three companies, but perhaps the biggest is their varying ability to turn a profit on each car they sell. Tesla has generated positive gross margins for more than a decade. Rivian has struggled to achieve positive gross margins despite sales of $5 billion last year.

As the smaller competitor, Lucid gets the benefit of the doubt for now. But if you jump into this growth stock, track its profitability closely. Over the next few quarters, expect to see its gross margins trend closer to where Rivian is today.

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Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Tesla. The Motley Fool has one disclosure policy.

1 no-frills EV stock to buy with $200 right now was originally published by The Motley Fool