Rivian and Lucid: Seizing the EV Market Amid Tax Credit Phase-Out

The U.S. electric vehicle (EV) market is undergoing a seismic shift as federal tax credits expire, reshaping the competitive landscape in favor of pure-play EV manufacturers like Rivian (NASDAQ: RIVN) and Lucid (NASDAQ: LCID). Legacy automakers such as GM (NYSE: GM), Ford (NYSE: F), and Hyundai/Kia are losing critical subsidies just as demand surges ahead of the September 30, 2025, tax credit deadline. This creates a rare window for Rivian and Lucid to capitalize on reduced competition, though their paths to growth diverge sharply. Here's why investors should pay attention—and where to bet.

The Tax Credit Phase-Out: A Catalyst for Market Restructuring

The $7,500 federal EV tax credit—a cornerstone of U.S. EV adoption—expires at the end of 2025 for automakers that have sold over 200,000 vehicles. This includes giants like GM and Tesla, which have long surpassed the threshold. Meanwhile, Rivian and Lucid, with 139,000 and 21,000 cumulative U.S. sales respectively, remain eligible for the credit until 2026 under the House-passed "Big Beautiful Bill". This creates two critical advantages:

1. Lower Effective Pricing: Rivian and Lucid can offer vehicles at prices competitive with legacy automakers, even as their rivals face rising sticker prices without subsidies.
2. Reduced Competition: Traditional automakers are scaling back EV investments due to fading incentives and margin pressures, ceding market share to EV-dedicated firms.

Rivian: Production Muscle and Strategic Pricing

Rivian's strong production capacity and upcoming R2 SUV position it as the prime beneficiary of this shift.

• R2 SUV: Priced at $49,000, the R2 targets mainstream buyers, undercutting Tesla's Model Y ($53,000) and legacy competitors. Analysts at BNP Paribas predict it could double Rivian's annual deliveries to ~120,000 units by 2026.
• Q3 Demand Surge: As consumers rush to secure tax credits before the September deadline, Rivian's ability to ramp production matters. Despite missing Q2 2025 delivery targets by 2.3%, Rivian's Tennessee manufacturing plant is scaling to 150,000 annual units by 2026—a rate unmatched by Lucid.

Lucid: Potential, but Delays Loom Large

Lucid faces a tougher path. While its Air sedan and upcoming Gravity SUV (delayed to late 2025) offer luxury appeal, production bottlenecks and pricing constraints threaten growth.

• Pricing Challenges: Lucid's Air starts at $93,000, far above the federal $80,000 SUV price cap for tax credit eligibility. This forces reliance on leasing loopholes, which may vanish post-2025.
• Product Pipeline Lag: Lucid's midsize crossover, planned for 2027, arrives after Rivian's R2 and Tesla's Cybertruck, risking irrelevance in the affordable segment.

Investment Thesis: Buy Rivian, Cautious on Lucid

The third-quarter demand surge will be a make-or-break moment for both companies:

• Rivian: Its R2 launch and $49,000 pricing align perfectly with post-subsidy affordability needs. Even if macroeconomic headwinds persist, Rivian's production scale and product timing make it a short-to-medium-term buy.
• Lucid: While its tax credit eligibility until 2026 is a lifeline, delays and reliance on high-margin luxury models leave it exposed to rising competition from Tesla and Rivian. Investors should wait for clarity on production timelines and pricing strategy before committing.

Conclusion: The EV Market's New Rules Favor Rivian

The tax credit phase-out isn't just a policy shift—it's a market reset. Rivian's execution on the R2 and production scalability position it to dominate a shrinking field of competitors. Lucid, meanwhile, must prove it can overcome delays and pivot to affordability before losing its edge. For now, Rivian is the safer bet in a race to capture a $150 billion U.S. EV market by 2030.

Investment Recommendation:
- Rivian (RIVN): Buy at current levels (~$18–$20) with a 12-month price target of $28–$32, assuming R2 success.
- Lucid (LCID): Hold for now; revisit in early 2026 after Gravity deliveries and crossover plans materialize.

The EV landscape is changing—investors who back the right disruptors will profit handsomely.

Data as of June 19, 2025. Past performance is not indicative of future results. Consult a financial advisor before making investment decisions.