1 High-Risk, High-Reward EV Stock to Buy, and 1 Money Pit to Avoid

Key Points

• Lucid has recorded six consecutive quarters of record deliveries.

• VinFast failed to break into the U.S. and European markets.

• Over $14 billion has been invested in VinFast, and it's still losing money.

• 10 stocks we like better than Lucid Group ›

When looking for an investment that can completely change your returns for the better, you need to have an eye on the future. But that's far easier said than done.

When thinking about the future, it's an exciting time to contemplate where the automotive industry is going. The future for this sector has some pretty interesting things in store, including driverless vehicles, ones that are software-defined, and a slew of new and highly advanced electric vehicles (EVs) that are almost certainly the eventual future of the industry.

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If you want to jump into the EV industry, here's a look at one high-risk, high-reward EV start-up and another that investors should avoid.

Steer clear of this EV stock

VinFast Auto (NASDAQ: VFS) is a unique and intriguing EV start-up. The automaker is based in Vietnam, is backed by an extremely wealthy founder named Pham Nhat Vuong, has state-of-the-art production, and thoroughly dominates its home market. VinFast decided its next move would be to enter the U.S. and European markets, two of the most important globally. The problem: It is always going to be a foreign automaker with no customer base, attempting to get its foot in the door. Not an easy task, and not cheap.

After losing billions of dollars to try to become a real player in the U.S. and Europe, Vietnam's richest man is steering the ride in a different direction: focusing on Asian markets such as India, Indonesia, and the Philippines. But VinFast already looks like a money pit. Consider that at least $14 billion has been poured into it from Vuong himself, his conglomerate Vingroup JSC, its affiliates, and external lenders. Yet in 2024, the company booked a $3.2 billion loss.

Making matters worse, Chinese EV start-ups are beginning to expand globally and are finding much more success winning over consumers due to their advanced technology and more affordable pricing. If VinFast can't get a foothold in Asian markets before brutal Chinese competition moves in, it could leave the company playing in only its home market.

While it's tempting to invest in young EV start-ups in the hope of them becoming major industry players, the truth is the automotive industry is ruthlessly competitive, and VinFast hasn't cracked the code so far.

Lucid's Gravity SUV. Image source: Lucid.

An accelerating start-up

Similar to VinFast, Lucid Group (NASDAQ: LCID) is a high-risk, high-reward EV start-up. The automaker, based in California, says it produces the world's most advanced EVs. Unlike VinFast, however, the company has been able to gain traction in the U.S. market and is starting to emerge as a viable player in the industry.

Its sales volume is still low -- Lucid delivered 3,309 vehicles in the second quarter compared to rival Rivian's 10,661 -- but it's gaining momentum with the second quarter representing the sixth consecutive period of record deliveries.

The good news is that the trend is likely to continue. The automaker is slated to rapidly accelerate production of its newly launched Gravity electric SUV during the second half of the year. With a price tag far lower than the company's Air sedan, the vehicle is expected to expand the company's addressable market considerably.

Another vote of confidence for Lucid, as well as an exciting development in general, was the automaker's recent deal with Uber Technologies and Nuro that is expected to launch later in 2026 in a major U.S. city. The three companies plan to develop a new robotaxi service that combines the leading software-defined vehicle architecture of Lucid's Gravity SUV, the Nuro Driver Level 4 autonomy system, and Uber's global network and fleet management.

Uber plans to deploy 20,000 or more Lucid vehicles over the next six years. The ride-hailing company is also putting its money where its mouth is with a $300 million investment in the automaker.

Winners and losers

There are going to be some serious winners and losers as the automotive industry gears up to evolve more over the next decade than it arguably has over the past century. Some EV start-ups will certainly close their doors, some already have, while some will become small niche players, and others may grow into the next Tesla or something even more impressive.

These are high-risk investments and should remain a small position in any portfolio. Lucid is also burning cash at a rapid rate and will likely have to raise more. All that said, it shows far more upside than foreign rival VinFast.

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Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla and Uber Technologies. The Motley Fool has a disclosure policy.