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BofA Explains Neutral Rating for Tesla, Buy for Rivian, Lucid

Technology is a strength for Tesla, while competition is an obstacle, BofA said. Rivian benefits from its Amazon partnership.
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Bank of America offered explanations Wednesday for its ratings on electric vehicles, which include neutral for Tesla  (TSLA) - Get Tesla Inc Report and buy for both Rivian  (RIVN) - Get Rivian Automotive, Inc. Class A Report and Lucid  (LCID) - Get Lucid Group, Inc. Report.

As for Tesla, it’s technology is a strength, say BofA analysts led by John Murphy. “TSLA's technology leadership in the electric vehicle space is a function of its first mover advantage,” they wrote in a commentary.

“TSLA has successfully commercialized five vehicles (Roadster, Models S, X, 3, and Y) … One of TSLA's competitive advantages with respect to technology is its heavy involvement in the design, specification, validation, and integration of technology in its vehicles.”

But competition is a headwind for Tesla, Murphy said. 

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“The competitive environment is becoming one of the fiercest seen in decades. In the U.S. market alone," he said. "We project more than 85 new standalone electric vehicles will be coming to market over the next several years.”

When it comes to Rivian, the customers and partnerships category represents a strength, he said.

“RIVN has one key partner in Amazon AMZN,” which serves as its anchor customer for electric delivery vans, helped develop the product for last-mile delivery and serves as a key source of funding and endorsement for the company, Murphy said.

Meanwhile, Lucid benefits from its commercialization strength, he said. It has a “greenfield/clean-sheet approach to manufacturing,” and production already has commenced.

“LCID's advanced manufacturing plant in Casa Grande, Ariz. is among the first greenfield EV manufacturing facilities in North America,” Murphy said. “Start of production for the Air sedan has already commenced.”