Are Tesla's Best Days In the Rearview Mirror?

Tesla's success has inspired every other automaker in the world - and a raft of well-funded startups - to develop electric vehicles. 

But while Tesla has a much higher market cap, its sales - and profits - are lower than or equal to ten other competitors, all of whom are investing in EVs. The implication is that future growth is going to be harder to get. JL 

Barry Ritholtz reports in The Big Picture:

Tesla story is much more challenging than it was in the 2010s: Their success has attracted competitors from around the world, from well-financed start-ups to world-class legacy automakers. Their future product line is let’s just call it a work in progress, especially the cyber truck versus the Ford Lightning and the Chevrolet Silverado. That is before we get to the endless new choices from Porsche, Audi, Lucid, Rivian, Hummer, Polestar, Mercedes Volkswagen, Toyota, Hyundai, Genesis, Kia, GMC, Mazda, BMW, Volvo, the rest of Ford, and whoever else I forgot.

This week, we have been looking at some of the market surprises from 2021: The various charts, relative performance, returns, and other issues that were unexpected.

Today’s surprise: Ford versus Tesla.

Everybody knows Tesla has been on a tear, becoming of the 10 largest companies by market cap, making Elon Musk the richest man in the world. TSLA’s stock performance was stellar, adding 49.8% in 2021.

It’s just a shame how badly TSLA lagged F, which had gains of 137.5% in 2021 — nearly tripling the market performance of the pioneering EV company.

Here’s where things get interesting:

Ford has a market cap of $95 billion, revenues of $135 billion, and profits of ~$3B.

Tesla’s market cap is over $1 trillion, revenues of $46.8B, and profits of ~$3B.

Tesla’s narrative was wonderful: Its technology was years ahead of everyone else’s, especially its in-car software and over-the-air updates; its designs were better, its battery tech was superior, its range was world-class, and its driving experience unlike anything else on the market. The stock price would rise as the S&P500 managers would have to add the company to the index.

Ford’s narrative is less known but also intriguing: The only US automaker that did not need a bailout in the GFC, whose quality and designs have improved enormously. The company’s Mustang Mach E was a minor EV hit, the Lightning, a new electric version of the Ford 150 pick up (America’s best selling vehicle) has presold 200,000 units. The new Bronco is also a smash success, with an EV version sure to follow.

What is the Tesla story today? It’s much more challenging than it was in the 2010s: Their success has attracted competitors from around the world, from well-financed start-ups to world-class legacy automakers. Their future product line is let’s just call it a work in progress, especially the cyber truck versus the Ford Lightning and the Chevrolet Silverado. That is before we get to the endless new choices from Porsche, Audi, Lucid, Rivian, Hummer, Polestar, Mercedes, Volkswagen, Toyota, Hyundai, Genesis, Kia, GMC, Mazda, BMW, Volvo, the rest of Ford, and whoever else I forgot.

Ford is currently trading at 1/10^th of Tesla’s market cap. Can you imagine any scenarios where a decade from now, they are at (or close to) parity? Where both Ford and Tesla have market caps of say $500B? I think there is at least a 25% possibility that might come to pass.

Said differently, would you lay 4-to-1 odds that Tesla is still bigger than Ford in 2032?

I am not sure which side of that bet I would want to be on . . .