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 Tesla Cybertruck 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 1/10th 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 . . .
Update 2 January 15, 2022
Tesla delays Cybertruck to Q1 2023:
Tesla has never been fantastic at meeting deadlines, so it’s not too surprising that the company’s ambitious electric pickup — the Cybertruck — is running a little late. Recently, reference to a 2022 production schedule was scrubbed from its website, and Reuters is now reporting that production of the vehicle won’t begin until the first quarter of 2023. –The Verge
Update January 9, 2022
Software + chips remain a huge strategic advantage for Tesla:
“When Tesla couldn’t get the chips it had counted on, it took the ones that were available and rewrote the software that operated them to suit its needs. Larger auto companies couldn’t do that because they relied on outside suppliers for much of their software and computing expertise. In many cases, automakers also relied on these suppliers to deal with chip manufacturers. When the crisis hit, the automakers lacked bargaining clout.”
What Does Equal versus Market Cap Weight S&P500 Say About Top 5 Stocks? (January 3, 2022)
2021: Small, Medium & Large Cap Returns (January 4, 2022)
2021’s Surprising Laggard: Amazon (January 5, 2022)
7 Trends in Car Markets (December 23, 2021)