Conventional car maker Ford is beating modern electric car maker Tesla. On Wall Street, that is. Ford’s shares have gained 10.27% for the last three months and 33.33% YTD, compared to -15.20% and -29.95% for Tesla; and the gap gets wider when Ford’s 5.93% dividend is factored in.
Ford’s Shares Beat Tesla’s 1/5/19
That’s the second year in a row Ford beats Tesla—see table.
Ford’s Shares Beat Tesla’s 1/5/18
Ford’s outperformance of Tesla on Wall Street will have been a surprise to electric car fans who think that traditional automobile makers are on the way to extinction, to be replaced by modern electric vehicle makers like Tesla.
But not to Clement Thibault, Senior Analyst at global financial markets platform Investing.com.
“A combination of a beat-down Ford bouncing back on trade deal optimism and concerns regarding Tesla’s demand that recently pushed the stock lower have resulted in the current situation,” says Thibault.“However, both Ford and Tesla’s performances at the moment stem from temporary hopes and concerns, so the current trend for both might not last. I’ve seen Ford as undervalued and Tesla as overvalued in the past year, so to me the market is correcting both in the right direction.”
Then there’s conventional economics, as was discussed in a previous piece here. Like the old “law of diminishing marginal productivity of labor,” which has caught up with Tesla feverish growth, causing delays in quarterly delivery of new vehicles.
And the economics of scale and scope. Ford is an established company with $158.72B revenues—close to 8 times the revenues of Tesla, which is a new company—see table.
Ford’s sales come from crossover SUVs, Trucks and Vans, and legendary brands like Lincoln.
Tesla by contrast is a small new company with roughly $22.59 billion in sales coming from a narrow portfolio of sedans and sport utility vehicles.
Scale and scope has given Ford and Fiat Chrysler a cost advantage over Tesla, as reflected in the profit margins of the two companies. As of July 5, Ford’s profit margin was 1.95% compared to -4.29% of Tesla.
Ford and Fiat Chrysler vs Tesla 7/5/19
Ford and Fiat Chrysler vs Tesla 1/5/18
Meanwhile, there’s skepticism among investors about the future of government subsidies that have been helping Tesla’s sales.
And there are doubts about the promise of Tesla to transform the electric vehicle market into mass market and dominate it. Likea Harvard Business report, which argues that Tesla isn’t as disruptive as Wall Street believes it to be.
That remains to be seen. Meanwhile, betting on traditional vehicle makers like Ford seems to have been a superior strategy than betting on Tesla in the last couple of years.