This story is meant to be a reflection of the past growth and prediction of the future growth of Tesla, not a criticism of Ford. Having said that, the reason to have Ford even in the story is it provides a company to compare Tesla to, and Ford has been the least troubled of the traditional US auto manufacturers in my opinion. Of the big 3, it was the only one that didn’t need help in the 2008 financial crisis. I’m going to look at 4 metrics: market cap, profits, revenue, and unit sales.
Tesla & Ford Market Capitalization
Tesla & Ford Profitability
Tesla & Ford Revenue
The Electric Viking has similar thoughts. I started this article before this video came out, but he was quicker to publish his insights, so congrats to him!
Tesla & Ford Unit Volume
Unit volume will be the last of the 4 measures for Tesla to overtake Ford. In 2021, Tesla produced 930,422, over 9 times its total only 4 years earlier in 2017 (101,025). As we previously mentioned when discussing revenue, Tesla now has the factories built to make 3.7 million vehicles a year. I expect the volume to increase by about 15% a quarter from the 305,000 production total announced a few days ago for Q1 2022. That gives us 351,000 for Q2, 403,000 for Q3, 464,000 for Q4 (that is 1.5 million for 2022, a 62 % increase from 2021), 534,000 for Q1 2023, 614,000 for Q2, 706,000 for Q3, and 812,000 for Q4 2023 (that is 2.7 million for 2023, or a 77% increase from 2022).
Ford, on the other hand, has had sales drop from 6.6 million in 2017 to 3.9 million sales in 2021. Ford gets about 60% of its unit sales from North America and about 21% from Europe and 19% from China. Both Europe and China have very high gas and diesel costs, and also strong government incentives to go electric. It will be difficult for Ford to maintain unit volume with the strong electric vehicle competition coming in those 2 regions. In the US, the high fuel prices and the supply chain difficulties will likely reduce sales. Ford has some strong EVs coming out, but the volumes are too low to move the needle. I’d expect quarterly unit sales to decline by about 50,000 a quarter over the next 2 years. So, that’s 950,000 in Q1 2022, 900,000 in Q2, 850,000 in Q3, 800,000 in Q4, 750,000 in Q1 2023, 700,000 in Q2, 650,000 in Q3, and 600,000 in Q4 2023.
If it plays out that way, it would be in about 15 months, or Q3 2023, that the unit sales of Tesla and Ford cross.
The thing that is interesting to me is that each of the 4 measures crosses over at a different time.
- Market cap was similar from 2016 to 2019, and then in 2020 the market decided Tesla was worth a lot more.
- Ford has made good profits for years while Tesla consistently lost money as it was building scale. In 2020, Tesla turned profitable, and in 2021, it showed it could make similar amounts of profit to Ford even though their revenue is much lower (if you back out the one-time, $9 billion gain from Rivian). It is also very worrying that 47% of Ford’s profit comes from Ford Credit, which is dependent on the resale values of Ford’s vehicles.
- Tesla’s revenue last year was about a third of Ford’s worldwide revenue, yet I’m predicting Tesla will catch up in 6 months, by the 4th quarter of this year!
- Unit sales take a little longer, since Tesla vehicles have a higher selling price than Ford vehicles, but for the numbers I projected, Tesla will make and sell more vehicles than Ford in a little more than a year.
So, to oversimplify, market cap crossed over in 2020, profits in 2021, and I’m predicting revenue to cross in 2022 and vehicle unit sales in 2023.
What do you think? Comment below where you agree or disagree.
Disclosure: I am a shareholder in Tesla [TSLA]BYD [BYDDY]Nio [NIO]and XPeng [XPEV]. But I offer no investment advice of any sort here.
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