Mr. Market’s view of the Ford (NYSE: F) and Tesla Motors (NASDAQ: TSLA) battle is strange.
Ford makes tons of money and generates vast amounts of cash yet it Mr. Market treats it like garbage. Ford shares; for instance, were trading at $9.03 on 29 November 2019. That gave Ford a Market Capitalization of $35.922 billion on that day.
Tesla shares however traded at $329.94 on 29 November 2019. Consequently, Tesla had a $59.47 billion Market Cap on that day.
Tesla vs. Ford
Ford reported a quarterly gross profit of $2.34 billion, a quarterly operating loss of -$261 million, and a quarterly net income of $425 million on revenues of $36.99 billion on 30 September 2019.
Tesla is doing well for a small player with a chaotic history. Tesla reported quarterly revenues of $6.303 billion; nearly three times those of Ford on 30 September 2019.
Additionally, Tesla reported a quarterly gross profit of $1.191 billion, a quarterly operating income of $261 million, and a quarterly net income of $143 million on 30 September 2019. Hence, Tesla is doing better than Ford in some respects.
The healthiest thing at Ford is its cash flows. On 30 September 2019 Ford reported an operating cash flow of $4.732 billion; an investing cash flow of -$4.547 billion, a financing cash flow of $-1.532 billion, and a free cash flow of $2.927 billion.
In contrast, Tesla reported an operating cash flow of $756 million, an investing cash flow of -$485.61 million, a financing cash flow of $118.18 million, and a free cash flow of $346.07 million.
Ford has vast amounts of Cash
Impressively, Ford has vast amounts of cash on hand. On 30 September 2019, Ford reported $20.523 billion in cash and equivalents and $16.808 billion in short-term investments. Tesla reported $5.571 billion in cash and equivalents on the same day.
Thus, Tesla is not generating large amounts of cash but Ford is. However, Ford is stuck with a money-losing legacy business that eats up a lot of its cash.
Sensibly, Ford is shedding that legacy business, CNBC reports. Ford is shutting down its heavy truck business in South America, closing its oldest factory in Brazil, and cutting 12,000 jobs in Europe.
In addition, Ford plans to sell six European factories and eliminate 2,300 jobs in the U.S. Finally, Ford is eliminating 10% of its white collar workforce or 7,000 jobs worldwide.
Ford F-Series vs. Tesla Cybertruck
In particular, Ford still offers America’s best-selling vehicle the F-Series pickup truck. CarSalesBase estimates Ford sold 909,330 F-Series pickups in 2018. In addition, Ford sold 214,176 F-Series trucks in the first six months of 2019.
One person who noticed the F-150’s success is Elon Musk. Musk finally unveiled his Tesla Cybertruck on 22 November 2019. I conclude the Cybertruck is no threat to Ford because it is ugly and stupid looking.
For example, the Cybertruck looks like something out of a bad 1970s sci-fi movie. In automotive terms, I think the Cybertruck resembles a cross between a Delorean and a Pontiac Aztec. The Delorean and the Aztec were two of the least successful American vehicles of all time.
Moreover, the Cybertruck looks impractical to me. It appears to have no bed and cargo hauling capacity. Yes small bed pickups are common but one reason why you buy a pickup is to haul stuff in the bed.
The Tesla Cybertruck will Fail
In my opinion, the Cybertruck was designed by somebody who knows nothing about pickup trucks. Perhaps, Elon Musk needs to go out on his factory floor in Freemont, California, and ask a few of the working stiffs on the assembly line about pickup trucks.
Finally, the Cybertruck could be Tesla’s biggest failure because it is the first ugly Tesla. For all their faults, Tesla’s earlier models have been great looking vehicles. I think the S-Series and Model 3 are excellent examples of modern automotive style and design.
The Cybertruck; however, is a horror straight out of the automotive dark ages of the 1980s. A vehicle that ugly deserves to fail. Plus, the vehicle’s game is ghastly. It reminds me of the Cybermen, the clunky cybernetic Dr. Who bad guys who want to turn humanity into soulless automations.
Rivian not Tesla is the future of Electric Trucks
My prediction is that the truck buying public will take one look at the Cybertruck and buy a Rivian or an Electric F-Series instead. I product the Cybertruck will not sell, no matter how well it performs.
In contrast, Rivian’s R1T truck looks like a truck, not a prop from a 1980s movie. Truck buyers are conservative, and I predict they will reject a vehicle that appears to be a transportation solution for Robocop.
Tellingly, Ford plans to invest $500 million in Rivian, a press release indicates. Beyond Rivian, Ford rattled Musk by unveiling an all-electric F-150 over the summer. Ford drove the insult home by having the all-electric F-150 pull a train of auto-carrying railcars in a YouTube video.
The video so upset Musk he had a Cybertruck beat a gasoline F-I50 in a towing contest during his Cybertruck premiere carnival. Barron’s reports, the Cybertruck won that “challenge.” Predictably, Ford is challenging Musk to towing battle between the Cybertruck and an all-electric F-150, TechCrunch reports.
I imagine Rivian and General Motors (NYSE: GM) will make similar challenges to Tesla. GM is reportedly planning its own electric pickup. Consequently, master marketer Musk is giving his competition free publicity.
In the final analysis, I predict Musk will have to go back to the drawing board and design a better pickup truck. I hope that truck will meet Tesla’s earlier high standards of design and aesthetics.
Tesla could deliver a Full Self-Driving vehicle soon
Tesla Motors (NASDAQ: TSLA) could unveil a full self-driving vehicle (FSD) in a few weeks, Fortune claims. Fortune bases that claim on statements Musk made during Tesla’s October 2019 earnings call.
However, I think Musk statement’s show the vehicle will be far from self-driving. “There’s the car being able to be autonomous, but requiring supervision and intervention at time,” Musk said.
Hence, Tesla could release a Level Four or highly autonomous vehicle not a Level Five fully autonomous vehicle. To explain, a true FSD vehicle or Level Five autonomous car will do everything itself.
No Tesla May not Have a Self-Driving Vehicle on the Road
In contrast a Level Four autonomous vehicle will perform 90% or 95% of the driving functions. Hence, a Level Four Self-driving vehicle drives itself most of the time. However, a Level Five vehicle drives itself all the time.
My statement is based on the Six Levels of Vehicle Autonomy created by the US National Highway Traffic Safety Administration (NHTSA). How to Geek defines those levels here.
Hence, Tesla could make a big breakthrough soon but not the breakthrough Fortune claims. Plus, Tesla could be behind Alphabet (NASDAQ: GOOG) subsidiary Waymo in self-driving tech.
TechCrunch writer Ed Niedermeyer claims to have ridden in a fully autonomous Waymo Chrysler Pacifica minivan in Arizona in October 2019. In fact, Waymo is testing a driverless taxi service in Chandler, Arizona.
Are Self-Driving Vehicles Here?
Therefore, Tesla could lag behind Alphabet (NASDAQ: GOOGL) and Fiat-Chrysler (NYSE: FCAU) in self-driving vehicles. Fiat-Chrysler manufactures the Pacifica. On the other hand, Tesla’s tech could be state-of-the art.
Self-driving vehicles are here and many companies will roll them out including both Ford and Tesla. Under those circumstances, autonomous vehicle technology is not a as big advantage for Tesla as Musk will have us believe.
Despite Musk’s exaggerations it appears that Level Four self-driving vehicles are here and will totally disrupt the auto industry. In particular, Level Four self-driving vehicles will threaten many truck and bus driver’s jobs.
Autonomous vehicle technology will heat up the debate over job-killing technology and boost Andrew Yang’s (D-New York) presidential prospects. One nightmare for Tesla and Waymo could be governments banning self-driving vehicles to protect “jobs.”
Is Ford a Good Investment?
In conclusion, I still think Ford (NYSE: F) is a good investment because it is cheap; cash-rich, and pays a good dividend. Ford shareholders received a 15₵ dividend on 21 October 2019. Moreover, Dividend.com estimates Ford investors received a dividend yield of 6.59%, an annualized payout of 60₵, and a payout ratio of 48.51% on 29 November 2019.
I think Tesla Motors (NASDAQ: TSLA); in contrast, is overpriced, cash-poor, and pays no dividend. I think Auto industry investors who want to make money now need to buy Ford. Those who want a long-term speculative stock that could not pay off for a decade, can stick with Tesla.