Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Good StocksStocks

How and Why Toyota Could Crush Tesla and the Apple Car

daniel , , , , , , , , ,

Toyota Motor Co (NYSE: TM) is now in a very good position to crush both Tesla Motors (NASDAQ: TSLA) and the Apple Car. The automotive giant has just taken two steps to make sure that it will dominate the global car business for the foreseeable future.

First it is spending $1 billion to create a new think tank called the Toyota Research Institute at Stanford University in the heart of Silicon Valley. This Institute is Toyota’s version of the Manhattan Project, a massive, well-funded effort to win the autonomous car wars quickly and completely.

Toyota Could Dominate Autonomous Cars

Akio Toyoda introduces Dr. Gill Pratt to the press.
Akio Toyoda introduces Dr. Gill Pratt to the press.

The goal of the Institute is simple: develop the next generation of self-driving cars, probably by using Toyota’s cash to buy the best brains in Silicon Valley. To achieve that goal, CEO Akio Toyoda has opened his check book and turned to a guy with military experience. The head of the Institute will be Dr. Gill Pratt, a well-known artificial intelligence expert who used to work for the Defense Advanced Research Projects Agency, or DARPA.

DARPA is the agency that develops next generation technologies for the Pentagon. Those technologies include some of the world’s most advanced robotics. Pratt had been expected to land at a well-known tech company like Google (NASDAQ: GOOGL) or Apple Inc. (NASDAQ: AAPL) or possibly Tesla. Instead, he landed at Toyota, where he will undoubtedly be making a lot of phone calls to robotics experts.

Toyota has just demonstrated that it is capable of becoming the leader in the self-driving car race. Akio Toyoda has also shown that his company is capable of competing effectively and aggressively in the world’s center of robotics and artificial intelligence research, namely Silicon Valley.

By spending $1 billion, Toyoda is also showing that his company is serious about autonomous vehicles and committed to this technology. He is determined to catch up to rivals such as Daimler (ETR: DAI) and block upstarts such as Tesla and Apple.

Toyota Fuel Cell Car for Sale

The second step to domination that Toyota has taken is to keep moving ahead with the rollout of its hydrogen fuel cell-powered vehicles. Toyota’s fuel cell-powered sedan, Mirai, is now for sale in the United States. It has also has been getting a lot of great exposure as a pace car at NASCAR races.

960-toyota-motor-mirai-or-tesla-motors-inc-electric-cars-consumers-preference

Forbes writer Sue Callaway recently drove the Mirai, and she thinks that it is a worthy competitor for Tesla’s vaunted Model S. Mirai certainly has some advantages over Tesla’s vehicle, including Toyota’s resources and its dealer network. It also has one serious weakness. It is powered by a fuel that is not available in most communities: hydrogen. Tesla’s power source is available at any electric outlet.

By going ahead with fuel cell technology, Toyota is demonstrating that there are alternatives to electric vehicles. It is also ignoring the pundits and the electric car fanatics. Toyota is also demonstrating that its technology is better and that it has the capability to roll out new vehicles and new technologies.

Elon Musk had better be worried because Toyota is committed to destroying him. The billionaire playboy might have picked a fight that he cannot win.

Toyota vs. Tesla by the Numbers

The numbers demonstrate that Tesla might not stand a chance in a battle with Toyota. These financial figures prove that Tesla is no match for Toyota whatsoever:

Tesla's main factory in Fremont, California, ironically enough it used to be a Toyota plant.
Tesla’s main factory in Fremont, California, ironically enough it used to be a Toyota plant.

Revenue:

  • Toyota – June 30, 2015 – $243.03 billion
  • Tesla Motors – September 30, 2015 – $3.788 billion

Free Cash Flow:

  • Toyota – June 30, 2015 – $541.65 million
  • Tesla Motors – September 30, 2015 – $627.88 million

Net Income:

  • Toyota – June 30, 2015 – $19.51 billion
  • Tesla Motors – September 30, 2015 – $675.9 million

Cash and Short-Term Investments:

  • Toyota – June 30, 2015 – $37.66 billion
  • Tesla Motors – September 30, 2015 – $1.462 billion

Cash from Operations:

  • Toyota – June 30, 2015 – $34.57 billion
  • Tesla Motors September 30, 2015, – $581.05 million

Market Capitalization:

  • Toyota – $192.64 billion
  • Tesla Motors – $29.47 billion

184ca9703c5441bfa17a4f6e920db656

Enterprise Value:

  • Toyota – $324.15 billion
  • Tesla Motors – $30.65 billion

Get the picture, folks; the amount of money Toyota has in the bank exceeds the value of Tesla. That means Toyota could simply buy Tesla if it wanted to, but it does not need to. Instead, all it has to do is spend cash on research.

To make matters worse, Tesla seems to be losing money every time Elon Musk opens the factory door. It’s hard to see how that company can stay in business with its net income and free cash flow, particularly with the money that Musk is investing in his Giga Factory scheme.

Why Toyota Will Grind Tesla into the Dust

The financial resources indicate that a battle between Tesla and Toyota would be like a wrestling match between Chewbacca and an Ewok. The little guy simply does not stand a chance in such a fight.

Then there’s some of the physical numbers:

  • Number of Toyota Dealers in the USA: 1,400 (1,200 Toyota dealerships and 200 Lexus dealers)
  • Number of Toyota Factories Worldwide: 51
  • Number of Tesla Dealerships: 0
  • Number of Tesla Factories: 2, with one under construction

One just has to wonder how Tesla can survive. Toyota has the resources to grind it into the dust if it wants, and it looks like Akio Toyoda is planning to do just that. Therefore if you want to buy an automotive stock that starts with a T, buy Toyota because it is poised to dominate this industry for the foreseeable future.