Is Fiat Chrysler a Bargain in Self Driving Cars?
Fiat Chrysler Automobiles NVA (NYSE: FCAU) could be the bargain in self-driving vehicles.
To explain, autonomous Chrysler Pacifica minivans hauled 6,299 passengers in their first month of operation in California, TechCrunch claims. Overall, the vans operated by Alphabet (NASDAQ: GOOG) subsidiary Waymo completed 4,678 passenger trips in July 2019.
Consequently, the Chrysler Pacifica is the most successful self-driving or autonomous vehicle in the world. In comparison, Tesla Motors’ (NASDAQ: TSLA) vaunted robotaxi is still a figment of Elon Musk’s imagination. Musk wants to put a fleet of Tesla robotaxis on the road next year.
Waymo has a fleet of Chrysler Pacifica autonomous taxis on the streets now. To clarify, Waymo is testing autonomous taxi service in several San Jose suburbs. Waymo has been testing autonomous taxis in the Phoenix area for nearly a year.
Tesla vs. Fiat Chrysler
Thus Fiat Chrysler could be a value investment in self-driving vehicles because its shares traded at $12.98 on 26 September 2019. In contrast, Tesla shares traded at $242,56 on the same day.
Importantly, Fiat Chrysler makes money while Tesla reports losses. Fiat Chrysler reported a gross profit of $2.988 billion on revenues of $24.481 billion on 31 March 2019. In addition, Fiat Chrysler reported a net income of $614 million on 31 March 2019.
Meanwhile Tesla Inc. reported a gross profit of $921.05 million on revenues of $6.349 billion on 30 June 2019. However Tesla reported a net loss of -$408.33 million on the same day.
Is Tesla Generating Cash?
Interestingly, Tesla generated some cash in the quarter ending on 30 June 2019. In detail, Tesla reported an operating cash flow of $863.61 million, a financing cash flow of $2.143 billion and a free cash flow of $595.73 million.
Comparatively, Fiat Chrysler reported an operating cash flow of $281 million, a negative financing cash flow of -$811 million and a negative cash flow of -$1.265 billion on 31 March 2019. Thus, Tesla is generating some cash while Fiat Chrysler is burning cash.
Interestingly, Fiat Chrysler still had some cash left over on 31 March 2019. FCAU reported $13.151 billion in cash and equivalents and $661.72 million in short-term investments. Meanwhile, Tesla reported $5.083 billion in cash and equivalents on 30 June 2019.
Is Tesla Doing Better than Fiat Chrysler?
Thus, Tesla is doing better than Fiat Chrysler in the cash generating department. I think this justifies part of Elon Musk’s business model of pre-ordered cars.
In addition, Tesla is growing dramatically. Stockrow estimates Tesla’s revenues grew at a rate of 58.65% in the quarter ending on 30 June 2019. In comparison, Stockrow gave Fiat Chrysler a negative revenue growth rate of 4.87% in the quarter ending on 31 March 2019.
Tesla is experiencing some fantastic sales growth right now. CleanTechnica estimates the Model 3, Tesla’s affordable car, was the bestselling vehicle in Norway; the 3rd bestselling vehicle in the Netherlands, and the 7th bestselling vehicle in Switzerland between January and August 2019.
In detail Tesla sold 11,517 Model 3 cars in Norway, 7,823 Model 3 sedans in the Netherlands, and 2,871 Model 3 grocery getters in Switzerland during that period. Hence, Tesla proves there is a market for electric cars for average people.
However, Tesla is still a small player in the auto industry. Statista estimates Tesla sold 95,200 vehicles worldwide in 2nd Quarter 2019. In contrast, Statista calculates Fiat Chrysler sold 600,000 vehicles in the United States in 1st Quarter 2019.
Comparatively, Fiat Chrysler sold 2.235 million vehicles in the United States in 2018, and 1.096 million vehicles in the USA in the first six months of 2019, Fiat Chrysler Authority estimates. Thus, Tesla is a successful niche player outside its own country.
Is There a Market for Electric Cars?
Tesla’s success demonstrates that there is a market for electric cars. In response, Fiat Chrysler is testing vehicle-to-grid (V2G) technology in Italy.
In V2G they feed electricity from vehicle batteries into the grid. For example, you could use your car battery to power your house. Fiat Chrysler plans to test up to 700 V2G vehicles with the Italian utility Terna, Automotive News Europe reports. Uses for V2G could include powering electric tools at job sites.
In addition, Fiat will produce a full-electric version of the Fiat 500 hatchback in Italy next year. However, Fiat will stop selling the 500 in the United States next year, Forbes reveals. Instead, Fiat will market a 500X crossover in the American market. However, there are no known plans for an electric 500X.
Will the Drone Attack Boost Electric Cars?
I think the market for electric vehicles could grow because of the 14 September drone strike in Saudi Arabia. Drones reduced Saudi Arabia’s oil production by 5.7 million barrels a day by destroying two processing plants, Bloomberg estimates. Thus, the drones caused the single greatest disruption to the world oil supply ever.
Moreover, the drones prove that massive military forces like those of the United States and Saudi Arabia cannot protect the world’s oil supply from disruption. For example, Saudi Arabia’s 313 fighter jets and 122 batteries of antiaircraft missiles did not prevent the drone assault. Hence, the drone attack made Elon Musk’s day.
Therefore, millions of people around the world will get the message if I want to drive I need an electric car. In addition, people will get the message “I need an electric vehicle to reach my job and the grocery store to keep my family fed.”
The war scare between the United States and Iran will only increase such fears. For example, Iran and its allies could launch more drone attacks to show America and its allies how costly a war could be.
How Ford’s Electrics Threaten Fiat Chrysler
Such war fears are a threat to Fiat Chrysler because it has no electric pickup truck. Fiat Chrysler’s Ram pickup truck is the company’s best seller in America.
The Ram 1500 is now the second best-selling pickup in America outselling General Motors’ (NYSE: GM) Chevy Silverado. CarBuzz estimates Fiat Chrysler sold 120,026 Rams in 1st Quarter 2019, while GM sold 114,313 Silverados.
The Ram 1500 is even threatening pickup leader Ford’s (NYSE: F) seemingly unbeatable F150 in sales. CarBuzz estimates FCA sold 68,098 Rams in June 2019, in comparison to 71,500 F150s. Notably, Ram 1500 sales grew by 56% in June 2019, Carbuzz claims.
High gas prices; and fears of gas shortages, could threaten Ram’s success, because FCA has no electric pickup. Meanwhile, Ford plans to bring an all-electric F150 to market before 2022, Electrek claims.
Importantly, the prototype for the electric F150 exists. Ford streamed video of an electric F150 pulling railcars that it claimed weighed one million tons down the tracks. In addition, Ford invested $500 million in Rivian, a small manufacturer that plans to market an electric pickup next year.
Plus, Amazon (NASDAQ: AMZN) plans to order 100,000 electric delivery vans from Rivian by 2030, TechCrunch reports. Interestingly, an image of the Rivian delivery van looks suspiciously like the Ford Transit van.
Thus, Chrysler could face competitors with electric versions of some of its best-selling products, vans and pickups, when the public fears gas shortages.
Is Chrysler a Value Investment?
Currently, I consider Chrysler a potential value investment because of its alliance with Alphabet (NASDAQ: GOOGL) Waymo. I think autonomous taxis could be a big business and Fiat Chrysler and Waymo have the lead in that market.
However, Fiat Chrysler is reliant on another company’s technology for its self-driving vehicles. Notably, Fiat Chrysler will not get the most valuable side product from Waymo’s self-driving experiments the data. Instead, the data will stay with Alphabet.
In contrast, Ford and Autonomic are building a Transportation Mobility Cloud to harvest data from self-driving cars, Market Mad House reports. Thus, Ford can sell the data from its self-driving vehicle tests, while Chrysler only provides the van. Instead, Alphabet makes the money from the data.
In conclusion, I think Ford (NYSE: F) has a better business model than Fiat Chrysler. Thus, I think is the better value investment in self-driving vehicles and electrics because it is cheaper than FCAU and pays a dividend.
Currently, Fiat Chrysler pays no regular dividend while Ford paid a 15₵ dividend on shares that cost $9.14 on 26 September 2019. Thus, I consider Fiat Chrysler Automobiles and Tesla Motors risky speculative stocks, while Ford is the value investment in self-driving vehicles. I advise investors to stay away from both Fiat Chrysler and Tesla.
