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Ford vs Tesla in Research and Development (R&D) Spending

Ford Motor Company. Source: Flickr

Ford Motor (NYSE:F), a global player in the automobile industry, is aggressively transforming from manufacturing fossil fuel vehicles to full battery electric vehicles.

As recent as Feb 20201, Ford has just announced that it will invest as much as $29 billion through 2025 to turn the company around into a full-fledge EV player.

Ford commanded 13.6% market share in North America in 1Q 2020, making it one of the largest automotive companies in North America aside from General Motors.

Being a major automotive player, Ford has spent considerably on research and development (R&D).

The spending on R&D is considered necessary especially for a company like Ford when it is racing to turn itself around in vehicle electrification and autonomous driving.

In this article, we will explore Ford’s research and development expense and compare it with that of Tesla over a period of time.

We are using Tesla’s research and development costs as the reference and see how the two companies stack up against each other when it comes to R&D spending.

As we all know, Ford has been in the automobile industry for more than a couple of decades whereas Tesla is still a relatively new player.

As a result, it’s interesting to see how far has Ford gone in terms of R&D spending when compared to a new player in the industry.

Please note that R&D cost, budget, expense, spending, etc are used interchangeably in this article and are meant the same.

So sit tight and read on to find out more about Ford’s R&D budget relative to that of Tesla.

Ford vs Tesla in R&D Spending

Ford research and development spending

Ford research and development spending

The chart above shows Ford and Tesla’s research and development costs from 2013 to 2020 on an annual basis.

As the chart shows, Ford’s R&D expenditure has been ticking higher year over year since 2013, rising from $6.2 billion in 2013 to as much as $8.2 billion in 2018 before declining to $7.1 billion in 2020.

The same goes for Tesla when the company’s R&D expenditure has increased year over year since 2013 and reached the highest at $1.49 billion in 2020.

From a comparison perspective, Ford’s research and development expense has been much higher than that of Tesla for the past 8 years.

In fact, Ford’s R&D expense of $7.1billion in 2020 was nearly 5X higher than Tesla’s R&D expense of $1.49 billion in the same year.

While Ford’s R&D spending has been much higher all the while, the gap between both companies’ R&D spending has actually been narrowing significantly in recent years.

If you have noticed, the gap in terms of R&D spending between the two automakers was much higher back in 2013.

For instance, Ford’s research and development spending of $6.2 billion in 2013 was 27X higher than Tesla’s R&D costs of only $0.23 billion in the same year.

However, the difference has been reduced to 5X in 2020, driven mainly by the growth in R&D spending for Tesla.

In general, Tesla’s research and development spending has been fast catching up with that of major automobile players such as Ford and General Motors.

At the same time, Ford’s expense in R&D has only increased minimally from 2013 to 2020.

In fact, Ford’s R&D expenditure has actually declined from its high of $8.2 billion reported in 2018 to only $7.1 billion in 2020.

On the other hand, Tesla has been jacking up its research and development activities, hoping to get an edge over its much bigger and older competitors.

As a result, it’s not surprising to see that Tesla has been spending heavily on research and development in recent years in an effort to dominate not only in the electric vehicle space but also in autonomous driving technology.

Ford vs Tesla in R&D Expenses Growth Rates

Ford's R&D expense YoY growth rates

Ford’s R&D expense YoY growth rates

The chart above represents Ford vs Tesla in research and development expenses year over year (YoY) growth rate between 2014 and 2020.

As the chart shows, Ford’s R&D growth had been in the high single-digit between 2014 and 2017.

However, Ford’s growth rate has declined significantly to only 2.5% in 2018 and has even turned negative at -9.8% and -4.1% in 2019 and 2020, respectively.

On average, Ford’s R&D spending YoY growth rate for the past 8 years was only at 2%. This average figure is not something out of a surprise as Ford is already a mature automaker.

To this end, I would expect Ford’s R&D costs to remain more or less the same now and in the future.

While Ford may have pledged to spend up to $29 billion through 2025 to expand its R&D activities in an effort to boost vehicle electrification and expand its autonomous driving technology, that amount will average a little over $7 billion per year through 2025 which is about the same as what Ford has been spending all these years.

On the flip side, Tesla’s R&D growth rates have only been negative once in the last 8 years which was during 2019 at -8.2%.

Tesla’s R&D expenditure rose as much as 11.2% in 2020 compared to the prior year.

On average, Tesla’s growth in research and development spending was around 35.6% in the last 8 years, which is much higher than the average figure reported by Ford.

In summary, the automobile industry must have been in pretty bad shape in 2019 when major automakers such as Ford and Tesla, irrespective of new or established companies, cut their research and development spending, causing the growth rates to turn negative for both companies.

Moving into 2020, Ford’s R&D growth was still in the red while Tesla has already boosted its spending significantly compared to the previous year.

Ford vs Tesla in R&D Costs to Revenue Ratio

Ford's ratio of R&D expenditure to sales

Ford’s ratio of R&D expenditure to sales

Looking at just the absolute value of the research and development costs does not tell us much about the budget or size of the R&D activities of the respective companies.

As such, we have to analyze the R&D expenses with respect to revenue in order to gauge the seriousness of the companies in allocating the much-needed R&D budget.

With this said, I have created the chart above that illustrates Ford and Tesla’s R&D expenditure with respect to their annual revenues for the past 8 years.

Let’s first look at Ford’s ratio of R&D budget with respect to the company revenue.

As shown in the above chart, Ford’s ratio has increased steadily from 2013 to 2020, albeit at a slower rate.

Accordingly, Ford’s ratio has increased from 4.2% in 2013 to as high as 5.6% in 2020.

On average, Ford spent around 5% of its sales on research and development in the last 8 years.

This figure is quite reasonable considering that the automotive industry has been a slow-growth industry and the technology hasn’t changed much for over a decade.

On the other side of the coin, we are seeing a much higher ratio for Tesla.

Between 2013 and 2017, Tesla’s R&D budget with respect to revenue had been above 10% and even reached up to 18% in 2015.

However, the ratio had declined since 2015 and reached the lowest level at only 4.7% in 2020.

While Tesla’s ratio of R&D budget to revenue has declined over the years, the average for the last 8 years was much higher than that of Ford.

In fact, Tesla’s spending on research and development with respect to revenue averaged around 10% in the last 8 years.

The result shows that Tesla has spent as much as twice the budget of Ford on research and development with respect to revenue on average from 2013 to 2020.


To recap, we have seen that Ford’s research and development spending has been much higher than that of Tesla between 2013 and 2020.

In 2013, Ford’s R&D expense was 25X higher than Tesla’s R&D expense but the ratio has narrowed down to only 5X difference in 2020, indicating that Tesla has been racing to close the gap with its competitors in terms of R&D spending.

Both companies, Ford and Tesla have reported that their R&D expenditure was lower in 2019 compared to 2018 at $7.4 billion and $1.34 billion respectively, representing a year over year decline of -9.8% and -8.2% respectively for Ford and Tesla.

Ford’s R&D spending continued to head lower in 2020 while Tesla’s R&D spending bounced back in the same year.

Ford spent an average of 5% of its revenue on research and development which is about half of what Tesla spent between 2013 and 2020.

References and Credits

1. Financial figures and data in all charts in this article were obtained and referenced from financial statements available in Ford SEC Filings and Tesla Sec Filings.

2. Featured images in this article are used under Creative Commons License and sourced from the following websites: Ford Asia Pacific and jjkbach.

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{ 2 comments… add one }
  • John Henriquez December 18, 2020, 12:52 am

    I would be very curious to know about how much of the $7.4B Ford spent in 2019 was on Battery Electric Vehicle Technology.

    • cckean December 18, 2020, 9:42 am

      Good point! As far as I know, Ford didn’t disclose the breakdown in the financial statements. But i will try to find this out.

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