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Ford Vs Tesla’s Stock – Margin And Profitability

EV charging station. Flickr Image.

Tesla is a first mover in the electric vehicle space.

On the other hand, Ford has only got on the battery EV bandwagon in 2020 when it first introduced the all-electric MUSTANG MACH-E.

Moreover, Tesla is on track to delivering 1 million EVs by the end of 2021 while Ford has so far sold fewer than 30,000 EVs as of Q3 2021.

While Ford may not be a major disruptor in the EV space, it is still a formidable player in the automobile industry.

Ford has the necessary resources to take on Tesla in the EV race.

For example, Ford’s research and development spending in fiscal 2020 was nearly 500% higher than what Tesla spent in the same period on a dollar-to-dollar basis.

Therefore, Ford Motor can still be a better bet than Tesla’s stock in the future considering that Ford’s market cap was only 1/10th of Tesla’s market cap as of Dec 2021.

Additionally, Ford’s flagship vehicle, the F-150 Lightning, an all-electric pickup truck that is expected to debut in 2022 will have a profound impact on the company’s stock.

Will Ford succeed? Probably.

That said, in this article, we will compare Ford and Tesla’s stocks in several areas, including vehicle deliveries, revenue, margins and profitability.

Apart from these metrics, we also look at the cash flow aspect of both companies as cash is an extremely important factor for a car company like Ford and Tesla.

In this aspect, whoever generates cash in the most efficient way will most likely emerge stronger in the EV race.

Without further delay, let’s head out to the following topics!

Vehicle Sales Or Deliveries

Ford vs Tesla in vehicle sales

Ford vs Tesla in vehicle sales

* Vehicle sales or deliveries data shown in the chart is presented on a TTM basis.
* Quarterly results are obtained directly from the respective company’s financial reports.
* Ford and Tesla’s fiscal year begins on Jan 1 and ends on Dec 31.

Let’s first look at Ford and Tesla’s total vehicle sales and deliveries results over the last 3 years.

As shown in the chart above, we can see that both companies’ figures are literally going in the opposite direction.

For example, Ford’s total vehicle sales which are inclusive of EVs and fossil-fueled vehicles, have been on a decline since fiscal 2017.

As of 3Q 2021, Ford’s total vehicle sales came in at only 4 million units on a TTM basis, the lowest figure that we have ever seen.

On the flipped side, Tesla’s total vehicle sales have been increasing since fiscal 2017 and reached more than 800,000 vehicles as of Q3 2021.

By the end of fiscal 2021, Tesla’s total vehicle deliveries will most likely exceed 1 million units.

While Ford’s total vehicle sales have been heading lower, they are still much higher than Tesla’s figures on an absolute basis.

For example, as of fiscal 2021 3Q, Ford’s total vehicle deliveries were 4X higher than that of Tesla.

The difference was much bigger back in fiscal 2017 but the gap has been narrowing over the years, illustrating the growth that Tesla has been leading over Ford.

Total Revenues

Ford vs Tesla in total revenue

Ford vs Tesla in total revenue

* Total revenues data shown in the chart is presented on a TTM basis.
* Quarterly results are obtained directly from the respective company’s financial reports.
* Ford and Tesla’s fiscal year begins on Jan 1 and ends on Dec 31.

Similar to the total vehicle sales, both companies’ revenue figures also have been going in the opposite direction.

For example, Ford’s total revenue clocked at $135 billion USD as of fiscal Q3 2021, one of the lowest figures ever reported.

On the other hand, Tesla’s total revenue has been on a rise, reaching as much as $47 billion USD as of fiscal Q3 2021, a record high for the company.

Again, on a dollar-to-dollar basis, Ford’s total revenue is nearly 3X higher than that of Tesla.

However, in terms of revenue growth rate, Tesla has performed much better in the last 3 years.

Going into 2022 and beyond, Tesla’s revenue growth will most likely outperform that of Ford Motor considering that the world’s transition from fossil fuel vehicles to EVs has only just begun.

Therefore, Tesla will greatly benefit from the expanding demand for EVs in the future given the company’s focus on not only the EV space but also the renewable energy market.

Unless Ford can drastically transition into developing more sophisticated EVs, Tesla will be leading the race in the electric vehicle space in years to come.

Gross Profit Margin

Ford vs Tesla in gross profit margin

Ford vs Tesla in gross profit margin

* Gross profit margin data shown in the chart is presented on a TTM basis.
* Quarterly results are obtained directly from the respective company’s financial reports.
* Ford’s gross margin consists of only the automotive sector while Tesla’s gross margin comes from all segments.
* Ford and Tesla’s fiscal year begins on Jan 1 and ends on Dec 31.

From the perspective of profitability, Tesla is leading the race as reflected in the higher gross profit margin shown in the chart above.

As shown, Tesla’s gross profit margin averages 2X the figure of Ford Motor in most financial periods.

As of fiscal 2021 3Q, Tesla’s gross profit margin totaled 23% while Ford’s figure came in at only 7%, a 3X difference.

More importantly, Tesla’s gross profit margin has been rising while Ford Motor’s gross profit margin has only recovered in fiscal 2021 but was still far below its historical highs.

In addition, the gap between Tesla’s and Ford’s figures seems to be widening, indicating the growing profitability of Tesla over Ford.

Operating Profit Margin

Ford vs Tesla in operating profit margin

Ford vs Tesla in operating profit margin

* Operating profit margin data shown in the chart is presented on a TTM basis.
* Quarterly results are obtained directly from the respective company’s financial reports.
* Ford and Tesla’s fiscal year begins on Jan 1 and ends on Dec 31.

Again, Tesla is beating Ford Motor in profitability as reflected in the growing operating profit margin.

A trend worth mentioning is that Tesla used to lag behind Ford in terms of operating margin.

Since fiscal 2017, Tesla has been turning around from being unprofitable to highly profitable.

As of fiscal Q3 2021, Tesla’s operating profit margin reached 10% while Ford Motor’s ratio clocked at only 1% on a TTM basis which was way behind that of Tesla.

Also, Tesla’s operating profit margin has been trending higher while Ford’s results have only recovered in fiscal 2021.

Therefore, from an operational perspective, Tesla is much more profitable than Ford Motor.

Net Profit Margin

Ford vs Tesla in net profit margin

Ford vs Tesla in net profit margin

* Net profit margin data shown in the chart is presented on a TTM basis.
* Quarterly results are obtained directly from the respective company’s financial reports.
* Ford and Tesla’s fiscal year begins on Jan 1 and ends on Dec 31.

The net profit margin takes into account all costs of doing business, including the costs of debt and taxes.

That said, Tesla’s net profit margin also has started to overtake that of Ford by a wide margin since fiscal 2020.

As seen in the chart above, Tesla’s net profit margin has surpassed that of Ford since fiscal 2020 and the figures are still rising.

As of fiscal 2021 3Q, Tesla’s net profit margin came in at 7.4% compared to only 2.1% for Ford Motor.

At these levels of profit margin, Tesla is more than twice as profitable as Ford Motor.

In short, Tesla’s huge profitability will absolutely help the company to secure the much-needed resources to compete in the EV race.

Operating Cash Flow Margin

Ford vs Tesla in operating cash flow margin

Ford vs Tesla in operating cash flow margin

* Operating cash flow margin data shown in the chart is presented on a TTM basis.
* Operating cash flow margin is calculated based on the ratio of TTM net cash from operating activities to TTM revenue.
* Ford and Tesla’s fiscal year begins on Jan 1 and ends on Dec 31.

Cash is the lifeline of a business and it is even more so for automobile companies like Tesla and Ford.

Therefore, in this section, we will explore Ford and Tesla’s operating cash flow margin to find out the respective operating cash flow efficiency.

As shown in the chart, Ford and Tesla seem to be racing head-to-head in terms of operating cash flow margin.

However, Ford’s operating cash flow margin has trended lower since fiscal 2Q 2021, giving Tesla an opportunity to lead the race.

As of fiscal 2021 Q3, Ford’s operating cash flow margin declined to only 12.5% compared to 21.2% for Tesla.

While Ford’s operating cash flow was nearly twice as much as that of Tesla on an absolute basis, its cash flow efficiency was much lower compared to Tesla.

Therefore, Tesla generates much better operating cash flow with respect to revenue compared to Ford Motor.

Again, Tesla’s higher operating cash flow margin will provide the company with the much-needed working capital so that the company does not have to rely on external capital funding.

Free Cash Flow Margin

Ford vs Tesla in free cash flow margin

Ford vs Tesla in free cash flow margin

* Free cash flow margin data shown in the chart is presented on a TTM basis.
* Free cash flow is the difference between net cash from operating activities and capital expenditures.
* Free cash flow margin is calculated based on the ratio of TTM free cash flow to TTM revenue.
* Ford and Tesla’s fiscal year begins on Jan 1 and ends on Dec 31.

While Tesla is much more efficient in generating operating cash flow, it is losing out to Ford in terms of free cash flow margin.

As seen in the chart above, Ford’s free cash flow margin seems to be slightly better than that of Tesla.

However, Ford’s free cash flow margin dived significantly in fiscal 2Q 2021 and clocked at 8% as of fiscal 3Q 2021, a 1 percentage point lower than that of Tesla.

While Ford’s results have been slightly better, it is coming head-to-head with that of Tesla.

Particularly, Ford’s free cash flow margin has declined significantly in the latest quarter, giving Tesla an opportunity to slightly lead in this metric.

On an absolute basis, Ford’s free cash flow was more than twice the amount of Tesla but its margin was only slightly better at best.

In short, both Ford and Tesla are having almost the same level of efficiency in terms of free cash flow generation but Ford generates a larger pile of free cash flow on a dollar-to-dollar basis.

Dividends

For your information, Tesla is a non-dividend payer while Ford has reinstated its cash dividend only in recent quarters.

Therefore, income investors would probably go for Ford’s stock in view of the cash dividends that it offers.

However, I do not rule out the possibility of Tesla paying a dividend in the future given the growing profitability and free cash flow of the company in recent years and in the future.

In this aspect, Tesla may pay a cash dividend since the company has been profitable and is expected to be doing so in the future.

More importantly, Tesla also has been free cash flow positive and it is likely to pay a dividend out of positive free cash flow.

In addition, Tesla’s outlook is much better than Ford’s as Tesla is considered an early disruptor and is a pure EV play while Ford has only embarked seriously on the EV race as recently as 2020.

For now, Tesla’s shareholders are expected to be contented with the no-dividend policy of the company while Ford’s shareholders are happily collecting cash dividends.

Therefore, if you are looking for dividend payments, go for Ford’s stocks.

Summary

To recap, we can see that Tesla’s historical growth rates have been outperforming Ford’s growth rates from the perspective of vehicle sales and revenue.

In this aspect, Tesla’s vehicle sales and revenue have been growing as opposed to the declining results of Ford Motor.

Going forward, Tesla’s growth momentum will likely stay at the current pace and may even exceed its historical results given the bright outlook of electric vehicles.

On the other hand, we are not sure if Ford may turn around unless Ford can drastically transition to producing more sophisticated EVs that can take on Tesla.

As of Q3 2021, the majority of Ford’s vehicle deliveries were still focused on fossil-fueled vehicles and we are seeing that the sales results for fossil-fueled vehicles have been on a declining trend.

Fundamentally, Tesla is far superior to Ford in most areas, including profitability and cash flow, as of fiscal 3Q 2021.

For example, Tesla is leading the results for all GAAP margins, including gross profit margin, operating margin and net margin.

Apart from profitability, Tesla also is beating Ford in operating cash flow and free cash flow margins as of the latest quarter.

Therefore, given Tesla’s far better results, I believe Tesla’s stock warrants a better buy than Ford’s stock.

Unless you are chasing dividend income, Tesla’s stock should be a better bet in the EV space.

References and Credits

1. All financial figures in this article are obtained and referenced from Ford and Tesla’s earnings reports which are available in:

i) Ford Earnings Releases, and
ii) Tesla SEC filings.

2. Featured images in this article are used under Creative Common licenses and obtained from the following source: charging an EV and EV charging station.

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Disclosure

The content in this article is for informational purposes only and is neither a recommendation nor a piece of financial advice to purchase a stock.

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