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 3 million EVs by the end of 2023 while Ford has so far sold only 50,000 EVs as of 2022.
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 2021 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 Sept 2022.
Additionally, Ford’s flagship vehicle, the F-150 Lightning, an all-electric pickup truck that has already debuted 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!
Ford Motor Vs Tesla’s Stock Topics
1. Vehicle Sales Or Deliveries
2. Total Net Sales And Revenue
3. Gross Profit Margin
4. Operating Profit Margin
5. Net Profit Margin
6. Operating Cash Flow Margin
7. Free Cash Flow Margin
Vehicle Sales Or Deliveries
Let’s first look at Ford and Tesla’s total vehicle sales and delivery 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 2Q 2022, 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 1,000,000 vehicles as of Q2 2022.
By the end of fiscal 2022, Tesla’s total vehicle deliveries will most likely reach 2 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 2022 2Q, 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.
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 $148 billion USD as of fiscal Q2 2022, a much lower figure compared to those reported in pre-COVID periods.
On the other hand, Tesla’s total revenue has been on a rise, reaching as much as $67 billion USD as of fiscal Q2 2022, 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
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 2022 2Q, Tesla’s gross profit margin totaled 27% while Ford’s figure came in only 10%, 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 2022 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
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 fall behind Ford in terms of operating margin.
Since fiscal 2017, Tesla has been turning around from being unprofitable to highly profitable.
As of fiscal Q2 2022, Tesla’s operating profit margin reached 15% while Ford Motor’s ratio clocked at 5% 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
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 2022 2Q, Tesla’s net profit margin came in at 14% compared to only 8% 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
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 margins 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 2022 Q2, Ford’s operating cash flow margin declined to only 8% compared to 20% 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
While Tesla is much more efficient in generating operating cash flow, it is nearly the same as 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 2022 and clocked at only 4% as of fiscal 2Q 2022, a much lower figure than that of Tesla.
Particularly, Ford’s free cash flow margin has declined significantly in the last few quarters, giving Tesla an opportunity to slightly lead in this metric.
On the other hand, Tesla’s free cash flow margin has been steady and quite stable over the past several years.
In fact, Tesla’s free cash flow margin has been growing steadily over the years.
As of 2Q 2022, Tesla’s free cash flow margin came at 10%, one of the highest figures ever reported.
In short, both Ford and Tesla are having almost the same level of efficiency in terms of free cash flow generation but Ford’s cash margin has been on a decline, indicating the weakening cash generation capability.
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.
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 Q2 2022, 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 2Q 2022.
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 much 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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