The contrast between Tesla and the rest of the auto industry is terrifying
Mark J. Terrill / Associated Press
- Some think that Tesla is a tech company, but its main product is cars, so it effectively exists in the auto industry.
- For years, auto sales have boomed in the US and automakers have raked in profits while Tesla has lost billions.
- Unless Tesla reverses this trend, it won't be able to weather a downturn when sales drop and profits vanish.
Optimism and skepticism about Tesla's future are in an all-out war. Those who are bullish on the 15-year-old maker of sexy all-electric cars are doubling down on their bullishness and support for CEO Elon Musk.
Those who are bearish are predicting a bankruptcy in the next year, as Tesla burns through all its cash and fails to convince new investors to fund its monumental losses (something like $20 billion for the life of the company).
Tesla, at base, is an automaker. But unlike other automakers, Tesla is valued like a rapid-growth tech firm and avidly followed by the same enthusiasts who might consider social media, fintech, and cryptocurrencies to be their passion.
Meanwhile, there's a traditional auto industry that after being pummeled by the financial crisis has come roaring back since 2010. The four old-school companies that I follow closely - General Motors, Ford, Fiat Chrysler Automobiles, and Ferrari - are awash in cash and profits and have been raking it in for literally years.
One salient statistic: both GM and Tesla staged IPOs in 2010, but since then Tesla has never posted an annual profit, while GM has made over $70 billion.
The stock of GM and Ford has performed poorly relative to the overall markets, and since 2010, Tesla has massively rewarded risk-taking investors. Since its own IPO in 2014, FCA shares has rallied strongly, up almost 275%, while following Ferrari's spinoff from FCA and its 2015 IPO, stock in the Italian supercar brand is up 140%.
Those returns have been relatively riskless, while Tesla's certainly haven't. And even if you bought Ford and GM expected better results, both companies have compensated investors with robust dividends and stock buybacks.
Tesla bulls will tell you that to properly understand the potential of the company, you have to rearrange your thinking. Musk is a disruptive visionary; the cars are rolling computers.
That's fine for a jazzy storyline, but Tesla's struggle isn't related to its narrative - it's falling short on fundamentals, such as being able to effectively build a mid-size sedan in the Model 3. Any other established carmaker could crank out hundreds of thousands in short order, but Tesla spent a closely watched year trying to manufacture a few thousand per week.
So let's take a closer look at how Tesla is terrifyingly different from a regular car company:
Get the latest Ford stock price here.
Tesla vs. GM
Tesla vs. Ford
Tesla vs. FCA
Tesla vs. Ferrari
So what's the bottom line?
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