My Dad emailed me this article regarding Ford (F) vs. Tesla (TSLA) and asked what I thought:
Ford Motor Company (F): Ford Vs. Tesla... Which Stock Should You Buy? - Seeking Alpha
Here's my response. What do you guys think?
Dad,
That was an interesting article. With regard to Ford, I have no idea if the price is too high or too low. I haven't researched Ford. That being said, considering their valuation is already 67.1 billion dollars, I don't think really think it'll get too much higher, but that's just an unresearched assumption.
Regarding Tesla, I do believe they're going to make profit margins better than Porsche on cars that sell for less than Porsches. Battery prices continue to drop every year by roughly 9%. Engine prices aren't dropping.
There was one section in the article that I believe shows the author's lack of understanding of Tesla and EVs. The author said: "Yet the bulk of Tesla's sales are expected to come from its Gen 3 sedan, slated for release in 2017. That car is expected to go head to head with the Ford Fusion, Toyota (TM) Camry and Honda (HMC) Accord, all three of which are making tremendous strides in terms of drivetrain electrification." I have two points to make about this:
One is that the Gen 3 sedan is probably going to be more geared against the BMW 3 Series and the Audi A4, not the Accord, Camry, or Fusion (I'm not sure where he got that information from, but I've never heard that before). The car might start off in the 30s, but with decent options it'll probably cost in the 40s or 50s (or more if you want it decked out), similar to a BMW 3 Series (which, according to the BMW, website costs as little as $33,675 and as much as $88,377 for the M3). That'll help with the margins.
The other point is that Ford, Toyota and Honda (or anyone else really) have yet to show anywhere near the level of technology that Tesla has not only demonstrated, but has been selling on the market and perfecting for the last five and a half years, starting with the Roadster. EVs need range and performance, both of which require a large battery, which is the most expensive part of an EV. By utilizing the 18650 form factor, which is an inexpensive form factor for Li-ION batteries, Tesla has brought down the cost of the pack to a much lower cost per KWh than any other auto manufacturer. So far, all the other auto manufacturers have been utilizing a prismatic battery pack form factor, which is more expensive per KWh, but has a lower R&D cost to get it to work properly as compared to the 18650 form factor. Additionally, in order to get such a large battery in a car and still have storage space, the battery pack and car must be designed together. So far, all the other auto manufacturers have been just using gas car bodies, and trying to put batteries and electric motors in them. This doesn't leave much room storage. Ever since the Model S, Tesla has been putting the battery in the floor, which not only helps keep the center of gravity down low, but is also the only way an 85 KWh battery will fit in a car and still actually have storage space.
It took Tesla five years to develop the Roadster, (which perfected the drive train and the use of 18650 cells), and then another four years after that to perfect the packaging for an electric car (which came in the Model S). The other auto manufacturers haven't even talked about designing an EV from the ground up, never mind creating a prototype.
All this being said, it certainly is true that all the other auto manufacturers have much more cash available than Tesla has. They have large teams and large factories and brand recognition and a large amount of loyal customers already buying their cars. And they can all buy a Tesla Model S, take it apart, and learn from that too (which I'm sure they've all done by now). So, to me, the question isn't whether or not the other auto manufacturers are currently competing with Tesla in the EV space (they're not), it's more a question of if they decide to make an EV from the ground up to compete with Tesla. They'll be behind at first, but with lots of engineers and the Model S as a starting point, it won't take them as long to develop it as it took Tesla, and with big factories and lots of cash, it won't take them as long to ramp up production. If the other auto manufacturers don't act soon though (and I don't think they will), it'll be too late (and many people think it's already too late). Tesla will be destined to get a firm standing in the auto industry, and it will no longer be possible to simply put out a better, cheaper car. Tesla will have factories up and running making a car that the competition doesn't know how to make, at margins the competition doesn't know how to achieve, all at high volume, and getting brand loyalty all the while.
Eventually, the other car companies will see what's happening, and they'll either adapt or die (they'll probably all adapt), but Tesla will be a major player by then.
So in the short-term, I don't know if the TSLA stock price will go up or down, but in the long-term, I'm still bullish on TSLA. I don't think the market believes they'll achieve as much success as I believe they will. Then again, I think it still is possible for the other auto manufacturers to jump in with lots of R&D and possibly catch up to Tesla... so really, the chance still exists that Tesla could end up stuck in the very high end range of electric cars and never really go mainstream. But I doubt it. There are, of course, other risks for Tesla as well, but they seem to be doing one heck of a good job internally (making a car that is Motor Trend's Car Of The Year, a car listed as the best car ever tested by Consumer Reports, and a car that is the safest car ever tested by the NHTSA). So my only real concern is for external risks (i.e. other auto manufacturers).
Jarrod
Ford Motor Company (F): Ford Vs. Tesla... Which Stock Should You Buy? - Seeking Alpha
Here's my response. What do you guys think?
Dad,
That was an interesting article. With regard to Ford, I have no idea if the price is too high or too low. I haven't researched Ford. That being said, considering their valuation is already 67.1 billion dollars, I don't think really think it'll get too much higher, but that's just an unresearched assumption.
Regarding Tesla, I do believe they're going to make profit margins better than Porsche on cars that sell for less than Porsches. Battery prices continue to drop every year by roughly 9%. Engine prices aren't dropping.
There was one section in the article that I believe shows the author's lack of understanding of Tesla and EVs. The author said: "Yet the bulk of Tesla's sales are expected to come from its Gen 3 sedan, slated for release in 2017. That car is expected to go head to head with the Ford Fusion, Toyota (TM) Camry and Honda (HMC) Accord, all three of which are making tremendous strides in terms of drivetrain electrification." I have two points to make about this:
One is that the Gen 3 sedan is probably going to be more geared against the BMW 3 Series and the Audi A4, not the Accord, Camry, or Fusion (I'm not sure where he got that information from, but I've never heard that before). The car might start off in the 30s, but with decent options it'll probably cost in the 40s or 50s (or more if you want it decked out), similar to a BMW 3 Series (which, according to the BMW, website costs as little as $33,675 and as much as $88,377 for the M3). That'll help with the margins.
The other point is that Ford, Toyota and Honda (or anyone else really) have yet to show anywhere near the level of technology that Tesla has not only demonstrated, but has been selling on the market and perfecting for the last five and a half years, starting with the Roadster. EVs need range and performance, both of which require a large battery, which is the most expensive part of an EV. By utilizing the 18650 form factor, which is an inexpensive form factor for Li-ION batteries, Tesla has brought down the cost of the pack to a much lower cost per KWh than any other auto manufacturer. So far, all the other auto manufacturers have been utilizing a prismatic battery pack form factor, which is more expensive per KWh, but has a lower R&D cost to get it to work properly as compared to the 18650 form factor. Additionally, in order to get such a large battery in a car and still have storage space, the battery pack and car must be designed together. So far, all the other auto manufacturers have been just using gas car bodies, and trying to put batteries and electric motors in them. This doesn't leave much room storage. Ever since the Model S, Tesla has been putting the battery in the floor, which not only helps keep the center of gravity down low, but is also the only way an 85 KWh battery will fit in a car and still actually have storage space.
It took Tesla five years to develop the Roadster, (which perfected the drive train and the use of 18650 cells), and then another four years after that to perfect the packaging for an electric car (which came in the Model S). The other auto manufacturers haven't even talked about designing an EV from the ground up, never mind creating a prototype.
All this being said, it certainly is true that all the other auto manufacturers have much more cash available than Tesla has. They have large teams and large factories and brand recognition and a large amount of loyal customers already buying their cars. And they can all buy a Tesla Model S, take it apart, and learn from that too (which I'm sure they've all done by now). So, to me, the question isn't whether or not the other auto manufacturers are currently competing with Tesla in the EV space (they're not), it's more a question of if they decide to make an EV from the ground up to compete with Tesla. They'll be behind at first, but with lots of engineers and the Model S as a starting point, it won't take them as long to develop it as it took Tesla, and with big factories and lots of cash, it won't take them as long to ramp up production. If the other auto manufacturers don't act soon though (and I don't think they will), it'll be too late (and many people think it's already too late). Tesla will be destined to get a firm standing in the auto industry, and it will no longer be possible to simply put out a better, cheaper car. Tesla will have factories up and running making a car that the competition doesn't know how to make, at margins the competition doesn't know how to achieve, all at high volume, and getting brand loyalty all the while.
Eventually, the other car companies will see what's happening, and they'll either adapt or die (they'll probably all adapt), but Tesla will be a major player by then.
So in the short-term, I don't know if the TSLA stock price will go up or down, but in the long-term, I'm still bullish on TSLA. I don't think the market believes they'll achieve as much success as I believe they will. Then again, I think it still is possible for the other auto manufacturers to jump in with lots of R&D and possibly catch up to Tesla... so really, the chance still exists that Tesla could end up stuck in the very high end range of electric cars and never really go mainstream. But I doubt it. There are, of course, other risks for Tesla as well, but they seem to be doing one heck of a good job internally (making a car that is Motor Trend's Car Of The Year, a car listed as the best car ever tested by Consumer Reports, and a car that is the safest car ever tested by the NHTSA). So my only real concern is for external risks (i.e. other auto manufacturers).
Jarrod
