Real Money, Real Trades:
Why I’m Bullish on Ford and Bearish on Tesla for The Next Two Years:
Ford is gaining legitimate momentum in the EV market while at the same time, Tesla has a lot of obstacles including Elon's split focus with his multitude of companies...
But also more fundamentally than that, I think the majority of folks who are Tesla fans and want to drive a Tesla already have a Tesla.
And unlike an iPhone, you don't upgrade your car every year. Meanwhile, there is a whole landscape of folks who aren't "Ford fans" but will enter the EV market and make the best decision for their lives and Ford is gaining ground.
So let’s take a look at what’s going on with Ford and Tesla.
Ford:
Ford started its life with one goal, to make an everyday affordable vehicle for the masses. Since 1903 they’ve been crushing that goal. Not just on a countrywide scale, but at a global scale.
Henry Ford once famously said:
“I will build a motor car for the great multitude. It will be so low in price that no man will be unable to own one.”
I would argue that 121 years later, he succeeded and ushered in a new era of mass industrialization, mass production, and mass innovation, much of which stemmed from his brilliance when it came to the assembly line.
While most automakers are struggling right now to grow sales, Ford’s not having one bit of trouble.
Ford's new vehicle sales have risen 11.2% over the last year.
And for Ford EV’s that number is even more staggering: Ford sold 20,233 EV’s in the first quarter of this year, an increase of 86% year over year.
Meanwhile, Toyota’s domestic sales in Japan dropped 33% over the last year, and 7% globally.
Honda’s most popular vehicles aren’t selling as well anymore either. With sales for the Accord, down 31% in May compared to last year, and 17% year over year.
For the Honda passport, another popular vehicle, sales are down 32% since this time last year.
Honda’s EV sales are also experiencing some shortcomings, falling 27.3% year over year.
Acura sales have also dropped 28.9% since May of last year.
Chevy’s sales fell 2.1% in the first quarter of this year compared to last year.
Dodge’s sales also dropped by 10% in the first quarter of this year compared to last year’s numbers.
On the luxury side, luxury brands have experienced a decline in sales across the board since we entered a high inflation and interest rate environment.
In January, Bentley reported sales dropped 11% in 2023. Orders of high-end Mercedes dropped 11% alone in the third quarter of last year. And sales for Mercedes flagship S-class model fell 18%.
Meanwhile, sales in China, Mercedes's largest market for its S-class vehicles fell by 12%.
Over in Korea, Audi continues to rapidly lose market share to cheaper more affordable vehicle options. With the German automaker reporting an 88% decline in vehicle sales from February of last year to February of this year.
Audi also announced in their first quarter 2024 earnings report that across their brands deliveries to customers fell 4.5% for Audi’s, 28.7% for Bentley, and 16.2% for Ducati motorcycles.
Cadillac sales decreased by 7% in the fourth quarter of 2023, with some more expensive models experiencing sales drops of 34%.
How is Ford doing so well when everyone else is failing?
I think it all comes down to consistency. They have maintained their position as the everyday average American affordable vehicle.
Now, I will say that cars have gotten way too expensive across the board. Especially compared to the meager level that income is rising.
But Ford has tried to maintain its place as the “everyman’s vehicle”. And they’ve incorporated this approach into the EV market. This is especially strategic when the economy isn’t in the best place like where we find ourselves now.
Lavish spending on luxury goods is often one of the first things to go when the economy gets tight.
And we’re seeing that with a flight back to Ford, America's original affordable car company.
Ford’s mission to create the same “luxury” experience in their latest models at a more reasonable cost has certainly seemed to help it gain market share based on the trends we just looked at.
For example, Ford has been rolling out an entire lineup of hybrid and electric vehicles in recent years, competing with the luxury brands that have historically had a strong foothold in that market.
And given that Ford EV and hybrid sales grew 65% in May, it’s safe to assume they are pulling the rug out from the more expensive guys–after all, we’re not talking about buying clothes here where you might get both the designer pair and the more affordable ones…
When someone buys an EV from Ford, they’re specifically not buying one from Tesla.
Tesla:
Tesla’s market share in the EV space has continually eroded as more and more major automakers enter the space. And at more affordable levels than Tesla’s Ev’s.
At the beginning of 2022, Tesla captured 74.8% of the market share in the EV space.
Today, that number is 52.1%.
Having over half of the market share for the EV space is still a big deal, but what’s staggering and especially important to note here is that Tesla lost almost a quarter of the market share in the EV space in just two years.
Meanwhile, Ford’s market share in the EV space has almost doubled during that time, going from 4.4% in 2022 to 7.5% in the first quarter of this year.
You can buy an all-electric Ford F-150 Lightning for $54,995 meanwhile the 2-wheel drive base model Cyber Truck starts at $60,990 if you can get your hands on one – which is challenging.
The F-150 Lightning is the EV version of a big full-size truck that millions of Americans have depended on for decades. In fact, the F-150 has been the top-selling vehicle in the US since 1981.
So, Ford took the most popular vehicle and electrified it. That’s a solid tactic to make a hit and erode away at Tesla’s market share.
The F-150 is a trusted platform, it looks like the trucks people are used to, it feels like the trucks people are used to, it’s something people are comfortable with. And it’s not a major culture shock to switch to.
Especially compared to the unique angular sheet metal look of the Tesla Cyber Truck. The truck bed is more challenging to use, the vehicle almost stands as a novelty… Not a truck.
Just from the utility and function standpoint it’s a big culture shock to switch to a Cyber Truck… Whereas most Americans would have a much easier time switching out their gas-powered F-150 keys with an all-electric F-150 Lightning.
The switch is a lot easier.
I would also argue that another big shortcoming for Tesla is Elon Musk's bandwidth right now.
Elon Musk is in charge of:
- SpaceX, the rocket company
- Tesla, the EV giant
- X (formerly Twitter), one of the largest social media platforms
- SolarCity/Tesla Energy, a solar energy company
- xAI, an artificial intelligence company
That’s a lot for one man to handle, especially with 11 children.
Elon’s focus has simply become too split between his different endeavors and we are starting to see his businesses suffer for a number of reasons.
Other than Tesla, which is publicly traded, we don’t have complete insight into his other businesses, but Elon does enough public talking that we get an idea.
Vehicle sales have dwindled in recent quarters, production quotas have been missed, and it seems as if innovation has grown stagnant in the company despite the recent launch of the Cyber Truck.
And here’s what might be the most important part of Tesla’s story:
The majority of folks who are Tesla fans and want to drive a Tesla already have a Tesla. And unlike an iPhone, you don't upgrade your car every year (this is why stocks like Apple, Amazon, and Nvidia have such a leg up on a vehicle manufacturer — repeat customers are a massive part of the equation).
What we are seeing with Tesla is the instability of its growth. Especially as so many players flood the EV market at a more affordable price and continue to chip away at Tesla’s market share.
- Nate Tucci
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