Tesla Inc. (NASDAQ: TSLA | TSLA Price Prediction) has a market cap of $1.18 trillion, which makes it the 10th most valuable company in the world. Ford Motor Co.’s (NYSE: F) market cap is $47 billion. That means Tesla is worth 24 times more than Ford. There are a number of reasons, even if some investors do not believe them.
The spread may have fallen slightly this year. Tesla’s stock is down 14% while Ford’s is 19% higher. However, even with the change, investor views of the two stocks are tremendously different.
Robots
Tesla has continued to make the case that it is a robotics and artificial intelligence (AI) company. It says it has the world’s best self-driving product, which it calls Full Self-Driving (Supervised). Tesla has had some widely publicized problems with the system. Ford’s equivalent is Blue Cruise, which Ford says allows for “hands-free highway driving.” Auto industry experts say Tesla’s works better on many highways and roads.
Tesla says another proof of its superior self-driving system is that it is being rolled out and tested in large cities. Its only real competitor, industry observers say, is Google’s Waymo. Tesla says its product will reach a point where it requires no driver input at all. Even if this works, it faces a swarm of state and city regulations.
Tesla’s largest advance in technology is a robotics product it calls Optimus Gen 3. It is built to perform unsafe, repetitive, or boring tasks. If it works, Tesla could sell hundreds of thousands of them. In theory, it could become the electric vehicle (EV) company’s largest revenue producer.
Legacy
Tesla’s valuation is based on one other calculation. Despite a drop in sales volume, it is profitable. Ford has lost at least $20 billion moving into the EV sector and will lose another $5 billion a year. While Tesla has just shy of 50% of the U.S. EV market share, Ford has less than 10%. Tesla has a large EV footprint in China, the world’s largest EV market; Ford has none. The same is true in Europe.
Ford is still viewed as a legacy car company. That means gasoline powers almost every one of its products. EVs were only 4% of Ford’s first seven months’ total, and sales were down from the same period a year ago. An investment in Ford is an investment in the future of fossil fuel-powered vehicles.
Ford said it believes that Chinese EVs are a huge threat to Ford’s future. Ford has a new EV initiative it announced recently. It said the price tag for building the entire program would be $5 billion. All Ford will have to show for it in 2027 is a single four-door EV that it prices at around $30,000. By 2027, legacy car companies will have flooded the market with such products.
The market cap difference shows Ford’s lack of a future as much as Tesla’s expected success.
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