The electrification of the automotive industry has taken the fast lane, and for that we have You’re here (NASDAQ: TSLA) thank.
The company and its CEO Elon Musk are sometimes lightning rods for controversy, but it’s hard to deny the impact they have had on the industry. Musk’s vision for Tesla from the start was to prove to the world that electric vehicles (EVs) could be economically viable if done right, and he’s obviously succeeded.
Of course, as they say, imitation is the sincerest form of flattery. Many companies have borrowed from Tesla’s playbook, and they’re making a profit as well.
Here’s why three Motley Fool contributors believe Ford engine (NYSE: F), Panasonic (OTC: PCRFY), and Lucid Motors, which is in the process of merging with Churchill Capital Corp IV (NYSE: CCIV), are well set up to take advantage of the trajectory Tesla has mapped out.
There is still time to get on board Tesla 2.0
Lou whiteman (Churchill Capital / Lucid): Many companies are following Tesla’s lead in making electric vehicles, but few have also copied Tesla’s swagger.
Lucid, which is in the process of going public through a merger with Special Purpose Acquisition Company (SPAC) Churchill Capital, plans to introduce its first vehicle later this year. The company is following Tesla’s go-to-market strategy, starting with a more expensive $ 70,000 sedan to recoup its initial investment more quickly, and then slowly working down the line to make vehicles more affordable.
The company does not lack self-confidence. Lucid bought some ad time during Musk’s recent appearance on Saturday Night Live to show off its upcoming Air, which is designed to be a competitor to Tesla Model S.
Lucid has over 9,000 reservations for air travel, representing over $ 800 million in potential sales. It is also working to reuse its batteries as energy storage systems for residential and commercial units, similar to Tesla’s Powerwall.
Another trait Lucid shares with Tesla is sky-high valuation. The company’s deal with Churchill values it at over $ 30 billion. That’s well below Tesla’s more than $ 550 billion valuation, but sparkling enough for a company that has yet to deliver a vehicle.
Lucid plans to begin deliveries later this year, targeting 20,000 in 2022 for a possible 370,000 vehicles per year on a large scale. Yes they can get there, and it’s true that at this point it’s still an “if” with a lot of risk, it’s possible that Lucid’s action will take after Tesla and pull higher in the years to come.
America’s oldest automaker has learned a lot from its most recent
John rosevear (Ford Motor): Perhaps the most important thing Tesla taught the auto industry is the most obvious: EVs can sell on their own merits if they better than internal combustion alternatives.
Electric vehicles were a tough sell before Tesla arrived because they were seen as compromised, lower-quality vehicles that only existed to help automakers meet environmental regulations. Tesla’s Roadster and Model S changed that perception – and those who watched learned a lot from Tesla’s experience.
Among the observers were Ford executives, who took this and other lessons to heart. Ford realized that it could also make EVs that were better than internal combustion alternatives, and that if it harnessed its own strengths and used the potential of EVs wisely, it could bring its customers the most conservative to rush to zero emissions. some products.
Ford thought deeply and then explained to auto investors how it would proceed. During its investor day presentation in September 2016, Ford said it would focus its electric vehicle efforts on products that showcase its historic strengths: pickup trucks, SUVs, commercial vehicles and vehicles. performance.
It took a while, but now we are seeing this plan come to fruition. Ford unveiled its battery-powered electric F-150 Lightning on Wednesday. When it arrives next spring, the Lightning (a pickup truck) will join Ford’s electric Mustang Mach-E (a performance vehicle) and the upcoming e-Transit (a utility vehicle). Analysts expect Ford to launch a new electric SUV in 2023, with more to come in the next few years.
The Mach-E is a great product, of course, and the Lightning looks like another home run for the Blue Oval. It’s a safe bet that Ford’s other upcoming EVs will be strong contenders as well, and Ford’s share price and results will benefit as the world shifts to EVs, because Ford has learned well. his lessons.
Don’t buy the gold miner, buy the shovel seller
Rich smith (Panasonic): Do not mistake yourself. Tesla cars are great and all, but they don’t go very far without batteries. As a value investor, I love Panasonic, Tesla’s most important battery partner, much more with less than 10 times free cash flow (FCF) than I do for Tesla stock. to more than 225 times FCF.
In the 12 months ending in March, Panasonic generated a huge positive free cash flow of $ 2.5 billion. That’s two-thirds more than the $ 1.5 billion net income the company reported under generally accepted accounting principles (GAAP). In fact, that’s $ 100 million more than the $ 2.4 billion in free cash flow Tesla reported for the same period. (By the way, Panasonic’s net profit was also higher than Tesla’s – $ 1.5 billion versus $ 1.1 billion.)
With $ 2.7 billion more in cash than debt on its balance sheet, I record Panasonic at a value-to-free cash flow ratio of just 9.1 – not bad for a company whose analysts predict its earnings to grow. profits of nearly 18% per year over the next five years. And for income-seeking investors, Panasonic pays a 1.7% dividend, which Tesla does not.
I also like Panasonic for its diversification.
As a spare parts supplier, Panasonic can sell its batteries to any successful automotive company in the market. At present it is Tesla – a partner of Panasonic since 2009. But in the future it could be Electrameccanica vehicles or Workhorse Group – both are Panasonic customers according to data from S&P Global Market Intelligence. Panasonic has also supplied car batteries to Volkswagen in the past – a company with well-known EV ambitions. If Europe continues to develop its domestic electric car industry – and JP Morgan believes so, predicting that electric and hybrid-electric vehicles will account for 30% of all European car sales by 2025 – it could be a market. attractive for Panasonic because good.
My advice: in the midst of the electric vehicle gold rush, don’t all bet on one gold miner. Buy the company that can sell all of these new excavators.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.