Let’s get something out of the way. Arguably, the Ford ($F) F150 Lightning is a much more traditional-looking vehicle style than the Cyber Truck. Hands down. Don’t get me wrong, I would choose Tesla ($TSLA) over Ford in terms of technology any day, but if my goal is to not look like a real-life Batman villain in a homemade tank, I would choose the Lightning. Why do I make this comparison?
Unless Rivian R1T really starts delivering in 2022, Cyber Truck and Lightning were the only two Trucks that have any chance of being built in large numbers (Sorry Nikola ($NKLA) but you’re out). At least that was my opinion until Tesla’s last earnings call where Elon disappointed when he was asked about when the Cybertuck will go into large-scale production. His response was: "...hopefully next year". The way he answered the question almost made it seem like he didn’t really know and given that the factory that will build Cyber Truck, Giga Texas, is not even finished yet and Tesla has a bunch of products in the works, I will go ahead and presume it won’t happen until at least 2023, which is sad but a good sign that Tesla’s is growing in scale and can’t keep up with demand, which is a good problem to have short term, but a bad one in the long term as other car manufacturers catch up in the EV space. The pick-up truck market is one of the most lucrative in the car industry and any viable electric option will take massive market share. At a minimum, a range of 300 miles, towing capacity of at least 8,0000 pounds electric trucks can easily perform like gas/diesel trucks, the only problem is that no company has been able to make a purchasable electric truck yet.
How does this Affect the Two Stocks?
If you ask people like Cathy Wood, CEO of Ark Invest and a Tesla bull, to say the least, thinks you need to Buy. She just recently added 55,000 Tesla shares to one of her ETF's on the recent dip. The justification for buying Tesla stock is fueled by incredible growth (especially in China), superior technology, and Tesla’s disrupting capabilities.
But Ford’s stock has also been on a tear ever since the new CEO Jim Farley took over in 2020 and the buying is fueled by hopeful dividend investors, trust in the company’s production capabilities and scale, and a decent electric car line up including the F150 Lightning which already has approximately 200,000 reservations, which is years of production capacity, but not even close to Tesla’s Cyber Truck preorders which supposedly is over 1 million!!! It would take Tesla years to fill all the orders once they start producing. Let’s just note that preorders or reservations are not sales, and customers can change their minds at any time and cancel the reservation. Ford actually halted the preordering to make sure they can actually deliver timely, Tesla is still accepting preorders. Ford annually builds about twice the amount that Tesla does, just for comparison. Ford sold around 1.9 Million cars in 2021, Tesla sold around 936,000 in the same year.
Which Company will take the EV Truck Crown? Let’s look at some context
The pickup market is growing more competitive. Chevy's Silverado’s outsold Ford’s F Series in Q2 2021. Dodge, GM, and Ford trucks share about 80% of the market share, but Toyota and Nissan are about 20%. So far the only EV Trucks on the horizon are the F150 Lightning and the Cyber Truck, Rivian R1T, and now the new Silverado EV (expected 2023). I believe that this new EV truck market will affect the current combustion engine truck market not as much as some expect. The alternatives are still just too good, especially if you consider the price. Tesla will not simply sweep up all the pickup market share with a $60k Truck that in no available version is equipped to be a Work Truck. If other companies make gas-powered trucks half the price with similar capabilities or even fewer capabilities, Cyber Truck will not gain significant market share. Is this bad for Tesla stock? No. Tesla-philes will buy the Cyber Truck, only in rare instances will buyers be torn between Ford and Tesla because the reasons for owning them are different, they are essentially two different types of vehicles. The Lightning can also be expensive but is built on an existing truck chassis that is a proven design on job sites all over, the Cyber Truck will have some tight turns on the construction site, to say the least.
The Case for Ford
Ford has already announced another truck that will soon be in production called the Maverick, it’s a Hybrid, smaller, and much cheaper than the Lightning. If Ford can deliver in 2022 as they promise, they have a great chance of taking the EV/Hybrid truck market by storm. Ford is a proven car manufacturer and the F150 is one the best-selling trucks ever. According to Ford, Lightning will receive a revamp a few years in and will get its own original chassis. Until then it will be built on a modified F150 chassis, which is good. The Lightning will be a rarity, because, besides Rivian’s R1T, which is promised to hit the market in 2023, there is no other EV Truck that looks like a regular vehicle. To me, this makes a strong case for Ford as being the one who will make significant moves in the EV truck market, possibly before anyone else.
The Case for Tesla
The Cyber Truck will not be the next best-selling truck of the year. The truck is cool and edgy, and state of the art, but it does not seem like a daily driver. Do I believe it will be a flop? No. Any product Elon Musk adds to the lineup will find some taker. The Cyber Truck is too impractical to become a staple like the F150, but it doesn’t need to be. Tesla already owns the EV sedan market. The real important point is that Tesla will another vehicle to sell. If Giga Texas gets off the ground Musk said Model Y will be produced until demand is met and after that, Cyber Truck, this could take some years.
Giga Berlin is another story; the factory is uncertain even though Musk is saying he is on pace, but we don’t know yet when it will be operational. When the factory is operational the real fun begins because Germany's overregulated labor laws and powerful unions are a nightmare for a large successful company, especially a car manufacturer. Motor vehicles are Germany’s largest export, and the industry is heavily subsidized by the German government. While this has nothing to do with the Cyber Truck it can become a large distraction. To me, this sounds like Cyber Truck will not be taking over the EV pick-up truck market any time soon. BUT, if/when, in the future, Tesla has its international factories running like Giga Shanghai is right now, it will have a clear advantage in getting the product to new markets. This could quickly increase sales and market share and is something other car manufacturers will have a hard time imitating.
Honorable Mention: GM
Under CEO Mary T. Barra, GM’s EV ambitions are nothing short of revolutionary. With its ingenius Ultium EV platform, GM ($GM) has the potential to disrupt the entire EV market. Not only has the company promised to have 30 EV vehicles in its lineup by 2025! It also has plans to only sell EV vehicles and discontinue all sales of combustion engine vehicles by 2035. The company is serious about this effort and has plans to invest $35 billion dollars to make these ambitions come true, this is about half of the company’s current market cap. The new Hummer EV is sure a sight to behold, the company even delivered some already. Also, with record earnings in Q4 21, the company is reawakening investors' interest. The company is worth paying attention to.
Thanks for reading,
The Punkrock Capitalist
Comments