Interactive Investor

Tesla drops to back of the grid as electric vehicle race hots up

29th March 2021 16:30

Keith Bowman from interactive investor

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Electric car makers are lined-up on the grid, but who’s in pole position?

Grand Prix fans took their seats for the start of the new Formula One season this weekend. The race to see whether Lewis Hamilton and his Mercedes team can hold off Red Bull's Max Verstappen and Charles Leclerc at Ferrari (NYSE:RACE) to win the title again is back on. 

But off the track, a very different battle between the car makers continues to play out.

US electric car maker Tesla (NASDAQ:TSLA) lapped its rivals many times over during 2020, with its shares rising by more than 700%. A move into quarterly profit for the maker of the Model 3 and Model S in late 2019 got the US manufacturer off to a flying start.

However, share price performance in 2021 has seen Tesla demoted to the back of the grid.

Company Change between 31 Dec 2020 and 26 March 2021 (%) Stock market value (bn)
Volkswagen 48.3 € 131
Ford 40.5 $49.2
General Motors 36.4 $81.9
Daimler 25.6 € 79.20
Aston Martin -3.8 £2.20
Ferrari -11.1 $49.8
Tesla -12.3 $585

Tesla’s fourth-quarter 2020 results, published in late January, saw a sixth consecutive quarterly profit. A previous cash raising of $5 billion had helped it to strengthen its cash and cash equivalents to just over $19 billion. 

A move into the S&P 500 index over the course of 2020 and subsequent buying by index funds potentially added to share price momentum. So did the election of a more climate change friendly President, Joe Biden. 

However, Tesla’s rivals have been fighting back. Fellow US auto manufacturer Ford (NYSE:F) recently began deliveries of its first mass market electric Mustang Mach-E SUV and new F-150 pick-up truck. 

Ford in early 2021 announced plans to inject $22 billion into electric vehicles and $7 billion into autonomous, or self-drive vehicles.

European juggernaut Volkswagen (XETRA:VOW) is also ramping up its plans for the changing landscape. It recently began deliveries of its new ID.4 electric model to customers in Germany. VW is now planning to build a series of battery cell plants in Europe and is also hoping to more than double deliveries of electric vehicles this year.

The German car giant is also said to be considering an IPO of its Porsche business, although it appears to be in no rush. 

General Motors (NYSE:GM) is soon to launch its all-electric Chevrolet Bolt models this summer, and hopes to become an all-electric vehicle company by 2035. 

Aston Martin Lagonda (LSE:AML) recently outlined plans to build a new pure-electric sports car and SUV within the next four years. Both are to be made in the UK. 

Share prices for Volkswagen, Ford and General Motors are all up by more than 30% since the start of the year. Tesla shares are down by more than 10% year-to-date. 

However, Tesla’s stock market value continues to tower above rivals such as VW and Ford. A one-year estimated price/earnings ratio of over 100 at Tesla compares with multiples of under 15 for VW, Ford and General Motors.

Tesla head Elon Musk previously highlighted its own vehicle software and the development of autopilot and full self-driving capabilities as all feeding into prospects. 

Investors in 2021 so far appear to be concluding that the race for Tesla rivals in the future world of car manufacturers is still very much on. 

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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