The auto sector is surely facing some headwinds lately. Supply chain issues are hurting performance of all leading automakers. Even as the sector is undergoing a massive transformation towards electric vehicles (EVs), the current backdrop makes it more challenging to identify potential winners.
If you want to look past the current headwinds and bet on EV growth in the long-term, which is a better stock to do so -- Tesla (TSLA 8.22%) or Ford (F 2.38%)? Let’s discuss next.
Tesla is managing challenges better
Even though the environment is tough, Tesla managed to keep its production relatively flat in the latest quarter. Tesla produced 305,407 vehicles in the first quarter of 2022, compared to 305,840 in Q4 2021. Over the year-ago quarter, Tesla's deliveries grew 68%. By comparison, Ford's Q1 vehicle sales fell 17.1% year over year.
This is not the first time that Tesla managed supply chain crisis better than the competition.
US Total Vehicle Sales data by YCharts
As the chart above shows, Tesla's revenue has been rising consistently for the past several quarters. By comparison, Ford's revenue dipped in-line with the drop in total U.S. vehicle sales in the last two years. It hasn't risen back to pre-COVID levels yet. The total U.S. vehicle sales data in the chart is monthly.
Even as the total vehicle sales dropped, EV sales in the U.S. continued to rise.
Data source: St. Louis Fed. Chart by author.
The EV sales in the chart shows sales of fully battery electric vehicles (BEVs) and do not include plug-in vehicle sales. Tesla's revenue growth reflects the growth in EV sales in the U.S.
Tesla's higher margins
Not only is Tesla growing its revenue, but the company is also generating higher margins on its sales.
TSLA Profit Margin (Quarterly) data by YCharts
Tesla's profit margin exceeded that of Ford and General Motors (GM 0.78%) in the last three consecutive quarters. Ford's margin in the chart above includes the impact of a gain on its Rivian investment. The company's adjusted EBIT (earnings before interest and tax) margin for the fourth quarter was 5.4% -- well below Tesla's margin.
Which EV stock is better?
Tesla has already established a leading position in the EV segment. Though the company is facing some challenges, mainly due to supply shortages and COVID-19 related restrictions in China, it looks well-placed to overcome these.
Ford is also investing heavily to drive its EV growth. Yet, with nearly 36,000 electrified vehicle sales, including plug-ins, in the U.S. in Q1 2022, Ford has a long way to go to achieve its target of producing 2 million EVs annually. Importantly, Tesla would have further strengthened its position by then.
Though Ford has its own strengths, among the two, Tesla looks like a better bet on EVs than Ford right now.
