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The total market capitalization of Tesla (TSLA) is nearing $1.2 trillion. Investors are giddy about the prospects of making electric vehicles, even from the most unlikely sources.
Analysts at Morgan Stanley on Friday upgraded shares Ferrari (RACE) on the premise that investors are overlooking the EV made by the Italian supercar maker. It’s a stretch.
Instead, investors should consider buying Ford (F).
The lesson of investing in EVs, or any burgeoning technology for that matter, is simple: Invest in the big idea because that drives the narrative, and ultimately the price. Along the way ignore naysayers. They are looking at the wrong metrics. They are going to be wrong.
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Ford vs Tesla, 2021 ytd
Automobile sector veterans in 2010 laughed at Elon Musk when the Tesla chief said he had a plan to move the world away from internal combustion engines. Industry insiders said the idea that consumers wanted EVs, let alone those made by a company with no manufacturing experience, was preposterous. It would never happen, they asserted.
Skip forward a decade and every major automobile company in the world is scrambling to electrify their fleet, even Ferrari.
In most cases this process is simply not going to work.
Teslas represent the evolution of cars and light trucks. The driving experience is totally unique because its EVs were never designed to be traditional cars and trucks. From structure, safety, and software, to acceleration everything is superior.
Most legacy car companies are entering the EV marketplace with an outdated game plan. They are bolting on an electric motor or two, slapping a touchscreen on the dash, and calling it a day. These new cars will grow the EV market, yet they will not displace Tesla. They are half measures.
The Ferrari brand is about exclusivity and the finest fully aspirated, handmade sports cars in the world. The SF 90 Stradale, its new $513,000 hybrid EV, is a Frankenstein. It will use electric drive technologies supplied by Daimler, and other bits and pieces cobbled together through partnerships, according to a report from Reuters. That is hardly a rebuild from the ground up.
Ford is taking a different route.
Jim Farley, its new chief executive officer, announced in September that the company will spend $11 billion to build new battery manufacturing plants in Glendale, Kentucky and Stanton, Tennessee. Ford is also partnering with SK Innovation to increase production at a Georgia factory now under construction. The combined production by 2025 should supply one million EVs. Ford is going to need those batteries for its growing lineup of sold-out EVs.
The Ford e-Transit, an all-electric version of its best-selling commercial van, will start production later this month. The initial production run is fully subscribed. Farley said in October that global demand for the Mustang Mach-E now exceeds 200,000 units. Sales of the stylish SUV in Norway are topped only by Tesla. An astonishing 77.5% of all new vehicles sold in Norway are EVs.
And reservations for the Ford F-150 Lightning, a full size electric pickup, have now reached 160,000. The functioning pre-production concept has wowed automotive writers with its blazing 4.5-second 0-60 mph acceleration, towing capacity and practicality. The battery can power plug-in table saws, air compressors and even a house during a power outage. The Lightning also has a huge, lockable frunk where the engine used to be.
The Ferrari Stradale looks nicer than the new Ford EVs. And the Morgan Stanley headline arguing that investors are underestimating Ferrari’s EV portfolio, is clever clickbait. But the Italian supercar maker is not an EV company, and it will not get a premium valuation based that transition.
Ford is different. The Detroit, Mich.-based carmaker has a legitimate electrification transition plan, a big idea that drives investor narratives. As production inevitably ramps up the share price will follow, as it did with Tesla.
None of this is going to make any sense to the naysayers. Ignore them and their financial ratios. Investors have moved onto other valuation metrics such as EV investment, battery capacity and ultimately production.
Ford is in the early stages of transitioning to become an EV company. Shares could easily double within the next 12 months. Longer-term investors should consider new purchases into weakness.
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To learn how to improve your results in the market dramatically by buying options on stocks like Ford and Tesla, take a two-week trial to my special service, Tactical Options: Click here. Members have made more than 5x their money this year.