Investors bet on Tesla (TSLA) instead of GM and Toyota to lead auto technology

Investors would bet on Tesla instead of GM and Toyota to lead the auto industry’s technology transition to electric and autonomous vehicles.

As of earlier today, Tesla’s stock price was up almost 80% year-to-date, while Ford and GM are down over 45% and 40%, respectively.

Toyota, the world’s most valuable automaker, is down 15% year-to-date.

Investors and analysts are trying to understand what is happening, and many of them think Tesla will come out of the current crisis stronger than any other automaker.

In what is shaping up to be an extraordinarily challenging year for the global auto industry, many investors are comparing the resiliency and attractiveness of traditional auto OEMs vs. Tesla in a new light.

They are anticipating that Tesla’s free cash-flow position will be much better than the rest of the industry this year:

Based on our conversations with investors, many expect Tesla to burn up to $1bn or more of free cash flow this year but still expect near FY unit volume growth on the order of 5 to 10% or more. If realized, that’s a free cash flow yield of less than negative 1%.

Ostensibly, this compares extremely well to the average auto name under our coverage where we are forecasting 20 to 25% declines in volume and free cash burn anywhere between 10 to 30% of their market cap.

Morgan Stanley’s auto team polled some of its auto investors about the prospects for the industry and the results might be surprising:

The investors are split on the prospects of the industry benefiting from the transition to electric and autonomous vehicles, but there’s a consensus of belief when it comes to which company is in a better position to lead the transition: Tesla.

According to the survey, 54% of investors would bet on Tesla to lead the transition over GM and Toyota.

Electrek’s Take

I’m surprised that the majority of investors are recognizing that, but I guess it’s reflected by the market these days, with Tesla faring a lot better in the bloodbath that is the stock market.

First off, Tesla already has a massive lead in EVs, and depending on who you ask, they are among the leaders in autonomous vehicles.

Their vision-based approach appears to be becoming more and more popular, years after Elon bet the house on it.

Secondly, why is Toyota even an option here? We have yet to see a real electric vehicle program from them. Seriously.