The automotive sector is upside down.
While it is clear that the new path is electrification, it is still difficult to say which carmakers will be the winners except for Tesla (TSLA).
Founded in 2003, the electric vehicle manufacturer is in the process of increasing its grip on the market to the detriment of legacy carmakers. But what is striking is that Tesla is snatching all the titles from GM (GM) and Ford (F) that they've accumulated for decades.
Until now, the two Detroit giants could boast they continue to deliver more vehicles annually than Tesla. They also had another strong argument against their detractors: they earned more money than the company of the charismatic Elon Musk.
This last argument no longer holds. It simply disappeared with the analysis of the first quarter results of the three companies. The news went unnoticed, but it's a real thunderbolt because the millions of vehicles delivered per year by GM and Ford still allowed them to claim more profits than Tesla, even if their margins were lower than those of their young rival.
Tesla Now Makes More Money Than GM and Ford
Tesla just reported a first quarter net income of $3.31 billion. That's a 658% jump from the first quarter of 2021. At the time, Tesla had earned $438 million.
By comparison, GM recorded a net profit of $2.93 billion in the first quarter, down 3.04% compared to the first quarter of 2021.
Ford, for its part, has gone into the red since the group led by Jim Farley has announced a net loss of $3.1 billion from January to March. In the first three months of 2021, the maker of the hugely popular F-150 pickup had posted a net profit of $2.3 billion.
Ford, which does not hesitate to publicly attack Tesla, explains that its loss is due to elements external to its operations.
"A net loss of $3.1 billion was primarily attributable to a mark-to-market loss of $5.4 billion on the company’s investment in Rivian (RIVN). Adjusted earnings before interest and taxes were $2.3 billion," Ford said.
Ford’s stake in Rivian was valued at $5.1 billion on March 31, down from $10.6 billion at the end of 2021, the company said. The young electric vehicle manufacturer had a very difficult start to the year, marked by major difficulties in managing increases in production rates and a PR crisis after a controversial rise in the prices of its vehicles. Rivian shares thus lost 51.5% of their value between December 31 and March 31.
Nevertheless, Tesla has become the leading American automotive group in terms of profits. Musk's group was already the largest U.S. carmaker when it comes to market capitalization. This is currently at $853.48 billion at last check, while Ford's is at $56.48 billion and GM is at $54.83 billion.
What is striking is that Tesla managed to steal the title of the most profitable American automaker by delivering significantly fewer vehicles overall than its two rivals: 310,048 vehicles in the first quarter, up 68% over from a year ago, against 970,000 vehicles at Ford, down 9%, and 1.427 million for GM (-19.5%).
Tesla Spends Nothing on Ads
Elon Musk's group makes the difference on several points. Its adjusted EBITDA margin --- margin before interest, taxes, depreciation and amortization -- was 26.8% in the first quarter from 17.7% a year ago.
GM's adjusted EBIT margin -- margin before interest and taxes -- was 11.2%, down 2.4 percentage points. Ford's adjusted EBIT margin is 6.7% compared to 10.8% in the first quarter of 2021. Basically, Tesla is significantly more profitable than Ford and GM.
Tesla makes the difference on costs. The company seems to have better control over its costs, which is easy when you spend $0 on marketing, while rivals are flooding consumers with ads touting the merits of their latest models.
"Other companies spend money on advertising & manipulating public opinion, Tesla focuses on the product," CEO Musk posted on Twitter on April 27. "I trust the people."
Tesla receives massive media coverage from Musk, whose popularity now extends beyond automotive and tech circles. The tycoon has nearly 88 million followers on Twitter (TWTR), the social network he is about to acquire for $44 billion.
There are only two vestiges left for Tesla to hang on his bag: The title of the first American automaker in terms of revenue and in terms of vehicles produced and delivered per year. In the first quarter, GM had both trophies with revenue at $35.98 billion, followed by Ford at $34.48 billion.
But Tesla isn't far behind, at $18.76 billion.
