With the recent IPO of Rivian EV stocks have been all the rage. In fact, as of mid last week, the 3 largest US automobile companies by market cap were Tesla, Rivian, and lucid. This is big change from a decade ago when the big three US automakers were considered to be Ford, General Motors, and Chrysler. In this video we look at whether or not its reasonable for Rivian and Lucid, two companies with zero revenue and negative profits, to be worth more than Ford which has its own EV lineup and they have delivered far more EVs to date than either Rivian or Lucid.
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What's up guys and welcome back to wall street millennial on this channel, we cover everything related to stocks and investing in the past. When people talked about the big three us automakers, they were referring to general motors ford and chrysler, but over the past couple years things have changed tremendously in the industry. Today, the big three automakers are tesla rivian and lucid at 1.1 trillion dollars and 105 billion dollars, respectively. Tesla and rivien have larger market caps than general motors or ford after pulling back in the past few days.
Lucy's market cap of 77 billion dollars is slightly less than gm's 90 billion dollars, but at their peak of 56 dollars per share on wednesday november 17th, they were worth more than gm. Both lucid and rivien are essentially pre-revenue companies, but they're able to achieve such insanely high market valuations, because people are excited about electric vehicles and think that they are. The future. Lucid only made its first deliveries on october 30th of this year, but investors are excited by the 17 000 refundable pre-orders for the lucid air, which shows that there is real demand for their cars.
But the incumbent automakers are also making evs of their own. In the first nine months of 2021, ford has sold roughly 19 000 of their all-electric mustang mock e's. This is more than all of lucid's pre-orders. They also have the all-electric f-150 lightning, which will be released in 2022.
While it's true that the vast majority of ford's business is still the internal combustion engine, even if you only consider their electric vehicles they're still bigger than lucid or rivien, yet somehow lucid has a larger market cap than ford, despite the fact that, even by their own Estimates they plan to burn billions of dollars per year until 2026.. If you compare ford to lucid or rivien, it looks like the stock market is giving them zero credit for their internal combustion engine or ice business. In fact, they may be receiving a negative valuation, because ford is worth less than lucid. Despite having far more ev deliveries, it seems absurd that their ice business, which generates over 100 billion dollars of revenue per year and billions of dollars of net profit, could have a negative valuation in this video.
We'll look at ford's ev business and see if there's any way to justify lucid and rivien being worth more than them. Ford has a market cap of 78 billion dollars, but they also have about 65 billion of net debt, most of which can be attributed to their ford credit division, which provides financing to customers who buy forward and link in vehicles. They also own a 12 stake in rivien, which is worth about 12 billion dollars. This means their total enterprise value.
Minus derivation stake is 131 billion dollars. So when you look at total enterprise value, ford is actually about 25 percent, more valuable than rivien and about 70 more valuable than lucid. Now, let's take a look at ford's electric vehicles to see how they stack up against rivien and lucid for many years. The legacy automakers, including ford and gm, were rightfully criticized for ignoring evs. They would pay lip service to evs and make a few hybrid cars, but they primarily focused on maintaining their ice business. This all changed in 2020, when tesla's stock increased more than 10-fold, giving the company a market cap in excess of all the legacy automakers combined. This happened ford and gm finally pulled their heads out of the sand and realized that they had to start taking electrification seriously. In the fall of last year, ford appointed jim farley as their new ceo and, to his credit, he's gone all in on evs.
Ford currently has three electric vehicles that are either out now or in the works. Firstly, they have the all-electric mustang mach e, which started deliveries at the beginning of 2021. To date, they have sold roughly 19 000 of them. Secondly, they have the all-electric f-150 lightning pickup truck, which will be released in 2022 and finally, they have the all-electric e-transit van, which will also be released in 2022.
Over the next couple years. Ford will invest 7 billion in ev manufacturing facilities in tennessee and kentucky they're. Also partnering, with a south korean company called sk innovation to help build up their battery capabilities between the two of them. They will invest more than 11 billion dollars.
Ford claims this is the largest one-time, electrification investment of any us automaker. The mustang machi has a starting price of 43 000 and has been quite successful since its launch at the beginning of this year. Part of this can be attributed to the mustang brand name, which is one of the most valuable brands that ford owns, but what's even more exciting than the machi is the ford f-150 lightning. Electric pickup truck ford has made its f-series pickup truck since 1948, and they have consistently topped the charts for most popular car models in the us.
In 2020, the ford f-series was the most popular car model in more than half the states in the u.s. To date, the f-150 lightning has 160 000 pre-orders, given how strong demand is they doubled their annual production target to 80 000 vehicles per year by 2024 in their new tennessee and kentucky factories. To put this into perspective, ford's pre-orders for their lightning is almost 10 times greater than lucid's pre-orders for the lucid air part of this is because the lightning's price point of 43 thousand dollars is much lower than the lucid airs price of 77 000. But another reason is ford's brand value.
Ford has built a track record over the past 100 years. Consumers have purchased ford cars in the past and know what to expect. Furthermore, they're utilizing their most iconic brands, including the mustang and f-series, lucid and rivien, are at a disadvantage because they are starting from scratch. Besides car enthusiasts, nobody really knows them, but the most important thing for any ev manufacturer is production. It's one thing to have a prototype, but it's a completely different thing: to have the manufacturing facilities to produce hundreds of thousands or even millions of vehicles per year. Neither lucid nor rivien have done any manufacturing at scale, so investors will just have to trust them that they can get it right, according to their own estimates, lucid expects to make 251 000 deliveries in 2026.. They also plan to bring 2.7 billion dollars of negative free cash flow in 2022, negative 3.2 billion dollars in 2023 and negative 1.5 billion dollars in 2024, and then they will barely break even in 2025.. Currently they have a little less than five billion dollars of cash.
So they will almost certainly have to raise more capital over the next few years and dilute existing shareholders. Reviewing ceo rj scarange is targeting 1 million annual deliveries by 2030, but similar to lucid. They will also be burning billions of dollars per year for the foreseeable future. Rivien currently has only one factory which has a maximum capacity of 150 000 per year.
They have not announced any concrete plans to build new factories. If you want to believe their 1 million vehicle target by 2030, you have to blindly believe that they'll be able to build multiple new production sites across the world which will cost billions of dollars. Each ford delivered more than 4 million vehicles across the world in 2020 and have over 100 years of experience in mass production. They also delivered 19 000 battery electric vehicles to date in 2021 and they have concrete plans to build up their battery production in their tennessee and kentucky plants so that they can produce 1 million evs per year in 2025.
Well, look we're ramping up now. We have almost 20 gigawatt hours, the uh maki and the f-150 are completely sold out f-150, we're above 150 000 orders now, so we're not waiting for anyone we're in the market. Now it's show not tell time, and yes, this is going to be a further ramp up of our battery electric volumes. As i said, a million units worth of battery capacity just for ford, so do the math.
You know we sell about two 2 million vehicles in the united states. This announcement alone is a million vehicles worth of battery. So it's a very large scaling. We're not going to tell everyone what th what the product is, but we have a whole full f-series lineup.
We're the best-selling vehicle in america we sell over a million f-series and we're going to build lots of new kinds of ground-up battery electric f series in this plant. On top of that, ford is profitable. Today they generate billions of dollars of free cash flow from their ice vehicles in their vehicle financing arm ford credit, they can fund their investments in electric vehicles internally with their own free cash flow. If rivien or lucid1 get anywhere near the 1 million vehicles, they need to raise billions of dollars of new capital, while both of them are flushed with cash now from their ipos. This will run out pretty quickly, given how much cash they burn, even if you give them zero credit for their ice business and forward credit. Ford's ev business alone will likely be multiples larger than rivien or lucid. While it is true that ford has 65 billion dollars of net debt, this is not nearly enough to explain the valuation gap between them in the new ev startups. While this video isn't financial advice, it's pretty clear that rivien and lucid are massively overvalued because they're pure play ev companies.
Investors are willing to bid up their prices almost arbitrarily high ev companies are in a situation similar to the internet companies in the 1990s.com bubble. It doesn't matter if you're burning billions of dollars per year. As long as you have a cool looking car and are on a mission to solve climate change, you can get a 100 billion dollar valuation, alright, guys that wraps it up for this video. What do you think about rivian and lucid? Do you think it's reasonable that they both have market caps larger than ford? Let us know in the comments section below, as always.
Thank you so much for watching and we'll see you in the next one wall, street millennial, signing out.
The real scary bubble is tesla with its CEO that can't pronounce two sentences without a 5 seconds break in between, strange how pple could be so stupid but it's explainable as the psychology of the masses just like brainless fishes.
Union & pension & debt going to crush this company. Profit margin has never been good on cars!! 💯fact🙌🤪
Ford has over $160 BILLION dollars in debt which you failed to mention in the video. That's MORE than their entire Enterprise Value that you list at the start of the video. While the vast majority of debt is due to Ford credit borrowing money to give car loans to it's customers so they can buy Ford vehicles, it's still debt that Ford is liable for. If the customer's fall underwater on their loans and default then Ford loses money and has to pay the difference back to the lender. Banks often don't like giving auto loans specifically because of the risks of using a depreciating asset as loan collateral.
Legacy: that's a word that will haunt established automakers beyond 2030.
Legacy: Material Support for the combustion engine. Unions. Pensions. Dealerships.
Automakers can't go "All In" until they are almost clear and free of material support for combustion engines. Look at how Cadillac saw 16% of their auto dealerships decline supporting the move to EV's. They will be bought out by GM instead.
So, in short, the transition will be long and costly.
Tesla is more than an electric car company. It's a software, engineer, energy company
Dotcom bubble, housing bubble, EV bubble….yeah people love bubbles…until they burst.
Don’t know if I speak for everyone but…can you sprinkle in some loss porn. Its been a long time. 😬
I own and LOVE my Ford CMax plug-in hybrid…it’s crazy that Ford discontinued this car.
I don’t know if Ford is undervalued but Rivian, Tesla and lucid are insanely fucking overvalued up to shit lol
What about the legacy dept the "old big 3" have in the form of past employees that have retired. Back in the day you needed a lot more ppl. to make each car and they depend on "future" sales to fund some of the pension commitments. How much of the Big-3 earnings is profit and how much sales do they need just to pay into old dept. The new "players" don't have the old baggage and world wide many see Ford, GM as "crappy big gas guzzlers". Toyota for example has not had this problem. The true problem for Ford/GM is that PPL LIKE TESLA and TESLA is not "just" a car maker, they are the conglomerate candidate for the foreseeable "electric" future. Kind og like General Electric was back in the day.
Tesla's image is a that of a "Car-making tech company", while the Big-3 are seen as "has-been Detroit-like run-down factory of broken windows"..
It will be VERY hard for them to shake the stagnated image, especially world wide.
NAKD CENNTRO MERGER!!! delivers vehicles now and is sub .70 per share not for long take a look
If Ford sells off its EV business without any of its long term debt ($110 billion not mentioned in the video). the new company will be in a much stronger position to survive and perhaps even thrive. It may then be bought a Chinese start up to make cars in the US, benefiting from the US tax credit. The ICE portion of Ford, with its pension debt then goes bankrupt as the ICE business collapses.
Why are you not mentioning my a international EV company that ACTUALLY HAS SALES unlike rivian Cenntro Automotive needs coverage
Momentum plays are the new norm. Wall Street savvys allocate cheap money to create momentum so they can bring in little fish then they cash out at the top and little fish now a days consist of not only the robinhood trader but the greedy hedge funds. Cry me a river when quick flippers become backholders for years and years.
The EV market is the second largest bubble behind Crypo. Most EV stocks are just meme stocks with lots of hype. I think Ford can easily produce more EV than even tesla if they wanted too.
Everything in this video is misinformation. Ford has no concrete plans for BEV's they want to kill the EV revolution but they can't. So they are playing PR campaign biding their time. The longer they can drag it out the more money they will ring from internal combustion engines. They know they will die. They can't make decent products and their sales are falling off a cliff. No you should not invest any money in ford or GM. They have no path forward. And they know it. Which is why they're relying on PR campaigns to confuse the masses. But even that isn't all that successful due to Tesla. Burn in hell Ford.
Please keep in mind that the reason the original big 3 endured with such staying power in the brands was not just the diversity in the product models, but also extensive customer support through thousands of service dealership locations nationwide, coupled with comprehensive warranty and other incentive type programs. a company must break through the niche barrier..
Wouldn't it be ironic if Ford's 12% stake winds up being more valuable than Ford itself. Lol. From 19K to 1M EV's, Ford needs to grow production by 270% annually. Not saying it's impossible, but…
Half of these EV startups are pricing based on Tesla fame… with none of Elon’s credibility.
It a bloated Bubble Market floating on TRILLIONS OF DOLLARS OF ZERO-INTEREST LOANS.
As soon as Rates rise (if they ever rise), these Robin Hood stocks will catastrophically implode.
The New Great Depression is coming.
For the same reason as the OG…
I thinks about the 'new cool' like the new generation is not emotionally attached to Ford. They are looking at the new Tesla. Ford needs to start rebranding to connect with the younger generation.
This isn’t Capitalism.
Violently Leveraged Stock Market pricing based on Government Decree.
People aren’t EXCITED ABOUT EVs.
They are being FORCED to move towards EVs by government mandates…
Your are right about Rivian and Lucid, they have 4-5 years of bleeding to do that no one wants to sit through. The old 3 though…they are companies with poor histories of going bankrupt or near bankrupt for good reasons that have not suddenly gone away. e.g., they have to cannibalize their base, re-establish a huge new supply chain since they have little direct part manufacturing ability, they have ancient dealership (middle-men) agreements that remove 10%+ of their overall profit, are not known for being nimble, for better or worse, they are by far the most unionized companies in recent history, resulting in many huge liabilities, including pension shortfall after a ridiculously huge bull run and ultra low interest, finally, they almost entirely only make one type of car, the SUV/pickup, which makes them very unpopular internationally.
Something that I've always thought is when you have an established business versus a new comer with an updated version of a product, there is no reason why the incumbent shouldn't be able to just crush the newcomer. The problem is that it always requires the incumbent to spend money on r&d, build new factories or retrofit old ones, and just risk it with a new product, and so because of all of those, the established business usually gets embarrassed by the new guy
This is like in the last century with horses… You look at pictures of streets in 1900 and it's all horses. By 1910 there is a couple cars, and then by 1920 there are no horses
Ford is undervalued and Rivian/Lucid are massively overvalued but alas, as Keynes said, "the market can stay irrational much longer than you can stay solvent.".
Mainstream car makers ignoring EV isn't "deserving criticism" when before Tesla's nonsense few people were willing to buy EV.
I don’t think that on average people will be paying more for a car no matter it is ICE or EV so overall the whole market is overpriced.
yeah they really should stop selling to the United States Immigration and Customs Enforcement because it should be abolished
Step one: Announce going all EV.
Step two: Sell all shares at absurd highs.
Step three: Run.
EV's are in a massive bubble. Anyone suggesting companies like ford should stop bothering with ICE vehicles is a moron. I can't wait for the EV bubble to burst and take the morons out of the stock market
If Ford got rid of their ICE business the stock would go up short-term, but they would then give away a large market share to competitors like GM for free. There will be demand for ICE vehicles in the remainder of the 2020s
Valuations are like those kids in school who tell you "My Uncle is a astronaut, millionaire, football player, doctor, etc but they never follow up with facts just folklore stories. That's what valuations are speculative lies that hold no weight in real result value just speculation on paper someone decided they like this number.
Looks like you have been working on this video for quite awhile because the stock prices are higher for lucid and lower on ford