Ford vs Tesla vs Aston Martin – which company's stocks are on the rise?
The guys at eToro join us to look into the future of investing in car brands
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Usually a bumper month for new registrations, September 2020 recorded the lowest car sales in the UK for 20 years as according to the Society of Motor Manufacturers and Traders. Just 328,041 vehicles were registered that month – and it doesn't take a rocket scientist to see why. Fewer people are travelling for work or pleasure, and the recession is making more households think twice about the expense of changing cars.
The good news for investors is this sector is still home to some great companies and faced with a tricky outlook, it could be the time for some of the best in the business to shine. Our friends at eToro have picked out three interesting car stocks that could help take your portfolio up a gear. eToro is a popular investment platform that has tonnes of cool features, including copytrading – where your portfolio automatically mimics that of popular investors, matching it trade-for-trade.
Clearly Tesla is one of the most exciting companies in automotive right now. Headed up by insane/genius CEO Elon Musk, Tesla has revolutionised the electric vehicle industry. Although the company still has some way to go to introduce a properly affordable model (it will cost you a minimum of £77,980 to drive a new Model S out of a showroom), the rise of Tesla was seen by many as a ground-breaking moment in electric cars’ mainstream revolution. Importantly, this also coincided with consumers becoming more concerned about the environment, which has led to unprecedented demand for transportation that does not pollute.
Though the second quarter was tough for the entire car industry, Tesla’s numbers show an attractive level of resilience for any business during a pandemic. Revenue over this period was $6bn while a total gross profit of £1.3bn was recorded. Although Tesla’s Q3 figures have yet to be released, the company revealed it delivered 139,300 vehicles during the quarter, which broke the previous quarterly record of 112,000 vehicle deliveries. Resilient demand for Teslas and strong financial performance has seen the share price surge this year, with management even recently announcing a stock split to bring the price down. Tesla shares started the year at $86.05 on 2 January but as of 5 October were trading at $425.68.
Check out Tesla's current share price at eToro.
If Tesla is synonymous with the future of cars, Ford is an undeniable part of the industry’s stories past. The company’s founder Henry Ford innovated the first mass production of automobiles and since then Ford has established itself as one of the biggest and most well-known brands worldwide.
The Mustang Mach-E is Ford's first major move into the electric car market
However, Ford was facing challenges even before the pandemic closed dealerships and factories around the world. In 2018, management set in motion an ambitious $11bn turnaround plan to improve quality, reduce costs and align the company to new technologies such as electric vehicles where Ford had lagged. It says a lot about the lack of progress that 2020 marked the arrival of new CEO Jim Farley.
Farley, formerly the blue oval's chief operating officer, has made his ambitions clear and aims to streamline the business and increase efficiency throughout the organisation. This will include leveraging the critically important $42bn F-Series pickup line to pay for emerging technologies, with Ford aiming to launch competing models in the electric pickup space by 2022. Elsewhere this management change is seeing a new chief financial officer, chief information officer and chief marketing officer all being appointed.
However, despite its less-than-ideal recent management history, Ford is still dominant force. Results in the second quarter were better than expected and although adjusted pre-tax earnings were a negative $1.9bn, this was $3bn better than estimates. At the same time, net income was $1.1bn and the business confirmed it had $39bn in cash on its balance sheet. And although its full Q3 figures have yet to be released, US sales for the quarter (which give a good indicator of how Ford is fulfilling demand in its home market) showed only a 4.9% slump from the year before versus an industry decline of 10%. Shares rose 2.1% on the news and as of 5 October were trading at $7.02.
Check out Ford's current share price.
Ford is not the only major car manufacturer to recently appoint a new CEO, although the new boss at Aston Martin (former Mercedes chief Tobias Moers) has a bigger job on his hands. The British manufacturer of luxury cars has had a difficult time since its stock market listing in October 2018, with its share price falling more than 90% in that time.
Will the DBX find a substantial new customer base for Aston?
A combination of poor management and the pandemic have done a real number on Aston Martin’s finances this year. Over the first half of 2020, its revenue fell to £146m from £406m the year before, which resulted in a total pre-tax loss of £227.4m (versus £80m in the first half of 2019). Shares have fallen heavily this year, from £175.80 on 2 January to just £50 as of 5 October. Faced with a recessionary environment, and consumers potentially less willing to go out and buy a new £149,850 Aston Martin DB11, Moers and his team have a lot of work to do.
Fortunately for investors, that work has already started with the company seeking to rebalance supply to demand. This means cutting costs and Aston Martin is pulling back on how many cars it makes for its dealerships. At the same time, the company is focusing on producing the DBX, its first SUV. This should appeal to a different kind of buyer, and should help Aston out as it pursues around £28m of savings a year. Encouragingly, the company has also been able to source new investment with a consortium recently committing £688m to the business.
Check out Aston's current share price.
Which stock would you pick?
These three stocks could not be more different as car makers – an electric vehicle pioneer, a mass market brand and a luxury car manufacturer. Though they all face the same challenging environment each are tackling this in different ways. Therefore, it is important that investors take time to learn more about these companies and the route they are following for the road ahead. When you feel you're ready, head over to eToro where they have 15 car brands (and a further 1,500 non-car brands) to invest in commission-free* and with as little as $50. Or, if you feel that driverless cars are the future, check out their self-driving cars investment portfolio.
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