Where next for the Tesla, Rivian and Nio stocks?
Apr 8, 2022
Tesla, Nio, and Rivian represent opportunity and what can happen when your product is highly sought after in the market. General Motors and Ford represent opportunities for experienced manufacturers to compete in a market they don’t have to develop by themselves.
The electric vehicle market has seen an increase in investor attention over the last 12 months, with Tesla Inc. (TSLA) being the standout performer. Tesla’s electric-only vehicle manufacturing competitors, Nio Inc. (NIO) and Rivian Automotive Inc. (RIVN), have not shown a growth rate over the same 12-month period that allows us to identify them as direct competitors to Tesla. For that reason, we look to automobile manufacturers General Motors Company (GM) and Ford Motor Company (F) as benchmarks by which we can compare the performance of TSLA, NIO, and RIVN.
Figure 1 illustrates that over the last 12-month period only Tesla Inc. (TSLA) has outperformed the SPDR S&P 500 ETF (SPY), both TSLA and SPY remaining just below an unchanged value over the 12-month period. While Nio Inc. (NIO) and Rivian Automotive Inc. (RIVN) have seen significant drops in value over the same period, with NIO losing almost fifty percent of its value and RIVN losing nearly sixty percent of its value.
One of the primary reasons we see a large discrepancy in valuation between Tesla Inc. (TSLA), Nio Inc. (NIO), and Rivian Automotive Inc. (RIVN) is the number of vehicle deliveries that each can has produced. In 2021, TSLA delivered between nine-hundred thousand and one million (900,000-1,000,000) vehicles, NIO delivered between ninety-thousand and one-hundred thousand (90,000 – 100,000) vehicles, and RIVN delivered between one thousand and two thousand (1,000 – 2,000) vehicles.
For NIO and RIVN to elevate their ability to compete with TSLA, they will need to increase their ability to deliver products to consumers. All three of these electric vehicle companies continue to see pre-order volumes that indicate the market for their vehicles exceeds their ability to produce, a positive for the industry.
To better understand the performance of Tesla Inc. (TSLA), Nio Inc. (NIO), and Rivian Automotive Inc. (RIVN), we can compare them to more established vehicle manufacturers General Motors Company (GM) and Ford Motor Company (F). Figure 2 shows TSLA outperforming Ford, General Motors, Nio, and Rivian, while Ford and General Motors outperformed NIO and RIVN.
While all five companies have lost value over the last 12 months, Tesla Inc. (TSLA) has fared better than the rest. We can assume that Tesla’s ability to deliver more vehicles to its customers drives income growth. On top of that, we interpret its position as a quasi-first-to-market mass-produced electric vehicle manufacturer to be the reason why its valuation is much larger than its electric vehicle manufacturing competitors. Additionally, its ability within the electric vehicle market to produce standout vehicles that consumers want right now, gives it a valuation larger than staple manufacturers General Motors Company (GM) and Ford Motor Company (F).
That being said, Tesla (TSLA) is the big dog on the block with a huge target on its back. Nio Inc. (NIO), Rivian Automotive Inc. (RIVN), General Motors Company (GM), and Ford Motor Company (F) are fighting to catch up as quickly as possible with Tesla’s electric vehicle production volume. It's possible that Tesla’s comfortable status in the industry may be coming to a swift end, with the future holding more competition and a greater range of quality electric vehicles for the consumer to choose from.
Tesla Inc. (TSLA) has reported increasing net income and sales growth over the last four quarters, while increasing total asset growth during the same period. This implies strong sales growth, while investing in their ability to produce more and simultaneously remaining profitable.
Nio Inc. (NIO) has reported decreasing net income growth over the last four quarters, while posting increasing sales and increasing total asset value over the same period. This implies that NIO is recording more sales and growing output capacity at the cost of income growth.
Rivian Automotive Inc. (RIVN) financial statements are limited and difficult to interpret this early. RIVN has reported decreasing net income over the last two quarters, while posting significant asset growth. This is what we expect from a new company trying to compete in a new market.
General Motors Company (GM) has reported decreasing net income growth and varying sales growth over the last four quarters. Total asset growth has remained about the same and total liabilities have posted a slight decrease. This implies that GM is tightening up its operating costs while sales have fallen off.
Ford Motor Company (F) reported a significant increase in income growth last quarter following three quarters of minimal income growth. Total liabilities have shown a slight decrease over the last four quarters while total asset growth has remained consistent over the same period. This implies that F has tightened up its operating costs while working toward increased sales. This is likely related to their announcement of their highly anticipated electric pickup truck line.
Tesla Inc. (TSLA) continues to show growth potential while maintaining its high valuation. If you want to get long TSLA look for pullbacks on the daily chart and build your position as we potentially see new all-time highs this year. The opposite is true if you’re looking to get short.
Nio Inc. (NIO) And Rivian Automotive Inc. (RIVN) have remained successful short opportunities in 2022. Until their vehicle delivery rate increases, they will continue to be valued below their competitors. Conversely, if you believe that NIO and RIVN are just now showing their true potential, they are currently priced at a great value.
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Ford Motor Company (F) and General Motors Company (GM) remain consistent choices for long term portfolio growth because they have a history of delivering products to their customers consistently, in positive and negative economic conditions. It is unlikely that either of these companies will lose their valuation rapidly, compared to TSLA, NIO, and RIVN. Ford and General Motors represent companies with significant moats in the automotive industry and will likely compete heavily with all newcomers in the electric vehicle manufacturing space. Traders could look to get long on price pullbacks when looking at the daily chart. On the flip side, traders could look to get short when General Motors and Ford prices push to new all-time highs.
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