The Only Automobile Manufacturer I Would Invest In
Tyler is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
There is one company that has got me excited recently. Its enormous growth potential, performance, and unique valuation lead me to believe there is money to be made for years to come. Other companies sell more vehicles, have bigger names, and are currently more profitable, but over the next few years, there is more than enough opportunity for Tesla Motors (NASDAQ: TSLA).
Ha! Not for Tesla. Just a few weeks ago, it completely paid off its 2010 loan from the Department of Energy with a wire of $451.8 million. Reports claim that Tesla was the first American automobile company to fully re-pay the government.
General Motors (NYSE: GM) has "officially" paid off its $49.5 billion loan that it received in 2009 from the U.S. Treasury Department. The key word there is officially. Some of it was paid off in cash, and some of was paid off through shares of its stock. The problem is GM's stock will have to increase dramatically (likely by the beginning of next year when the Treasury Department plans to sell off the last of the stock) to actually cover the full amount owed.
There is approximately $20 billion outstanding. In February, the Treasury Department still owned 277 million shares of GM. To make the math work, the average sale price of those shares would have to be $72/share. Currently, the stock is trading in the mid $30 range. The reality of the situation leads us to believe that approximately $12 billion of that loan will never be received.
Ford (NYSE: F) received a $5.9 billion loan in 2009 from the Department of Energy to work on more efficient models of cars. Its first payments on these loans are due in September of this year, with interest. Ford plans to pay off these loans well ahead of schedule, but has not paid it off yet.
Ford and GM have likely seen their best growth years already, while Tesla is just starting to gain traction. I dug around for a while and found some of these companies' best growth numbers in recent times.
For the year 2012, Ford experienced an increase with cars up 5%, utilities up 7%, and trucks up 2%. The company experienced the strongest December since 2006 with total company sales up 2%. June proved to be a big month for GM in 2013. Combined sales of GM’s mini, small, and compact cars were up 59% when compared to June of 2012.
That's a little more impressive. On GM's website, it states that Cadillac was the industry’s fastest-growing luxury brand with a first-half sales increase of 33% in "Calender Year-to-Date Sales Highlights (vs 2012)."
While those are some impressive figures, none of them compare to the growth of Tesla. In the company's first quarter this year, sales increased 83% over the quarter before. In fact, the company sold approximately 4,900 vehicles. That may not sound like a lot, but the company sold more cars in 2013's first quarter than it did for the entire year of 2012. The company expects 21,000 deliveries this year, but may even crush that figure at this rate.
I debated even including this section for the simple fact that it won't seem fair. Don't get me wrong, in the past year, both Ford and GM have seen their stocks increase nearly 77% and 74%, respectively. How can you be disappointed with that? Well, compare it to Tesla's 288% in the same period of time, and it seems minimal.
If we cut the time frame down a little bit, the growth is even more impressive. In the past three months, GM, Ford, and Tesla have seen their stocks increase 28%, 30%, and 201%, respectively. The chart below shows how these companies have done Year-to-Date.
GM and Ford have established themselves globally, as they should after 105 years and 110 years in business, respectively. China's Global Time has recently reported that Tesla will display Model S at September Chengdu Auto Show in China. Following this event, the company will open its first China show room.
Many analysts are skeptical of the move, stating that China is not ready for EV technology. I must be looking through a different kaleidoscope. A lot of analysts have been wrong about many of Tesla's moves, but Tesla has proved to be spot on. After all, China is the world's largest automobile market.
Tesla also plans on revealing a new Model X, which will hold seven passengers, have storage room, and essentially combine the convenience of a mini van with an electric car. Aside from those things, the car also includes many new features like the "falcon wings" seen above.
The bottom line
I have not been a big fan of the automobile industry, but Tesla has flipped that thought on its head. Tesla is gaining momentum, selling more cars than anyone thought it could at this point, and is now expanding in China. Its growth has been huge, and the future may be even better.
China is already the world's largest auto market -- and it's set to grow even bigger in coming years. A recent Motley Fool report, "2 Automakers to Buy for a Surging Chinese Market," names two global giants poised to reap big gains that could drive big rewards for investors. You can read this report right now for free -- just click here for instant access.
Tyler Wofford has no position in any stocks mentioned. The Motley Fool recommends Ford, General Motors, and Tesla Motors . The Motley Fool owns shares of Ford and Tesla Motors . Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!