will be far less severe than what we saw in 2008. Looking at the balance sheets of banks and automakers in the United States, I think the next recession in the U.S. Still, Ford's balance sheet is more levered than many of its competitors: Automaker _ Notice that both these companies have been de-risking their balance sheets over the past 10 years. It's more difficult for the shareholder (you) to be wiped out by recession losses when you have a larger amount of equity compared to liabilities and assets. Tesla's business model is also made possible by its share dilution, which raises cash from investors:īecause of Tesla's business model and share dilution, it has the better balance sheet on an assets to equity basis (a lower number means less risk): However, I wonder if Tesla can expand to be the size of Ford or General Motors ( GM ) using this business model. Tesla doesn't appear to be financing dealerships, but instead sells vehicles through its website and "company-owned stores." I like this business model better because it has less leverage. Tesla also offers loans and leases in select locations, but it simultaneously leans on financial institutions to provide 3rd party financing. But, Ford is paid for the risk it takes on in the form of interest (Sort of like a bank). All of this is leverage, and it's inherently risky. The company also offers financing to Ford dealerships, allowing them to afford their inventory and high operational costs. Ford Credit offers customers financing in the form of loans and leases. Ford's Leverage And How Tesla Comparesįirst of all, we need to understand that Ford has a massive financing business compared to Tesla. On the other hand, the primary risk with Ford Motor Company ( NYSE: F ) is leverage. ( NASDAQ: TSLA) is its valuation, which seems to be decoupled from reality as misconceptions swirl around Tesla's autonomous drive, EV semis, and Superchargers.
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