When it comes to the Detroit auto makers, investors seem overly focused on the few electric vehicles available for sale today. As anyone who visits the city's car show can observe, tomorrow will be different.
General Motors, Ford and Chrysler-parent Stellantis are by far the biggest exhibitors at the North American International Auto Show, which launched Wednesday with a media day that included a visit from President Biden. On neighboring stands, Ford's F-150 Lightning faces off against its GM peer, the Chevrolet Silverado EV. At one end of the hall, Stellantis makes much of Jeep's electric four-wheel-drive technology, "4xe," which has helped make the Jeep Wrangler the bestselling U.S. plug-in hybrid vehicle.
The stock market has a clear view on who is winning this competition . Ford trades for roughly seven times expected earnings, GM for six and Stellantis for just three times. Ford is the only Detroit auto maker that features among the five most popular stocks on investment platform Robinhood.
In a sector fixated on the outsized valuation of Tesla—another top-five Robinhood stock—one explanation for such divergent ratings among the Detroit Three is what all-electric products they have available now. Ford's popular F-150 Lightning is already for sale, albeit with limited production and long waiting lists. GM's mass-market EVs, including the Chevrolet Equinox EV unveiled last week as well as the electric Silverado pickup truck, will be first delivered to customers next year. Stellantis is further behind in the North American market, with the first all-electric Jeeps due to start production in 2024 and not featured at the show.
Speed to market could help Ford win some new EV customers that might otherwise have considered its competitors. In many respects, though, investors' preference for Ford seems shortsighted.
While GM has invested heavily in EVs, it has focused more on building up its own battery ecosystem than getting products to consumers quickly. When GM finally is ready to ramp up EV production, it should be able to do so in a way Ford may struggle to match operationally. RBC analyst Joseph Spak calls GM the tortoise to Ford's hare.
The new Equinox is one illustration: GM wants to sell the EV at a starting price of $30,000, which is well below that of products in the same category such as the Mustang Mach-E, Tesla's Model Y or the Hyundai Ioniq 5. Meanwhile, Ford has scrambled to ramp up output by inking a deal with Chinese battery giant CATL . The strategy seems hasty in light of Washington's new EV tax credits, which starting in 2024 probably won't be applicable to vehicles using Chinese battery cells.
Stellantis's undervaluation is much more extreme than GM's. Not only is it a laggard with non-hybridized so-called battery-electric vehicles, or BEVs, in North America, but its plan to catch up has largely been communicated through dry numbers and dates rather than the exciting products investors in the sector seem to need.
But the pitch is changing. The Detroit show presents a Dodge concept "muscle" BEV that Stellanis unveiled last month, and last week the company released the first images of two coming Jeep BEVs.
"We are trying to elaborate a Jeep BEV leadership story, and very soon we are going to do the same with RAM," said Chief Executive Officer Carlos Tavares. He accepts that the U.S. stock market is "very much product-driven, and this is a good thing because it means people are passionate about the product, which is what we know how to do best."
Based on cars on the road, Ford may appear to be the most credible Detroit challenger to Tesla right now, but this is a long race. It is only a matter of time before the product portfolios at GM and Stellantis catch up, and their valuations should follow.