• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing
  3. / Consumer Discretionary

Surprise, Tata Has the First True 'Tesla Killer' and a Head Start on the Future

Tata Motors's Jaguar and Land Rover divisions are the perfect platforms for BEVs and AVs.
By JIM COLLINS
Apr 26, 2018 | 04:23 PM EDT
Stocks quotes in this article: F, GM, FCAU, TSLA, TTM, GOOGL

As the companies formerly known as the "Big Three" report earnings, investors are keeping one eye on the future. Ford's (F) on an uptick today, General Motors' (GM) down in the face of a buoyant market and Fiat Chrysler's (FCAU) shares have given up most of their at-the-open gains.

Forgetting about quarterly profit reports and looking at the big picture, though, it's important to remember that if you own U.S automakers as long-term buy-and-holds, you are really investing in a future that will be dominated by autonomous vehicles (AVs) that are built with the construct of electrified powertrains. Or, put another way, battery-electric vehicles (BEVs).

So, one must not ignore the fact that GM and Ford are earning magnificent profits from the pickup trucks and SUVs that dominate their North American Operations (NAO, in industry parlance). Fiat Chrysler is an even more extreme example, as the Jeep brand represents the vast majority of profitability there. I estimate at least 85 % of FCAU's automotive (ex-Maserati) earnings come from Jeep, and that estimate could be conservative.

The dirty little secret that Detroit loses money on most of its passenger car models while subsidizing them with profits from trucks was exposed by Ford CEO Jim Hackett's pronouncement that Ford is all but exiting (only the Mustang and Focus Active will survive) the NAO passenger car market. Good for him; it was a rare, but pleasant burst of candor emanating from Dearborn, and has led to a rare, but pleasant green day for Ford's stock. GM CEO Mary Barra needs to watch what the Blue Oval is doing.

So, that's the key point here. The U.S consumer does not want to buy passenger cars. The issue for the futurists is that the high-volume, highly touted BEVs that are currently being sold in the U.S. market are, yes, passenger cars, and really ape the shape of the classic "three-box" sedan despite the fact that there is no need for an engine compartment.

I believe this is the reason for the poor sales performance of the Chevy Bolt. With sales of 1,774 units in March, the Bolt was outsold by its predecessor, the Volt, and is running well below the monthly sales that could be supported by the Bolt's production capacity of 25,000-30,000 per year.

The Nissan Leaf has never sold well in the U.S., and the other mass market BEV currently on sale in the U.S. is another passenger car, Tesla's (TSLA) Model 3. Delving into the Musk-mania behind the production hell Tesla has experienced with the 3 would require too much column space, but I will certainly circle back to Tesla in another  Real Money column, especially since TSLA's crucial first-quarter earnings report is scheduled for Wednesday, May 2.

Even if he has been frustratingly unable to master the very basic tenets of mass-market car production, Elon Musk certainly got the order of introduction right. Western world auto customers (and increasingly those in China and India, too) are clearly interested in two segments: luxury and SUVs. So that's where Tesla's Model S and X are positioned, and that's where the Model 3 can't quite reach and the Bolt and Leaf are not even close to.

So, why not build BEVs in the segments consumers want? Why not use those SUV/crossovers as the architecture for AVs, which will be used in ride-sharing applications where more interior room is a virtue? It's a darn good idea, and the company that is optimizing that strategy is Tata Motors (TTM) .

Tata's Jaguar and Land Rover divisions are the perfect platforms for BEVs and AVs, and Alphabet (GOOGL) division Waymo's decision to use the upcoming Jaguar I-Pace battery-electric SUV as the basis for its AV fleet is not a coincidence.

TATA shares are languishing near a 52-week low as the company cuts production due to weak sales -- especially of diesels -- in its core U.K. market, but I believe the future is bright for both brands, and concerns over the U.K.'s demise have been exaggerated.

All my friends at the European car makers are talking about the I-Pace as the first true "Tesla-killer" to hit the market, and that buzz should help the stock. TATA shares are currently trading at just over 6x the consensus forecast for EPS for the March 2019 fiscal year, a slight discount to TSLA's impossible-to-comprehend valuation of 13,690x its trailing 12-month EBITDA.

So, take a look at TATA here. I'll have more ways to play the future of automotive mobility in my next  Real Money column.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Collins had no positions in any securities mentioned.

TAGS: Investing | U.S. Equity | Consumer Discretionary | Technology | Earnings | How-to | Stocks

More from Consumer Discretionary

A Cannabis ETF and a Micro-Cap Stock That Have Grabbed My Attention

Bob Byrne
Aug 15, 2022 8:30 AM EDT

The ETF is showing signs of perking up and the micro-cap is a maker of electric outboard motors.

Fossil Group Sounds the Alarm While NL Industries Rewards Its Shareholders

Jonathan Heller
Aug 12, 2022 10:30 AM EDT

The former signaled lower revenues for the year while the latter declared a healthy special dividend.

Disney Is Firming Up a Bit Ahead of Earnings

Bruce Kamich
Aug 8, 2022 8:36 AM EDT

The charts of the entertainment giant are modestly positive before it reports fiscal third-quarter results after Wednesday's close.

Put e.l.f. on the Shelf as the Stock Surges to a 52-Week High

Bruce Kamich
Aug 4, 2022 2:31 PM EDT

Here's why investors should consider taking profits now.

Mixed Earnings Bag Requires Diligence Among Momentum Traders

Bob Byrne
Aug 3, 2022 8:48 AM EDT

Stocks are moving abruptly and dramatically depending on which way quarterly reports go for the companies that deliver them.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 10:24 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    To Improve Your Trading and Investing, Spend More ...
  • 08:44 AM EDT PETER TCHIR

    CPI Beats Expectations, But Maybe Not the 'Whisper'?

    Slightly better-than-expected inflation across the...
  • 01:44 PM EDT STEPHEN GUILFOYLE

    This Holding Lights Up With Strong Earnings

    Check out the latest from TheStreet's Stocks Under...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login