Tesla Motors Inc (NASDAQ:TSLA) is running a new business model that seems to be working. It is both manufacturing vehicles and collecting revenue by selling zero emission vehicle credits to companies like General Motors Company (NYSE:GM) that need these credits to continue selling their lower mileage trucks. Tesla is also leasing its drivetrain technology to Toyota Motor Corporation (ADR) (NYSE:TM) for its electric vehicles, creating yet another revenue stream. Tesla aims for a 25% gross margin, which would be the largest of any other automotive manufacturer.
It is hard to compare the businesses of Ford Motor Company (NYSE:F) and Tesla Motors Inc (NASDAQ:TSLA), as the two have very different business models, margins, and clients. Ford is valued at 11.6 times forward earnings, and Tesla, on the other hand, is valued at 22 times. Currently, electric vehicles are estimated to command more than 5% of total vehicle sales by 2017, a five-fold increase. This could mean that Tesla isn’t wildly overvalued, however, competition in the electric vehicle space is heating up, and any missteps could send Tesla’s stock tumbling.
Foolish bottom line
Genuine Parts Company (NYSE:GPC) has been growing earnings steadily, and the trend of older cars on the road looks like it will continue into the future. With a dividend payout ratio of 48% and a healthy balance sheet, this company is looking to reward its shareholders over the long term. Even if electric vehicles do increase their sales five-fold, that means that 95% of the market will still require the clamps, belts, and hoses that Genuine parts provides for years to come.
Wes Patoka has no position in any stocks mentioned. The Motley Fool recommends Ford and Tesla Motors . The Motley Fool owns shares of Ford and Tesla Motors .
The article Aging Cars Will Need a Facelift originally appeared on Fool.com.
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