A Comparative Study of Tesla and Traditional Automakers (Ford and Volkswagen)

Qinru Zhu

Co-Presenters: Individual Presentation

College: College of Business and Public Management

Major: BS.ACCOUNTING

Faculty Research Mentor: Yu, Huaibing  

Abstract:

With the global automotive industry entering the era of electrification transformation, there is a huge valuation gap between new energy vehicle (NEV) leaders and traditional automakers. Taking Tesla, Volkswagen and Ford as research samples, this paper focuses on exploring the driving factors of valuation differences among them, and emphasis on the impact of growth expectations, R&D investment and cash flow this three core factors. Based on the data of the three companies, this study adopts descriptive statistics, comparative analysis and panel regression methods to systematically compare the differences in valuation levels (Tobin's Q, P/S ratio, P/B ratio) and financial characteristics among the samples, and empirically tests the explanatory power of core factors on valuation differences.The results show that: (1) Tesla's valuation level is significantly higher than that of Volkswagen and Ford; (2) Growth expectations (measured by revenue growth rate and sales growth rate), R&D investment (measured by R&D intensity) and free cash flow are the key driving factors for the valuation gap, among which R&D investment and growth expectations have the most significant positive impact on valuation; (3) The low valuation of Volkswagen and Ford is mainly due to their low growth potential, high proportion of traditional fuel vehicle business, unclear electrification transformation effects and constrained cash flow by large capital expenditure. This study not only enriches the research on the valuation of NEV and traditional automakers, but also provides practical enlightenment for investors' valuation judgment and enterprises' transformation decision-making.