While Ford and General Motors straddle either side of the Domestic Automotive Industry average for the PE Ratio, they fall far below the average in the PS Ratio. This is propped up by the PS Ratio of pure play EV carmakers such as Rivian, Lucid and Tesla. However, unlike Lucid and Rivian, Tesla’s PE Ratio is almost 7X that of the average while the other EV carmakers trend negative.

In contrast, German carmakers Volkswagen, Mercedes-Benz and BMW show a very strong relationship to both ratios relative to the Foreign Automotive Industry averages. In fact, even when considering Japanese carmakers Toyota and Honda as well as Chinese carmakers Geely and BYD, the relationship between their PS Ratios with the industry average remains quite reasonable. When considering PE Ratios, however, the Chinese carmakers are significantly more overvalued than the Japanese and both are significantly more overvalued than the Europeans.

Japanese carmakers tend to have a much stronger footprint in Emerging Markets (EM) economies, where the middle class is resilient and rising and a possibly-significant attribution for these stocks’ high PE valuation. The Chinese carmakers, on the other hand, benefit from strong investor interest in their stocks from overseas buyers – who often consider buying Chinese stocks to be sufficient for “diversification” purposes. While Chinese consumption has, of course, been on an upward trend, signs of strains are becoming increasingly apparent in Q2. Whether this continues or if the Chinese government steps in with sops to props up consumption is a matter of conjecture at the moment but is likely to happen.

On the matter of Tesla’s stock performance, it bears noting that the Put-Call Ratio on the stock in the US markets (as of June 8) also puts forth some rather interesting perspectives.