There have been many debates regarding which auto company has the upper hand over the other. I have spent considerable time putting this analysis together. This data is based on the Fiscal Year ending December 2023, except for Toyota, whose fiscal year ends in March 2024. (Note: I will update this analysis when these companies close their books next year.) I offer this data without prejudice or comment, except to say that it may not reflect the opinions of their respective customers or employees. One metric in this analysis is the most critical for a Lean thinker. Can you guess which one? NOTE: The company that excels in this metric is not Toyota! 😉 Let us know how you interpret this data...all perspectives are welcome!
David Devoe
3mo
Mark, your analysis provides valuable insight into different Lean strategies. Comparing Toyota, Ford, and Tesla highlights unique paths to operational excellence and growth. Toyota, rooted in Lean TPS™ principles, exemplifies long-term stability with high vehicle sales (9.44 million), strong gross margins (20.8%) and consistent profitability (Net Income 11.2%). My experience at Toyota, including non-automotive sectors, reinforced how TPS principles drive waste elimination and continuous improvement across operations. Ford’s high inventory turns (9.6) and robust free cash flow (154% of net income) indicate strong cash management and responsiveness. However, its short-term focus may compromise margin stability (5.4% operating profit), contrasting with Lean TPS™’s pursuit of sustained quality and long-term efficiency. Tesla’s high working capital turns (12.3) and significant CAPEX (10% of revenue) underscore rapid scaling and innovation via 'mega factories.' Yet, lower inventory turns (4.9) and margin variability present challenges in maintaining efficiency at scale. Toyota’s Lean-driven stability contrasts with Ford’s adaptability and Tesla’s disruptive innovation, illustrating diverse paths to market leadership and long-term growth
Mohamed Mousa
3mo
Thanks Mark DeLuzio for your effort in compelling and analyzing the data. I think the metric you mean is 'Free cash flow as % of net income', which makes Ford a winner over Toyota in this metric 🤔. However, I interested in understanding other one in this analysis and how you can link to company progress; the working capital turns. Almost Toyota, Ford and BMW are so close. How can we connect to other metrics and lean progress?
Tony M.
3mo
Working Capital Turns - Tesla in a landslide
Steven Globus
3mo
Very interesting data Mark DeLuzio thank you for sharing. Could you help in explaining what impact does government subsidiary have on Tesla's numbers and what you expect to be the impact of getting the rest of Toyota's data when they reach the end of their fiscal year? Would these change the current picture in a meaningful way?
Colleen Soppelsa
3mo
My observation: Toyota has 1/3 FCF%NI versus Ford, but twice the Gross Margin. My thoughts behind reason: More longer term stability relating to their overall "system" which produces as an outcome less in need for FCF to counter all the eight wastes. In essence, doing more with less.
David Goodman
2mo
Great analysis Mark and thank you as it is good food for thought. How was the avg cost per vehicle determined? The Vehicles per employee metric is interesting - and it is interesting to see considering the extreme true costs per employee in those organizations. Additionally, does the headcount include temps/non-FTE’s? WCT - a solid lean thinkers metric A deep dive into Tesla’s extraordinarily low days receivable would be interesting
Chris Scambler
2mo
Can't see carbon credits as a revenue source here. Changes everything. Inventory prob answer you are looking for. Tesla won't even accept an order unless you want delivery in 6 weeks or less in UK.
Robert Radke
3mo
Is working capital turns the most critical for lean? Did you take a look at FCF as % Revenue? FCF as a% of Net Income could be misleading due to different capital structures and tax regimes
Paul Allen
3mo
Hi Mark - Whenever I get data like this I always like to give it the 'smell test'. This is not to criticise your work. As you say you gathered and presented, that's all. Look at Vehicles sold per employee between GM and toyota. Massive difference, then look at the Gross margin massive difference the other way. I wonder why GM are so labour efficient with such a low margin?? where does that money go?
Chief Operating Officer at Huf Group | Passionate about transforming organizations towards holistic business excellence, based on the principles of the Toyota Way, Theory of Constraints and other effective approaches.
3moWell, if the free cash flow is higher than your net income, then the logical question is how come? Would be good to know the DSO and DPO. Some OEMs are good in using suppliers as a bank. I know one (not in the comparison) who has 5 times higher payables than receivables. True “lean” behavior is also about how to treat your suppliers and there is nothing to complain about if you look at Toyota. Another question is, whether a company is investing in the future or not….. Short term free cash flow optimization can be dangerous and is certainly not “lean”. We will see!