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- Tesla’s recent precipitous stock-price decline has led to some renewed speculation that it could be bought by a deep-pocketed tech firm.
- CEO Elon Musk has reportedly discussed a Tesla acquisition with both Google and Apple in the past.
- NYU professor Scott Galloway thinks somebody could buy Tesla in 12 months if it drops below $100 per share.
- But nobody is going to buy Tesla. The company is on its own from here on out.
- Visit Business Insider’s homepage for more stories.
A persistent dream of Tesla boosters has been that a technology giant with piles of cash would swoop in and rescue Tesla from doom, should the carmaker’s finances become so tattered that bankruptcy threatens.
Reportedly, CEO Elon Musk has in the past talked with both Google and Apple about possible takeovers. But Tesla remains independent.
It’s also in the midst of a severe stock swoon that’s knocked shares down 40% since the beginning of the year, to around $190. Is the bottom in sight? Who knows, but the Silicon-Valley-to-the-rescue narrative is back in vogue, this time from NYU professor Scott Galloway, who previously called Amazon’s buyout of Whole Foods.
Galloway doesn’t think a major automaker would buy Tesla, but he seems to think that a tech firm might take a shot, or so he suggested on Kara Swisher ‘s Recode podcast.
The problem with this prediction is that nobody wants to buy Tesla anymore — except for maybe investors, who recently gobbled up a nearly $3-billion stock offering. Tesla looked better as an acquisition target a few years back, before it became a 250,000-per-year carmaker and revealed that it wasn’t immune to the economics of the auto industry. It might be relatively cheaper, but it’s now a huge execution risk, as the company’s ambitions collide headlong with the capital-intensive nature of making hundreds of thousands of cars.
A Tesla buyer would be acquiring a lot of baggage
Hubert Burda Media
This doesn’t mean Tesla has a worthless business; quite the contrary — it could eventually post some enviable profit margins, if it dials back its ambitions to flood the market with vehicles.
But technology companies that might have looked at the multi-trillion global auto industry a ripe opportunity have now sampled the market and decided the actually building and selling cars probably isn’t the way to go. Better to do as Waymo has done, developing a hardware-and-software self-driving system that can be installed in vehicles manufactured by partners such as Chrysler and Land Rover.
Or to do as General Motors has done, integrating a self-driving startup — Cruise — with existing, well-establishing manufacturing processes.
For the sake of argument, however, what would Apple get if it bought Tesla?
It would get a pile of debt and extensive production obligations, not to mention immense future capital demands and a volatile CEO in Musk. All so it could make Tesla into the Apple Car. Not worth it.
Tesla’s real value was in absorbing risk
Hollis Johnson/Business Insider
Apart from its beloved brand and some technical innovations, Tesla isn’t unique. It was a few years back, and most major automakers knew it. That’s why they watched and waited as Tesla essentially created a market for electric cars, soaking up all the early risk.
The automakers that want to take the EV plunge have now dived in. Those that haven’t could plausibly partner with Tesla without having to acquire the California company. In fact, that’s what happened when Tesla was much smaller and Daimler and Toyota took equity stakes that led to lucrative exists when Tesla’s stock price surged.
So with apologies to Prof. Galloway, nobody is going to buy Tesla — not a traditional automaker nor a big tech firm that might bafflingly want to obliterate billions.
Tesla, for better or worse, is on its own from here on out.
- Tesla will be acquired within a year, says the NYU professor who predicted Amazon’s takeover of Whole Foods
- Fiat Chrysler’s business is already complicated — a merger with Renault would make it even more challenging
- A Wall Street firm focused on disruption is delusional when it comes to Tesla