Tesla is building factories like gangbusters. If you read Torque News online or if you follow our Youtube channel, you already know that our site’s owner has been tracking giga factory construction on a daily basis for quite some time. In fact, it is apparent that our coverage of Tesla’s factory construction is the most comprehensive in the industry.
Tesla's Coming Giga Plants Are Not Enough
Once Tesla’s German and Chinese plants come online, Tesla could easily triple its delivery capacity. And Tesla has no lack of enthusiastic fans with dollars, euros, and yuan burning a hole in their pocket. Any difficulty Tesla has moving whatever it builds is quickly rectified with Tesla's short-term discounts and other sales gimmicks. No, Tesla won’t have trouble selling what it builds.
Does Elon Musk Look Like a Guy Happy With 2% Market Share?
When Tesla triples its annual deliveries it will capture roughly 2% of the global vehicle market. Does that sound like Elon Musk’s end point? It sure doesn’t to us. He has ambitions to go to Mars. Musk wants to convert the world to battery-electric vehicles and stop the production of all other types of automobile propulsion, green or otherwise. Will 2% market share be enough? Or even 5%, which is more than a decade away even at the frantic pace Tesla's crews in China and Germany have bulldozed forests down for more car plants?
Tesla presently has more market capitalization funding that all of the top automobile producers combined. Many publications term this a “higher value,” compared to other automakers, though I take issue with that since market cap is only only one measurement of a company’s value. What I am smart enough to know is that having so much money you need to a frunk full of commas for the numbers is never a bad thing.
I also know that Tesla builds nearly all of the cars it has sold in America in an abandoned Toyota/GM plant. Of all places in California. Tesla is not shy about using old auto plants made new again to produce its vehicles. Why should it be? Rivian is planning the same move.
Tesla M&A Talk
I’m surely not the only one to bring up the subject of Tesla acquiring an automaker. Or two. Or three. But I’m not well versed in mergers and acquisitions. I’ve only been involved with one as a manager in my business career, though I have worked as an employee at a few that were bought out. Some of the things I have learned about them are as follows:
-Pretty much nobody outside of the owners and top managers know when talks are underway.
-To an outside observer, the merger always seems impossible.
-There is never a perfect acquisition. They are always square peg into round hole.
-Once the rumors start, they almost always are true.
-The largest efficiency gains in mergers come from job cuts.
Are Tesla's Plants Really Special?
Some other things I know are that Tesla’s manufacturing lines on Youtube vids look very impressive. But are they really that special? Is there good data on how many employees per vehicle produced Tesla uses versus say, Volkswagen or Toyota? I’m betting that Tesla could make very good use of the technology, people, machines, and production capacity that the world’s largest automakers have in place right now.
Tesla Has the Money - So What's the Delay?
So why hasn’t Tesla moved to acquire another automaker yet? A few reasons come to mind. First, there is no battery infrastructure to support more battery-electric vehicles right now. I got this idea from Elon Musk. Second, there isn’t enough electricity in the grid to support a massive, short-term expansion of battery-electric vehicles right now. I got this idea from Elon Musk as well. Third, Ford, GM, and Volkswagen are not very close to being able to compete head to head and vehicle to vehicle with what Tesla has right now. So what’s the hurry? Why acquire an automaker with no battery benefits, no vehicle benefits, and who isn’t going anywhere any time soon.
Tesla will wait until the battery supply chain picture, electric infrastructure picture, and global taxpayer support for BEVs all look a bit brighter and then make its move. Or the reverse will happen, should Tesla’s stock have a double-digit percent correction. Feel free to tell me in the comments how dumb I am, but offer your own prediction as well.
John Goreham is a long-time New England Motor Press Association member and recovering engineer. Following his engineering program, John also completed a marketing program at Northeastern University and worked with automotive component manufacturers. In addition to Torque News, John's work has appeared in print in dozens of American newspapers and he provides reviews to many vehicle shopping sites. You can follow John on Twitter, and view his credentials at Linkedin