Hear from CIOs, CTOs, and other C-level and senior execs on data and AI strategies at the Future of Work Summit this January 12, 2022. Learn more

'Revenge of the Electric Car' premiere: Tesla Motors CEO Elon Musk on red carpetIn a sign of its continuing need for capital — and the good performance thus far of its stock — Tesla Motors said today it would sell 5.3 million more shares of common stock.

At the same time, according to the announcement, Tesla CEO Elon Musk plans to buy an additional 1.5 million shares of the company in a private placement. An entity called Blackstar Investco, a unit of German carmaker Daimler, will also buy up to 644,475 shares of Tesla as well.

Leading up to that announcement, Musk told Bloomberg last night that he “didn’t think it’s a good idea to plan to sell a company,” and that he personally had no interest in selling Tesla to any other carmaker–or selling it at all, for that matter.

Now, Elon Musk is a serial entrepreneur, and he knows how the game is played. He’s sold companies before, most likely saying right up until the announcement that the company wasn’t for sale, and that it wouldn’t make sense to sell it.

But regardless of how high the shares go, and how many deals Tesla Motors [NSDQ:TSLA] can cut, virtually no one believes Tesla can stay independent. At least, no one among auto industry professionals, as opposed to armchair commentators and stock speculators. Carmaking is a brutally capital-intensive business, one with long lead times (a new car takes about five years from conception to production), and one whose products are highly regulated everywhere in the world.

Consider China, where there are now several dozen native carmakers (analysts even disagree on how many). It’s official Chinese government industrial policy that this number should be reduced to five or fewer through mergers, forced if necessary. That’s the only way that a Chinese company can acquire the scale and capital necessary to survive, in the view of that government and most of the world’s auto industry analysts.

'Revenge of the Electric Car' premiere: Elon Musk arrives in a Tesla RoadsterAnd in China, remember, many automakers are owned and funded by state or regional governments, giving them access to capital outside that annoying glare of public disclosure enforced by the U.S. Securities & Exchange Commission. So today, Tesla faces resurgent global giants–General Motors, Toyota, Ford, Volkswagen, Nissan, Honda, Hyundai, Chrysler-Fiat, to name the largest–with the shadow of government-funded competition from China sooner rather than later.

Can it survive alone and grow from 1,750 cars (the number of Roadsters it has built since 2008) to tens of thousands of cars a year (its target for the 2012 Tesla Model S electric sports luxury sedan it hopes to introduce in roughly a year. Industry analyst Aaron Bragman, of IHS Automotive in Northville, Michigan, is dismissive of any chance that Tesla Motors will remain independent.

Saab and Volvo can’t survive independently, with conventional products, established production, research, development, and retail facilities, global customers, and massive investment,” he starts out. “Neither could Chrysler.

“But Tesla,” he continues as he hits his stride, “with a single $100,000 sports car and the promise of a nearly-that-expensive four-door, a handful of dealers, a lack of profit for the foreseeable future, and rivals rapidly developing their own competitor vehicles—they can?”

Other analysts will tell you the same thing, in different words. So what’s the future for Tesla Motors?

“I still think Tesla’s greatest chance at longevity remains its partnership with Toyota,” Bragman says. That alliance “strikes me as an excellent arrangement for both parties that could be developed into something even better long-term.”

The fact that Daimler, which bought 9 percent of Tesla in May 2009, well before the Toyota investment, is acquiring more shares may point toward a battle of the Titans, in which Toyota and Daimler contend for the fair maiden’s hand.

Which is, frankly, exactly what every venture capitalist–and startup founder–dreams of.

Written by John Voelcker, this article originally appeared on Green Car Reports, one of VentureBeat’s editorial partners.


VentureBeat's mission is to be a digital town square for technical decision-makers to gain knowledge about transformative technology and transact. Our site delivers essential information on data technologies and strategies to guide you as you lead your organizations. We invite you to become a member of our community, to access:
  • up-to-date information on the subjects of interest to you
  • our newsletters
  • gated thought-leader content and discounted access to our prized events, such as Transform 2021: Learn More
  • networking features, and more
Become a member