Elon Musk’s new plan to buy Mercedes will destroy the industry: Have you heard about the discussion about Elon Musk buying Mercedes? Surprising, right? But let me tell you that it’s not new. Musk reportedly said at a 2020 conference that he was open to the idea of a deal with another carmaker. But at that time no one ever thought of this deal.
So, why are they trying to buy Mercedes, and what are the advantages of Tesla acquiring Mercedes? Is it really happening, or Musk is just teasing just like every time.
Well, during Tesla’s early development phase, Mercedes-Benz parent company Daimler AG offered some assistance. Mercedes gave Tesla a 50 million investment, which equaled 10% of the company, and now Tesla is repaying the favor by buying Mercedes outright
There were reports that a Tesla-Daimler merger would take place shortly, and that Tesla would swallow Mercedes-Benz’s parent company, Daimler. Due to this investment, Mercedes engineers saw how Musk would release a technology that wasn’t perfect, then continuously improve it via software updates. And this collaboration made the organization stronger.
In May 2009, at the Mercedes-Benz museum in Stuttgart, Mercedes-Benz and Tesla announced they were forming an alliance to “accelerate the development of Model S and ensure it meets the highest quality standards”.
According to the plans, Mercedes will use Tesla battery solutions to power an electric version of the Mercedes-Benz B-Glass that it intends to release in the near future. Tesla is expected to release its Model S by 2012.
Within two years, an electric version of the B-Glass was introduced in showrooms. So, with this new method, software design, and electrical architecture, Tesla was able to implement improvements faster than its rivals, prompting people to draw parallels between Tesla and Apple.
Even Mercedes engineers helped Tesla with the Model S premium vehicle in exchange for access to Tesla’s partially assembled battery packs. But when Daimler sold its shares in 2014, they did it due to concerns about Tesla’s scalability.
Right now Tesla has a market cap of more than $1 trillion which is more than 100 times that of Daimler, which is worth $88 billion. Although Mercedes-Benz alone sold 9,35,089 cars in the first half of 2020, that’s still a lot more than Tesla sold — 1,79,050 cars.
Daimler, which owns Mercedes-Benz, appears at the bottom of the list of automobile companies ranked by their market capitalization, with a market share of less than ten percent of Tesla. It might seem weird for an organization that’s been around for decades to outperform a startup just starting out.
In terms of investments, Daimler hasn’t always followed this strategy. In 2012, when the company invested $50 million in Tesla, the company bought 10% of the company. It was enough for Daimler to get a board seat. Daimler will make a lot of money when it sells its Tesla stake for $718 million.
But if Daimler had held on to his shares for less than five years, the firm would have been worth more than the entire institution, which is approximately $100 billion dollars. Elon Musk said Daimler was a pioneer in the field of sustainable mobility and pouch-cell batteries. So, does Tesla have a plan to build an electric empire?
Well, Tesla would be considered one of its biggest acquisitions since it bought SolarCity for $2.6 billion in 2016. Obviously, such a deal would change everything about Tesla-but not everyone is convinced by what they’ve heard so far.
The billionaire businessman aims to beef up his automotive empire with a majority stake in Mercedes. Just when you thought Tesla couldn’t get any weirder, Elon wants to tie in Mercedes’ incredible reputation as a high-end carmaker. But when you think about it, Musk would have total control over 2 of the biggest automakers on earth.
After all, he has just 33% ownership in Tesla, but if he bought out Daimler he would have 60% ownership in 2 car companies that each make millions of cars every year. It’s hard to find a better example of too much power than buying out Mercedes.
According to a report published by The Times, Tesla CEO Elon Musk has put forward a plan of buying the stake that Daimler (Mercedes) owns in Tesla; that stake is worth $2 billion. Clearly, this is crazy on so many levels, but it could have incredible implications for consumers and potentially change everything about Tesla’s business model. But how will this affect the company?
Well, by buying an existing auto company, he has immediate access to production processes and infrastructure worth billions of dollars which he would otherwise have to spend years building from scratch.
And by doing this, he will have access to more consumer data, which is essential for increasing sales and growing his customer base as quickly as possible – something that no other electric vehicle maker has been able to do to date.
Moreover, by buying an existing auto company, he gets access to billions of dollars worth of production processes and infrastructure that he’d otherwise have to build himself. The deal gives him access to more consumer data, which is critical for getting sales up and growing his customer base as quickly as possible – something no other electric vehicle maker has been able to accomplish.
There might be a massive change coming for Tesla, and it could change everything we know about cars. Even though people are convinced of Elon’s good intentions with his purchase like SolarCity Corp., as well as numerous other deals in the green energy sector, some are skeptical about how he’ll handle a company like Daimler AG.
So, for both companies, this could mean big things-like making Mercedes products more affordable for America’s middle class while simultaneously pushing Tesla sales higher. Overall, it looks like they’re on their way to changing everything you think you know about sustainable cars.
However, what will happen after Tesla purchases this? Well, first of all, it’s a big risk. You can see what happened when Tesla bought SolarCity-it didn’t go exactly as planned. In addition, by buying Daimler, Tesla would be taking on a lot of debt.
So, investors would think twice about backing an automaker with that much debt without changing its overall business model. Matter of fact, Tesla took a while to become profitable even though Model 3 production exploded in 2018. But if Tesla shareholders stand to make any real money from buying Daimler, it might be worth looking into.
However, as you probably know, Elon Musk is a genius and business mind who has revolutionized every industry he’s entered. But many people are still asking, “What makes him believe that he can purchase Daimler-Benz?”
Well, as mentioned before, Tesla has a market value of $1 Trillion and almost everyone has heard about Tesla – but Volvo and Toyota offer electric cars too. So, it’s also worth noting that 21% of cars sold in America last year weren’t even powered by gasoline. That means Tesla Motors has huge room for growth – they already have a 90% market share in affordable EVs.
When you put it all together, it’s easy to see why Elon thinks buying out these companies will be successful, and it’s pretty obvious. In fact, I do think that once we get into mass production, we’re going to find out just how hard it is to succeed.
However, one more question arises as to why this acquisition is so important to both companies. Well, when you look back at Tesla and its accomplishments over such a short time frame, it really puts things in perspective – especially when it comes to manufacturing technology.
If we look at Tesla’s Gigafactory and Daimler-Benz’s Tuscaloosa factory, there are some big differences there. One thing’s for sure, no matter what you look at, these two factories are just too different in scale and there’s just no comparison.
Elon’s goal here, I believe, is not so much to build sustainable cars as it is to make sure that everyone can have access to affordable electric cars. If we had enough time (and money! ), those goals would probably be compatible so I’m excited to see what could happen here…my fingers are crossed!
While many people will try/claim that there are other reasons why neither company will benefit from a merger, I honestly can’t seem to find any solid evidence to prove such a claim.