Favorite is already certain: Tesla needs help from the German car world

Friday, December 4th, 2020

Favorite is already determined
Tesla needs help from the German car world

By Diana Dittmer

Tesla boss Musk is clearly in close contact with the German carmakers, he even signals willingness to cooperate. Why? "The most valuable carmaker in the world needs someone who fills his factory for him," says ntv auto expert Becker. There is someone who is also a Musk fan.

It is a small announcement with possibly big consequences: In the future, he will spend more time in Germany when the Tesla factory in Brandenburg is finished, Elon Musk announced this week at the award ceremony of the Axel Springer Awards in Berlin. Where he was sleeping that night, Springer boss Matthias Döpfner asked him. In a conference room of his still unfinished factory in Grünheide, is the Tesla boss's answer.

Musk really seems to want to put down roots in Germany. And he is looking for a connection: He is open to "mergers" with his German rivals – "friendly", he adds, and he explicitly rules out hostile takeovers. After entering the German auto industry with his Gigafactory, the Tesla boss now apparently wants to become a permanent fixture. As a partner among equals.

Musk's plans to stay overnight in Grünheide, an allusion to the turbulent time when he camped in a conference room or on the roof of his factory in California because of the stagnant production of the Tesla 3, reveal something else – probably completely unintentionally -: He is in crisis mode. "The most valuable car manufacturer in the world signals: He needs help," says car expert Helmut Becker. In this respect, his proposal is not an immoral offer. In the eyes of the former BMW chief economist, Musk is likely to have meant a cooperation, not a merger. This is the only way to "turn the offer into a sensible win-win situation," said Becker. Tesla would benefit and, conversely, a little Tesla would also do BMW, Daimler and Volkswagen good.

Grünheide as a contract forge?

In fact, there is a lot to support this theory: In Grünheide, around 500,000 electric cars are expected to roll off the assembly line every year. It is unrealistic that so many Teslas can be sold in Europe. "Tesla's portfolio is weak," said Becker. The electrical pioneer needs someone "who fills his factory". In Grünheide, mainly Model 3 will roll off the production line. Most of the other models are made in the USA. As things stand, the car market demands more cars across the board, above all it demands plug-in hybrid vehicles and hybrids.

The figures make it clear: In Germany, 28,965 new electric cars were registered in November (plus 523 percent), but at the same time 71,904 hybrid vehicles (plus 177 percent), including 30,621 plug-in hybrids alone (plus 383 percent).

Musk cannot serve this large market because it does not have combustion technology. But all German manufacturers have them. For the auto expert, the solution is obvious: contract manufacturing. "Musk can build plug-in hybrids for German car manufacturers in its factory." In return for the plug-in know-how, BMW, Daimler and Volkswagen get the battery know-how from Tesla that they lack. The result is a modern division of labor.

The pressure to cooperate is great for Musk. "Without cooperation, he risks bankruptcy," says Becker. "Not the German manufacturers." Because if the Tesla boss cannot fill his capacities and growth fails to materialize, the hoped-for profits will not come. These already consist almost exclusively of the sale of CO2 credits to combustion engine manufacturers, not the construction of cars. "Woe to the shareholders then change their attitude towards Tesla, then the dream is quickly over."

The Tesla boss seems to be aware of this risk. Even to him the extremely high share price now seems to be creepy. From the lines of an employee email this week, it is clear that not only do critics no longer consider a possible bubble to be ruled out, but also Musk himself. The fact that Tesla is included in the important S&P 500 index is something the stock has had in recent weeks once catapulted by around 40 percent and the total value to around 550 billion dollars.

Like soufflé under a sledgehammer

Not only the critics, Musk also fears the potential for a major setback: Tesla will be valued according to future profits, he writes. If investors "would at some point come to the conclusion that these fail to materialize, our shares would be destroyed immediately like a soufflé under a sledgehammer," the blog quoted Electrek from his email.

Musk urgently needs a plan B. The Tesla boss should already have one favorite for a cooperation: Volkswagen. In September, Musk and CEO Herbert Diess sniffed each other out in the new ID.3 on a joint tour. Diess had previously been in the Model Y from Tesla and had found words of praise. The chemistry between the two seems to be right. Diess is known as a big Musk fan anyway. In addition, VW has the largest capacities of all German car manufacturers. In 2019, the Wolfsburg-based company rolled off the assembly line with almost eleven million automobiles, more than ever before.

Immediately after meeting Musk, Diess – as was to be expected – rejected rumors of cooperation plans, but a later change of heart in the group cannot be ruled out. At least as long as Diess controls the group. Tesla is unbeatable in its technology field, the Tesla electrical management is far superior to the German. A cooperation with the newcomer would make more than sense for all German car manufacturers.

Interestingly, a recent speech by VW manager Alex Hitzinger seems to anticipate the possible change in strategy at Volkswagen. Coincidence? Hardly likely. The trend towards electrification, networking and automation of vehicles will trigger a wave of consolidation in the automotive industry, predicts Hitzinger at an event of the "Financial Times". But: "Not everyone will be able to afford these complex platforms." A smaller number of larger players will drive the transformation, said the head of the Artemis development project, which is part of the Audi brand. It can be assumed that he sees Volkswagen as one of the drivers. It is doubtful whether that would suit the powerful VW works council. As is well known, Musk is not a friend of trade unions.

Economy Minister Peter Altmaier does not seem to be averse to the idea of ​​cooperation. "In Germany we traditionally have a strong automotive industry with a high reputation worldwide, and Tesla fits in there, but that doesn't necessarily have to lead to mergers or larger mergers," said Altmaier in an interview with ntv. He has no doubts "that the best and most successful electric cars will be built in the next few years and decades. Elon Musk would be happy to, but not only," he adds. "Our traditional car brands" should also be successful in this market.