Tesla plans to buy Mercedes Benz

[Clustertruck]

This doesn't sound compelling.

1. This has three negatives: Dealers don't have EV technicians. Dealers don't have short-term profit-motive to sell EV over ICE. Dealers don't know how to sell EVs.

Dealers definitely have problems selling and servicing EVs, but that problem is becoming historical and there's the compelling necessity to be selling and servicing BEVs pronto. In any case, experience with Porsche, GM and Ford shows how the transition is made and the techs are receptive once the franchise management is compelled to stop sandbagging

1. A mailing list?

User data is indeed a valuable database of addresses, phone numbers and credit cards with an existing relationship (this is the core value of Apple and the core asset valuation when a company like Facebook pays a billion dollars to acquire a competitor … not to have their software, but to have their customers and future revenue from those customers. There's a larger issue of the cost to acquire a customer or the cost to "conquest" a customer (acquire them from a competitor) but that's just one facet. The bigger picture is how data has become the asset value of all businesses – what ads do we click on, what incentives do we buy, when do we upgrade, when do we pay for services, what is our credit history … all tied into every credit card swipe … all captured and stored, all on the balance sheet of corporate assets.

Another example of data: Tesla has "millions" of miles of road data, but zero data for numerous countries where Mercedes has millions of vehicles, many with degrees of data logging and autonomy, crash data, and their R&D. Sitting in a relational database in Germany, these data are probably not worth the storage devices they occupy. But as training data for AI and ML, Tesla can leverage years or even decades of vehicle and user data. An autonomous system driving a road for the first time is already equipped with dozens or thousands of occurrences of human drivers negotiating that length of road under all weather conditions, during road construction, knowing local traffic, making informed real time decisions. That all might sound unimportant, but it's this information which analysts credit as a material advantage Tesla has in keeping ahead of its competitors.

1. Patents for what? If their patents were valid, they would have sued Tesla for infringement already.

I mean the treasure trove of existing and future patents and intellectual property that Mercedes holds. Mercedes is famous for being first to invent or introduce technology which becomes "standard" on vehicles in the subsequent decades. It's not just the big obvious stuff like head-up displays or airbags or even seat-belts, it's also the intellectual property of knowing how to design suspension for ride quality and handling, reducing cabin noise, slipstreaming without causing instability, ADAS, guided diagnostic service, training field service staff, providing rewarding career paths and supporting employees in multiple countries, doing business unions and governments in multiple countries each with their own taxation and regulation.

1. How did that work out for NUMMI or Grohmann?

That some players fail at basketball or golf only emphasizes the achievement of superstars like Jordan and Tiger.

1. Writing off stuff they just spent money for doesn't save taxes.

I don't follow this one.

1. They already have the carbon credits leverage.

Tesla current sells its credits (to VW and others?) and I don't know where that goes in the next 5+ years, but keeping those credits for their own business where they have no choice but to sell "burn stuff" ICE vehicles is just one simple example of owning the whole chain and not selling off links for others (especially competitors) to profit or even to stay in business. Tesla was playing 3D chess by selling carbon credits so that the likes of VW were not compelled to drive their own innovation forward sooner. Those "competition free niche" days are ending.

1. Vans that aren't EV platforms.

I don't see the point here, but if I were to guess, I'd say that BEVs are 2-5% of the market today and will continue to expand as a niche – revenue from commercial vehicles dwarfs BEV revenues during the transition. By having those vehicles and those fleet contracts, Tesla would be well-positioned to work with large fleet customers cooperatively making the transition. Things like fleet management software and service level agreements are complex and expensive; the result of decades of negotiations and contracts … not just a matter of offering a competing product and "winning over" fleet buyers.

1. ...You have to sell new EVs to the fleet customers, they don't just buy whatever you offer.

I'm not sure what "have to sell new EVs" means in the context of fleet customers – these are the vehicles which will be last to come under regulatory deadlines. There will be near-term compelling use-cases (such as last mile delivery in cities that will soon ban tailpipe emissions) but the large long-haul van and truck fleets simply cannot replace their diesel engines with electric (though some will go to range extenders for example.) Heavy commercial and industrial vehicles are also further down the transition time line. Tesla, having the Mercedes reach into those markets would be well (or at least better) positioned to sell the Tesla Semi in a range of classes. This is also where customer data becomes valuable – knowing what fleet operators need from their vehicles, analyzing their costs, operations and logistics to devise BEV solutions, not just a vehicle as a product, but a business solution as a service.

Anyway, it's a thought-provoking experiment to wander through these aspects of the electric reinvention of the automotive industry. There's going to be surprises and new ways of doing business. Tesla buying Mercedes is one of the simplest to conceive. Tesla going straight to fully autonomous vehicles which it owns and never sell, only "leasing" to end users like a software license … this is a nebulous proposition for retail and commercial buyers … from the career and employment of drivers to the concept of having a car accident and the other driver … doesn't exist.

 

[Crissa]

1. Dude, there's plenty of evidence that dealer networks are a net negative to EV sales. Study after study shows that.
2. It's just a mailing list. Again, doesn't raise them over anyone else. Or a magazine.
3. Again, if their patents were important, they would defend them. This doesn't put Mercedes Benz over any other automaker.
4. Two just two points, but it was up to you to say it would help them. Well, it hasn't.
5. You said they could save taxes. You don't save money buying things, you just displace spending.
6. Again, they're the seller. Tesla has no need for carbon credits, nor any desire to need them.
7. Yes, vans that will consume resources to adapt to EVs. Tesla wouldn't sell ICE vehicles. And the vans would be suboptimal EVs until that adaptation was completed.
8. Fleet customers have an installed base. They want whatever they bought so many of, so they don't need new tools, incompatible parts, new training, etc. You'd be at square one trying to sell them on an EV.

-Crissa

Even if these give an advantage, that advantage has to translate into new vehicles they can build and sell. And I don't see how any of this does A, and they're of dubious value for B.

 

[nomadmusk]

I could see them buying the rights to their sprinter van and wheel design branches, otherwise that's about it. Soy wiring and common parts in MB go bad in 6 years, the opposite of sustainable. They have no battery tech, it would make Tesla beholden to MB dealerships, and not retooling factories was learned after they made Fremont. I really don't see them repeating that nightmare. Remember Tesla doesn't like wasting time on design, they put it into function.

 

[Crissa]

Tesla uses soy wiring, too.

It's just about being on top of your suppliers and your warranty repairs. Tesla is seemingly bad at the latter, but they seem to be masters at the former.

-Crissa

 

[JBee]

You argued against the idea that there is no way in hell Tesla is buying or merging with Mercedes. However, your argument that you can't think of another company that's a better fit assumes Tesla wants to or needs to merge with someone. Obviously, Tesla is not being forced to pick another auto company to merge with so that line of reasoning is meaningless.

Tesla will not be merging with another auto manufacturer because there is no conceivable way they could extract enough value from any of them to make it worthwhile.

That would depend on how a deal is structured. A share swap would cost Tesla little to nothing for a 50% (maybe less?) stake and wouldn't impact their other development cashflow. If anything it might well boost the shares so much in 3 months the deal pays for itself. It would also firmly bolster Teslas against "over valuation" status amongst the rest of the bears and drive them to buy Tesla and even MB instead.

I agree that Tesla doesn’t have too, but that doesn't mean they can't, and even make some more progress doing so. The commercial arm is my trigger.

I'm not sure where are I argued theres "no way they would". Can you point to the post?

 

[Clustertruck]

1. Dude, there's plenty of evidence that dealer networks are a net negative to EV sales. Study after study shows that.
2. It's just a mailing list. Again, doesn't raise them over anyone else. Or a magazine.
3. Again, if their patents were important, they would defend them. This doesn't put Mercedes Benz over any other automaker.
4. Two just two points, but it was up to you to say it would help them. Well, it hasn't.
5. You said they could save taxes. You don't save money buying things, you just displace spending.
6. Again, they're the seller. Tesla has no need for carbon credits, nor any desire to need them.
7. Yes, vans that will consume resources to adapt to EVs. Tesla wouldn't sell ICE vehicles. And the vans would be suboptimal EVs until that adaptation was completed.
8. Fleet customers have an installed base. They want whatever they bought so many of, so they don't need new tools, incompatible parts, new training, etc. You'd be at square one trying to sell them on an EV.

-Crissa

Even if these give an advantage, that advantage has to translate into new vehicles they can build and sell. And I don't see how any of this does A, and they're of dubious value for B.

I just explained each of these points, you've not rebutted one sentence and you've not brought a single counterpoint, just "I don't agree." This just doesn't seem to be a topic of interest to you.

If you are interested, do a little reading on topics like M&A, asset valuation, and the raw material of business today: consumer data. Acquisitions like Grohmann, Maxwell and Hibar are examples of "when you've got a lot of capital, go buy something you can't wait to build yourself" (a practice Apple, Microsoft, Google and Facebook have exemplified with acquisitions that start out "insane" like Google acquiring YouTube … it's not a 100% hit rate, it's the big wins that count.) It's important to make acquisitions for intellectual property, customers, and to thwart the plans of competitors. Once you've got capital to burn and you're already paying your execs with stock buy-backs to boost the stock price, and building everything you need for the next 10 years, what else can you do with cash?)

I don't think Musk would ever have the Tesla brand sell ICE or any burn stuff technology – probably not even a range-extender in a Semi, even though that's the only solution available today – it's too off-brand and short-term thinking for him. I don't think acquiring Mercedes is his cut of meat, either. I doubt Mercedes is even open to be acquired, it's just a "thought experiment" for now, but acquiring the brand and everything I described is an MBA thesis that would be graded as "too obvious, find something less straightforward."

 

[jerhenderson]

For one I'm not proposing EM should, rather only if he did, then MB should be the one to do it with.

I doubt our limited capacities would constitute serious consideration, but I think the commercial vehicle side of the opportunities is underappreciated. MB commercial vehicles is big, and operational.

so you're saying that MB would be the best brick Tesla could tie itself to before throwing itself into the water??

 

[Crissa]

You're saying these insane buyouts don't always work... well, duh. Most are nuts. And your suggestion that there's value here has no argument. You're suggesting they enrich someone else's shareholders to build...

...nothing. Mercedes Benz can barely built adapted ICE chassis, let alone purpose-built EVs.

Again, why would Tesla waste their money bailing out ICE manufacturers when Tesla is the one with the goods that are valuable in the deal?

-Crissa

 

[Cybertruck Hawaii]

Just selling a proven bulletproof product isn’t good enough anymore. Most people people base their choice on the name brand alone. Buying Mercedes Benz is a known brand for its reliability and opulent.

 

[Clustertruck]

so you're saying that MB would be the best brick Tesla could tie itself to before throwing itself into the water??

Well, maybe the lightest brick. : )

Fossilized brick most likely to float?

 

[jerhenderson]

Just selling a proven bulletproof product isn’t good enough anymore. Most people people base their choice on the name brand alone. Buying Mercedes Benz is a known brand for its reliability and opulent.

old brand isn't relevant to what's coming

 

[Ogre]

Just selling a proven bulletproof product isn’t good enough anymore. Most people people base their choice on the name brand alone. Buying Mercedes Benz is a known brand for its reliability and opulent.

Buying Tesla is a brand known for its reliability, performance, UI, and safety.

Tesla is a brand with a reputation at this point.

 

[nomadmusk]

Tesla uses soy wiring, too.

It's just about being on top of your suppliers and your warranty repairs. Tesla is seemingly bad at the latter, but they seem to be masters at the former.

-Crissa

Ah, that's a shame. Hopefully, the utter lack of original model S's with brittle/cracked wiring at service centers stays consistent. On a related note, I shouldn't say when, but I once heard a bunch of production line managers at Tesla got sacked because they allowed peanut oil as a lubricant when threading wires, which in-turn attracted rats. Morning shift has the dumbest people, I tell you.

Idk, I have a bunch of similar stories like that, which say the exact opposite, when I think bad warranty repairs I think about the Taycan whistleblower (activating reserve battery instead of repair, and charging repair prices). Tesla may take a while to get to you, but there's a lot of effort put towards actually fixing your issue vs bandaiding, and they regularly voluntarily recall real issues. As a quality tech, Tesla tends to have too many pots on the fire when it comes to diagnosing reoccurring supplier issues, i.e. a lot of cosmetic issues go on the back burner. I said it before and I'll say it again, I'm happy to wait for my CT so shit like heater issues and peanut oil get found.

 

[HaulingAss]

That would depend on how a deal is structured. A share swap would cost Tesla little to nothing for a 50% (maybe less?) stake and wouldn't impact their other development cashflow. If anything it might well boost the shares so much in 3 months the deal pays for itself. It would also firmly bolster Teslas against "over valuation" status amongst the rest of the bears and drive them to buy Tesla and even MB instead.

I agree that Tesla doesn’t have too, but that doesn't mean they can't, and even make some more progress doing so. The commercial arm is my trigger.

I'm not sure where are I argued theres "no way they would". Can you point to the post?

I said you argued against the idea that Tesla would not do a deal with Mercedes.

The reason Tesla will not hook up with any legacy automakers boils down to culture class. Tesla has far superior corporate culture that runs deep and strong within the company (that's why they are so successful) and that culture is essentially incompatible with any other legacy automakers corporate culture. And because there is no great advantage or need for Tesla to hook up with another automaker, it would be dumb to put themselves through that corporate culture clash. It would dilute their biggest advantage.

 

[HaulingAss]

If you are interested, do a little reading on topics like M&A, asset valuation, and the raw material of business today: consumer data. Acquisitions like Grohmann, Maxwell and Hibar are examples of "when you've got a lot of capital, go buy something you can't wait to build yourself" (a practice Apple, Microsoft, Google and Facebook have exemplified with acquisitions that start out "insane" like Google acquiring YouTube … it's not a 100% hit rate, it's the big wins that count.) It's important to make acquisitions for intellectual property, customers, and to thwart the plans of competitors.

Tesla didn't buy Grohmann, Maxwell or Hibar primarily for their customers, for their intellectual property, or to thwart the plans of competitors. All three companies were purchased primarily to grow the Tesla team with high-value employees so they could ramp battery production and improve manufacturing efficiency on new and existing production lines. Tesla got a whole bunch of new employees with expertise in exactly what they wanted.

And none of those three companies had the diseased corporate culture that all legacy auto has. This is how Tesla was able to scale the huge barriers to entry that the auto industry had created. It has been largely a closed club for the last 100 years save for some Japanese copycats with lower labor costs.