Is Tesla Buying Mercedes-Benz? Which acquisition in Germany would make sense for Tesla

Tesla dwarfs competition by market cap
Mercedes-Benz as the ideal takeover candidate?
Which speaks against a takeover

Even if Tesla is a small light when it comes to the total number of vehicles sold in the auto industry, when it comes to stock market valuation Tesla shines brighter than the competition. Elon Musk’s company is worth 938 billion US dollars on the stock exchange, Europe’s largest carmaker Volkswagen comes to a comparatively meager 109 billion euros, the equivalent of 124.75 billion US dollars (as of February 8th, 2022).

The stock market success of the Americans is no accident. Because business is going well at Tesla: record deliveries and record results, like most recently in 2021, are the result. Tesla is surprisingly robust in the midst of a difficult situation for the global automotive industry. While semiconductor bottlenecks and supply chain problems forced major competitors to suspend production, the production lines at Tesla did not stand still – also because the electric car manufacturer is significantly less dependent on suppliers.

Tesla is still growing and the expansion of production – for example through new production facilities in China and Berlin – should contribute to the number of vehicles that Tesla puts on the streets increasing further. This fact – combined with Tesla’s enormous stock market valuation – made analysts dream of a rough takeover by the Americans a few months ago.

Analyst considers Mercedes-Benz suitable

According to Reuters, the US car expert Christopher Thompson first mentioned the Stuttgart-based Daimler Group, which recently renamed itself the Mercedes-Benz Group, as a takeover candidate at the end of 2020. At the time, Tesla was worth $540 billion. The expert referred to a similar case in the past: In the middle of the dot-com bubble, AOL was valued so highly that the company was able to merge with Time Warner, creating what was then the world’s largest media group.

A merger between Tesla and Mercedes-Benz could cause a similar amount of furore, especially since the conditions are not dissimilar to those of the AOL-TimeWarner deal. Tesla’s customer base might be best suited to a luxury brand, Thompson said at the time. Tesla, on the other hand, could add the top-selling manufacturer of luxury vehicles to its portfolio. The electric car manufacturer would benefit from Mercedes-Benz’ market networking and its industrial output. However, Musk would have to accept a dilution of the portfolio, which is exclusively focused on electric vehicles – as well as the constraints of a German management structure, according to Reuters.

David and Goliath – Tesla & Mercedes

A takeover of the Stuttgart company by Tesla of all people would be an interesting interweaving of the two main protagonists. In 2009, Mercedes-Benz, for its part, entered the still young e-car company Tesla and took over 9.1 percent of the group’s shares – for 50 million US dollars. At that time, Tesla only had one vehicle on the market, the Roadster. Only a short time later, the Germans sold part of their shares to the state fund Aabar from Abu Dhabi, and the Germans kept the rest after the Tesla IPO in 2010. In 2014, Mercedes-Benz pulled the strings and got out of Tesla completely. At that time, the remaining four percent of the shares were worth 780 million US dollars – a hefty profit for Mercedes-Benz.

“We are extremely satisfied with the development of our stake in Tesla. However, a financial stake in Tesla is not necessary for our partnership and cooperation,” the sale was justified at the time.

Just eight years later, the roles have reversed: Mercedes-Benz is a David on the stock market, while Goliath Tesla is impressively underpinning its supremacy on the stock market. Most recently, the Stuttgart-based company had also learned a lesson from its much younger competitor in the vehicle business: In a test by the Norwegian automobile club NAF, in which 31 electric vehicles, including various models from Mercedes-Benz and Tesla, had competed, the Germans pulled ahead with their S-Class EQS, the most powerful Stromer on the market, the shortest in the cold test. Compared to the Model 3, which is significantly less expensive than the Mercedes-Benz model, there was an above-average loss of range in colder temperatures.

Why Mercedes-Benz would be the best choice for Tesla

But regardless of Tesla’s business success and the company’s undeniable market power, the question arises as to how likely it really is that Tesla will take over Mercedes-Benz.

The fact is: The purchase would be a billion-dollar deal and would catapult Tesla among the largest car manufacturers in the world in one fell swoop. At the same time, the Americans would not only buy a huge range of models, but also quality – because the traditional vehicles of the Stuttgart company enjoy a good reputation, while Tesla repeatedly made a name for itself with quality problems. In addition, Mercedes-Benz would ideally complement the US group in terms of its orientation. Tesla’s US competitors Ford Motor and General Motors serve other target groups, BMW is too difficult a takeover candidate due to its share allocation. VW, for its part, with a strong focus on the electric car segment, may be too big a chunk for Tesla, while a possible takeover of Japanese competitors is also historically difficult, according to Reuters.

Which speaks against a takeover

But with Mercedes-Benz, Tesla is not just getting a car manufacturer, but a highly intertwined global corporation with around 500 subsidiaries and joint ventures. While Tesla could benefit from the market penetration of Mercedes-Benz in some areas, the Americans would have to integrate a corporate colossus at the same time, which in turn would be much less flexible to control than the Tesla group as a stand-alone construct. Rapid adjustments, the implementation of customer requests via Twitter and the best possible independence from suppliers are likely to be increasingly difficult to implement.

In addition, the management of Mercedes-Benz is unlikely to take a positive view of a takeover by Tesla. In order to prevent a hostile takeover, the company decided last year to split into a car and truck division. However, the downsizing of the company could have increased the risk of an unwanted takeover.

Tesla is aware of its reservations about a hostile purchase request. “We will definitely not start a hostile takeover attempt,” said Elon Musk, according to dpa, at the presentation of the Axel Springer Awards in Berlin in December 2020. In this context, however, the company director did not rule out the possibility that he could imagine a merger through negotiations : If a competitor thinks “that it would be a good idea to merge with Tesla”, they will talk about it.

Targeting Mercedes-Benz: how likely is a takeover by Tesla?

There are still no signals from the United States that speak in favor of exploring a merger. The billion-dollar deal would also not only be scrutinized by Tesla shareholders, because Tesla’s last acquisition of this magnitude, the purchase of SolarCity in 2016, is still being processed in court six years later.

In order to maintain its independence and flexibility, Tesla would probably be more likely to buy a battery company than take over a highly integrated global corporation. Because the future of automobiles is electric, whether a traditional car manufacturer like Mercedes-Benz, which certainly has ambitions in the e-car segment, continues to do the vast majority of its business with traditional drives, be a step forward or a burden for Tesla is so far difficult to foresee.

Editorial office finanzen.net

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