Another episode in the great consolidation of the shifting giants of automobile manufacturers has begun.
Fiat-Chrysler is proposing a merger with Renault to create the No. 3 automobile manufacturer in the world, behind VW and Toyota. This will knock General Motors into the No. 4 slot.
Tesla is more than a car company. This makes it unlikely an auto company will acquire them. So who is a likely buyer?
What’s driving the consolidation? According to reports, there are two things: the industry has to achieve economies of scale. Go big or go home. The other is the rapid acceleration (pardon the pun) toward electrification. The costs for moving to EV production are not insignificant.
And that raises an interesting question about Tesla, the little auto company that upset the entire industry by producing the first truly successful EV. Can it survive? Will it be acquired?
It is unlikely it will be acquired by another auto manufacturer. The numbers don’t work for car companies, because their market value — the price of their stock times the outstanding shares in the market place — doesn’t give them enough leverage to buy such a small company for such a hefty price, especially a company that is losing money.
Tesla’s stock has been sinking as of late, due to dire news reports that Tesla is running out of funding. But even still, the market cap for innovative California concern is $33 billion. By comparison, Ford is $12.8 billion.
Perhaps VW could pull it off. With a total market value of $73.4 billion, it has the market cap to make it work. But then, one might ask, “why bother?”
VW is planning 27 new electric vehicles in the next three years (by 2022). It has the economies of scale to crank these vehicles out at a much cheaper cost than Tesla.
It could be for the battery technology. Tesla has invested heavily here.
Or it could be for Tesla’s long lead in autonomous driving. Tesla has innovated far beyond any of the other manufacturers in “crowd sourcing” data from its drivings and from sensors on those vehicles on the road. Using AI (artificial intelligence) and machine learning, it is able to provide over-the-air continuous improvements to the vehicles, and, perhaps of more significance, it is able to use that data to develop improvements in its autonomous driving capabilities.
As I have written earlier, I believe an Apple acquisition makes more sense. Apple has the market capitalization and cash on hand to swallow Tesla whole without making a dent in its reserves or market value.
I have taken some heat for these comments, mostly along the lines of: “Apple knows nothing about manufacturing cars.”
True. And this could be to their advantage. It knew nothing about the retail industry before disrupting that entire model with the Apple store. It knew nothing about phones before disrupting that entire industry with the iPhone.
Apple knows how to hire the right talent to move into a new industry, in my view.
And Tesla is not just a car company. It is into distributed energy storage (Powerwall), which is an ideal “vehicle” for Apple to get into the home (where it has failed to date against Amazon’s Alexa and Google’s Nest) and to do so by “leapfrogging the competition,” rather than just following them.
IRON-AGE EPILOG 
My quick take here is that Tesla and VW (Volkwagen) are going to the the leaders, because they are the only companies who are taking electrification seriously enough to invest in the huge battery tech & production necessary. What may happen is that Tesla and VW (and possibly another contender, not yet known) will provide EV platforms for others to build their cars from.
Another possible scenario is that the other car makers (together with the powerful oil industry lobby) are successful in slowing down Tesla’s development speed so that they all meet at the same tech and production level some time in the future. With China behind EV’s this may prove difficult. Which is why I’m betting on the first outcome. Heavily.
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