Recently the country’s hottest automaker and the country’s oldest automaker got into a bit of a public spat. It started when Elon Musk, who’s been reportedly sleeping under his desk as he tries to steer Tesla through “production hell,” told the Wall Street Journal that Ford “looks like a morgue.”
Ford, the company that pioneered the automobile more than a century ago, typically avoids engaging in public skirmishes such as this, but not this time. Head of communications Mark Truby shot back: “No doubt the vibe is funky in that ‘makeshift tent,’ but it’s not bad either across the street at the #FordRouge plant where a high quality, high-tech F-150 rolls off the line every 53 seconds like clockwork.”Bang bang. Shots fired. You can read more about it here.
The “makeshift tent” reference alludes to the latest stop Tesla’s pulling out to hit its Model 3 production targets. It’s literally a tent, and a very Silicon Valley-esque solution to a scale problem, which is commonly to JSIO (startup speak for “just shit it out” and iterate thereafter). BUT… it worked. How do you like them apples, Mr. Truby?
So why, then, am I suggesting that these two companies, come together? Because an alliance between Tesla & Ford could catapult both brands to heights higher than Starman in Elon’s roadster. Admittedly, it’d be more a marriage of convenience than love, but the two companies complement each other in several of the right ways, which could make this the ultimate ying & yang relationship. Or it could be a disaster. But here’s why I think it makes sense:
Similar Roots. Both companies were founded by visionary renegades and are rooted in disruption of the status quo. Henry Ford famously said, “if I had asked people what they wanted, they would have said faster horses.” Elon Musk has been quoted as saying, “When Henry Ford made cheap, reliable cars people said, ‘Nah, what’s wrong with a horse?’ That was a huge bet he made, and it worked.” Both of these men are criticized frequently and far from flawless humans, but they have similar DNA in that they are unabashedly dedicated to making their vision a reality and don’t care what the haters say. I bet if Henry was around today, he’d like to have a beer or two with Elon and talk shop.
Similar Goals. Electric cars might make up just single digit % of the automotive market right now, but there’s no doubt that EV will continue to grow. Every major automotive manufacturer is doubling down on electric, including Ford, which plans to spend $11B to bring 40 electric vehicles to market by 2022. And to his credit, Elon saw that opportunity before any of them and built a sleek, popular brand that has benefited from its first mover advantage to the tune of a $51B market cap, more than GM and Ford. Question is, does Elon really want to slog through decades of Tesla manufacturing to earn that valuation? Or, does he want to build a massive brand that revolutionizes the way people travel and then move onto bigger, better visions just the way he revolutionized the way people pay for things with PayPal before founding Tesla. I’d bet on the latter being his truest motivation.
Ford Needs a Face-lift. Musk’s morgue dart is a tad dramatic — morgues don’t crank out 6.6M cars annually and rake in 4.6B in profit — but it gets the point across. The company that pioneered the automobile has evolved into a behemoth stalwart of industry. No one thinks of Ford as innovative or stylish anymore. And although Ford has come a long way since the boring Taurus’ of yore, even the nicest Ford looks like a Yugo next to a sleek, sexy Tesla. And as for Lincoln, well, let’s just say that Matthew McConaughey is the best looking thing in the newly released, revamped Continental… gross. (Seriously, why are the door handles on the windows?)
This is not to suggest that Ford isn’t evolving or innovating — they’re talking about rolling out autonomous cars sans steering wheel by 2020 and all that, but GM is too, and Tesla’s already leading the autonomous driving charge. Forging an alliance w/ Tesla would bring Ford some much-needed panache and possibly give it a taste of the foundation Henry Ford laid out more than a century ago.Okay, so what’s in it for Tesla?
Tesla Needs Manufacturing Help. Credit to Elon where it’s due: he acknowledges that Tesla is in the midst of “production hell” and that’s why he’s sleeping under his desk and putting up circus tents to hit their targets. And the whole production economies of scale is great in theory, but they haven’t been executing on it. Ford, on the other hand, has that part nailed down — as Truby points out, an F-150 rolls off the line every 53 seconds across the street from Tesla’s circus tent.
The Whole is More than the Sum of Its Parts. If successfully combined, Ford & Tesla would be a Goliath because the companies are highly complementary to one another. Tesla’s innovation, style, and vision for the future of transportation paired with Ford’s manufacturing expertise and lessons learned over the last century could be unstoppable.Furthermore, Ford recently announced that it will decrease it’s production of sedans to about 10% of their total product line in an attempt to increase profitability in a market that favors pickups and SUVs to 4-doors and a trunk. Meanwhile, Tesla managed to rake in 455,000 pre-orders for its Model 3 sedan, requiring a $1,000 deposit no less, with nothing more than a launch event. Clearly, there’s demand for sedans, just not the ones Ford makes.
Make America Great Again! I’m not one to talk politics on LinkedIn, and I don’t quote the current resident of the White House often, but Tesla & Ford together could do some really amazing things for this country and establish itself as THE iconic American automaker of the 21st century. Ford, which helped to establish Detroit as the Motor City, just doubled down by purchasing Central Station to serve as its automotive technology groups campus. Detroit is said to be going through a bit of a renaissance moment, and what better way to facilitate that than inject a little Silicon Valley expertise to the mix by way of Tesla?Another reason to combine forces? International automakers dominate the U.S. market. Of the Top 20 Vehicles sold here, only 5 are American brands (3 Fords & 2 Chevys — Jeep/Chrysler/Dodge are now owned by Italian giant Fiat). And there are no Tesla’s on that list…yet. If Ford & Tesla combined forces, they could start giving these international players a run for their money.
Two Against One. Of the “new big three” U.S. automotive companies, General Motors is #1 in pretty much every category except market cap (Tesla beats by a hair, but its valuation is also widely regarded as highly speculative and generally bonkers). Although slightly outdated, the chart below is a good visual depiction of how these three compare. GM has dominated with double the net income of Ford on almost twice as many vehicle deliveries. Tesla is nowhere near either, which is to be expected given how young the automaker is, but some question the company’s ability to go it alone successfully.
Can Tesla catch up to these two iconic brands and earn its high valuation on its own? Maybe. Can Ford catch up to GM? Maybe. Would Tesla & Ford have a better shot at dethroning the king together? Definitely! Assuming they didn’t muck it up…
Of course, there are far more layers of this proverbial onion that need peeling, not the least of which is whether or not two companies with such different cultures and at vastly different levels maturity could ever combine forces effectively without exploding like a SpaceX rocket. However, if they could somehow figure out a way to make it work, I think the combined company would the best automotive brand of this century, and possibly ever, just as Henry Ford set out to build in 1904, and Elon Musk is attempting to build now.
Time will tell. What do you think? I think I want a Tesla, no matter what 😉