BMW Smacks Down Elon Musk’s Tesla Collaboration Hype

BMW insiders: Tesla CEO Elon Musk “is using us for PR purposes.”

It has been tough for Tesla recently. It normally excels like few other companies in pumping up its stock while losing money hand over fist and building so few cars that they’re not even a rounding error in the global production of 72 million passenger vehicles this year.

The biggest hits came when Daimler – its lineup includes Mercedes-Benz cars, all kinds of commercial vehicles, and as it says, the industry’s “biggest portfolio of electric vehicles” – announced in October that it had sold its entire 4% stake in Tesla for a pre-tax profit of $780 million. A couple of days later, Toyota disclosed that it too had sold part of its 2.4% state in Tesla. But why the heck did they turn a supposedly strategic, long-term investment, and one of the hottest stocks, into cash? What do they know that we don’t? [Read… Daimler Closes Tesla Hedge, Dumps Shares, Grabs Cash, Runs].

So a month after this debacle, Tesla CEO Elon Musk was back at it, trying to repair the damage these two exits had done. In an interview published last Sunday in the German magazine Spiegel (behind paywall), he said that Tesla was discussing with BMW a cooperation on battery technology – he wants to build a battery factory in Germany – charging stations, and BMW’s carbon-fiber production technology, which was “relatively cost efficient,” and “could be interesting” for the suppliers of Tesla’s car bodies, he said. And the fact that Daimler and Toyota had dumped their Tesla shares? Musk brushed it off: they just wanted to take profits, he said.

But Tesla began backpedalling immediately: “The conversation between Elon Musk and BMW has been a casual conversation, and not about a formal cooperation,” spokeswoman Kathrin Schira told Reuters afterwards.

A BMW spokesman could not be reached for comment at the time, so Musk’s words became part of the hype package in the US.

There was even talk of an “alliance”: “This round of news is interesting when you consider that Elon Musk previously said that there was room to improve on the [BMW] i3. He was quoted saying he did hope they improve it, so maybe Musk is the one who can.”

Ha, now the German magazine WirtschaftsWoche learned from “well-informed BMW sources” that Musk’s utterances had caused a bout of astonishment at BMW. There were no negotiations on concrete cooperation with Tesla, they said. And BMW told the WirtschaftsWoche directly that “BMW Group has no interest in acquiring shares of Tesla.”

Sure, there had been conversations, but these sources said that in the auto industry everyone is talking practically with everyone, and the “informal discussions” with Tesla mean little. Yes, BMW would be pleased to sell carbon-fiber body parts, but this applies “for Tesla as for any other automaker.”

Stung by the exit of Daimler and Toyota, Musk apparently wanted to “decorate” himself with the name BMW, these insiders suspected. “Musk is using us for PR purposes,” they said. BMW did not see how it could benefit, they said, because Tesla didn’t have a technological advantage over BMW in any area.

Even collaborating with BMW on a battery factory in Germany got smacked down. BMW does not think much of Musk’s assessment that battery factories would be required in Germany, and he could not count on BMW as a partner: “We do not need our own factory for battery cells,” the sources said. Battery cells are not a unique feature, and as other car parts, they can be purchased from suppliers, the said. “The joining of the cells into a battery and the control of the battery,” however, would be done by BMW, because that’s “the actual innovative performance.”

It’s a marvel how Musk can keep a small company like Tesla in the news and on Wall Street’s hype list. He has excelled in driving Tesla’s stock to an insane height, giving the company a market capitalization of $30 billion, compared to GM’s market cap of $54 billion. A mere tweet from him about an unspecified future announcement makes the stock jump. Few if any CEOs have this kind of talent. This has allowed the company to extract billions in new money from investors via a slew of equity and debt sales.

Tesla is now busy losing this money with its small-batch production of cool but expensive vehicles, each one of which – like other electric vehicles in the US and elsewhere – receives big taxpayer subsidies in order to be sold at all. But at least BMW didn’t want to be used for Musk’s hype purposes. And so they put a stop to it.

Global economic growth is in trouble, according to the very businesses that drive the economy forward. Their outlook for the next 12 months has plummeted to the worst level since crisis year 2009. Read…   Global Business Outlook: “Darkest Picture since Financial Crisis.” US Deterioration “of Greatest Concern” 

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  28 comments for “BMW Smacks Down Elon Musk’s Tesla Collaboration Hype

  1. MarleyChil
    Nov 28, 2014 at 2:33 pm

    Integrity, many don’t know the value. I believe it was something informally said and could have been overstated by Musk. The fact is the world want affordable electric automobiles. LCV or hybrids are not what the market wants but what the industry decides it wants to deliver. Elon and Tesla has shown that it is doable. The control of the consumer market is being shown to be done by multiple industry manipulation including the media.

    The world or marketplace wants affordable EV, so step aside you are part of the problem.

    • Nov 28, 2014 at 2:54 pm

      1. Since when is $70,000+ for a car “affordable?”
      2. This article is about Musk’s hype and incessant self-promotion (and what it does to Tesla’s ludicrously priced shares) and not about Tesla’s expensive, small-batch production cars that only a few people can afford to buy.

    • MarleyChil
      Nov 28, 2014 at 4:24 pm

      $70,000 and more like $85,000 + the desired Model S is not affordable for most people and neither is a showroom BMW for the most part. The article does show a dislike for Mr Musk’s brassiness. Mr. Musk has already said that what would get him in trouble and why he was bullied. Are people with the power of words not also capable of a bully? The affordable electric car refer to the coming Model 3 at $35,000 +. The price of Tesla’s is the belief of the cause, belief in the product and hope for the execution of Tesla’s stated plans. Of course there are also a lot of speculators as well.

      Also, Mr. Musk has said that drawing attention to himself is also part of getting support for those worth while projects he feels are important to the future of humanity. We all can see that he some what happy for the attention and has profited from these ventures. I am willing to bet though that he will invest most of the fortune he has made for the even greater good of humanity in the future. He may overstate, but he has integrity and goodness of heart.

      This response is not meant to be and attack, but rather a reflection point. We need to all do the right thing. The fact that so many things are wrong in the system that is easy to forget enough courage each of us can make a difference. Is that what so many Americans see in Elon, and reflect a dislike for?

      • Crazy Cooter
        Nov 28, 2014 at 4:45 pm

        Lol, are you serious?

        I have a question ; do you have a financial interest in Tesla or are you paid by Tesla/Musk?

        That is the biggest crap post I have seen here!

        I am on my Z30 right now, but I will check back to see if you wanna tango.

        Regards,

        Cooter

        • MarleyChil
          Nov 28, 2014 at 5:53 pm

          It may soon funny, but yes I always try to see the glass half full. I am sorry, I am not a very good writer, debater, or have any wish to denigrate my fellow man…….. No I have financial ties when any of Mr. Musk ventures…….. And if I was able to purchase stock, I would look at stock other than Tesla for a better return near term 3-6 months…. As a long term investor 3-5 years or more I see 15-25% annual return…. Tesla’s mission is to escalate the growth of the EV industry, not just sell cars.

        • johnnygeneric
          Nov 29, 2014 at 5:13 am

          And you got that bad boy off the sweat and blood of the taxpayers. And I think that is IMMORAL.

      • Nov 28, 2014 at 5:17 pm

        I like electric cars. They’ve been around longer than gasoline powered cars. The problem has always been the battery. And that’s still the problem today, though progress is being made constantly.

        That’s all nice and dandy. But my job isn’t to advise car buyers but to give investors something to think about before they make their investment decisions (not car purchase decisions). That’s all.

        • johnnygeneric
          Nov 29, 2014 at 5:21 am

          Wolf, I agree. I like them, too. But the following of Tesla is almost religious.

          While reading about it on a Car/Driver website I made the mistake of making a comment about the (still) lousy mileage these things get and everyone piled on and ranted at me for daring to say anything bad about the car. I got dozens and dozens of comments chastising me.

          Let people buy the Tesla or any other electric car. But I shouldn’t be expected to help them afford it by subsidizing their purchase through tax credits!

        • Crazy Cooter
          Nov 29, 2014 at 10:58 am

          I wanted to reply to Marley, but I don’t see a reply button on her last post. Is there a limit to prevent “skinny threads”?

          I have a few concerns regarding EVs and how they will eventually be adopted in the global marketplace.

          Let’s start with IP (e.g. design and patent). Where is all the IP in an ICE (internal combustion engine) vehicle? Back in the 70s, it was simple enough the working man could pretty much do anything that needed fixing. Enter the EPA and manufacturers are piling up patents/design (a.k.a. assets) as they comply with the law. This STILL goes on (i.e. the EPA changes stuff around and manufacturers have to change designs/parameters).

          Extremely complicated control systems (i.e. computers, sensors, etc) had to be integrated into the design of the ICE. Did you know the wiring harness on a vehicle is the single most expensive part? It isn’t because of all the lights!

          With that said, how much IP do y’all think is in the steering system? Brakes? Air conditioning? Body? Material sciences.

          In fact, one metric I have not seen, but would like to see, is a comparison of distinctive parts and moving parts between EVs and ICEs. I think this would clearly show which is the more complicated vechicle. Think about it; how many moving parts are on an EV?

          Anyway, when you look at an EV, much of the EPA madness falls away; batteries don’t pollute (excluding crashes).

          So where is all the IP for an EV? The battery! EVs have a flat power curve and none of the complexities you get with ICEs. This begs the question; where is all Tesla’s IP?

          See, here is the first big problem with EVs; any company that sells one is potentially selling a low margin differentiated product. Why? Because who ever owns the battery IP is going to make all the money.

          Let’s say in two years a company in Canada, partnered with a mining resource play, announces a new battery that is 100% better at half the price. Who ever uses it has a car that is twice as good, so everyone is roped. Consumers will simply buy a product with the new battery and all the manufacturers are going to try to sell their product by using approximately the same inputs.

          With ICEs and the accompanying EPA regulations, you don’t have a risk of a pile of assets on the books becoming “short lived”, nor is your profit at risk when a research company introduces a new product that has to be integrated into your product line.

          That is the first dynamic I think everyone needs to realize about all the big Auto companies; EVs are a risk to their current position of strength. They are nice and comfy in a market where they are heavily protected by regulation.

          Another dynamics folks don’t think about is what does success really look like? Let’s say EVs grow to 5% of the new car sales market share in the US. A quick google shows 15 million a year, so we are talking about 750,000 batteries. How much crazy ass rare earth raw material is going into each one? Are there mines and global supply to support that kind of demand, and if so, at what price? Further, batteries only last so long and have to be recycled, so the demand for batteries will be significantly more as folks replaced them on cars sold in past years.

          Reports on this vary, but it appears that this “giga-factory” would consume a significant percentage of global lithium supply. It just doesn’t seem to pencil out in the sense that the average middle class American can drive an EV instead of an ICE, which is a quarter billion passenger vehicles on the road today according to wiki. Take 5% of that and you are talking 12.5 million battery packs, each needing to be replaced after 5 years. And this excludes all other car markets globally.

          So, let’s recap.

          Tesla is losing money on small production runs, and unless something changes, will simply lose larger amounts of money on larger production runs. It’s stock price is grossly out of whack compared to its actual value and ability to earn profits.

          The core value of the Tesla product is in the battery packs, IP which is purchased from a vendor and not exclusive to Tesla. This creates a situation where a competitor can step into the market and sell a differentiated product, reducing Teslas margins. Tesla would need large scale production to reduce unit costs, an advantage many other manufacturers have that Tesla does not.

          If EVs are adopted at a sustained rate, battery supply chains will become a bottleneck, a problem that is compounded by the need to replace batteries after some years (i.e. battery production will have to be significantly greater than the number of new units sold).

          With all that said, I like EVs. They actually make a lot of sense in some places and that is where they should be used. But the idea that middle class American is going to be driving EVs instead of ICEs is a pipe dream.

          Regards,

          Cooter

        • Aggro
          Nov 30, 2014 at 3:03 am

          I disagree with Cooper.
          I see EV as juste another version of shale gas/fracking : an economic nonsense as far as oil costs less then 300 USD/baril.

          I heard that our leading battery tech (Li-Ion) was discovered by scientists a century ago. That is to say that it’s unlikely to see a battery revolution before 2020, maybe 2030.

    • Tomaso
      Nov 30, 2014 at 11:34 am

      @ Marley Chil,
      “the world want affordable electric automobiles”. Yes , but I fully agree to Wolf. The 70.000 USD Tesla (think this is the cheapest version available) is not affordable. And even the 70.000 is a fake just because Tesla produces every car with a loss. So in addition to the 70.000 USD the customer has to pay for this car the Tesla shareholder probably pays another 3.000, 5.000 , 10.000 ??? US-Dollars for it. And all taxpayers pay another 5.000, 10.000 ??? US-Dollars subsidies . So it’s a very expensive car !!!!

  2. Edward
    Nov 28, 2014 at 4:32 pm

    We’ll never know what Tesla and BMW have discussed. It’s all speculation at this point. Producing lightweight carbon fiber auto parts is nice, but doesn’t get cars to go 0-60 in 3.2 seconds or being able to drive up to 275 miles or more per charge. Until BMW can produce a direct analog to the Model S, they remain second tier in pure BEV manufacturing technology to Tesla.

    • Tomaso
      Nov 30, 2014 at 11:23 am

      @Edward: no, carbon fiber doesn’t necessarily get a car to go 0-60 in 3.2 seconds. But for how many car buyers is it crucial to get their car to go 0-60 in 3.2 seconds?? And by the way: People who think this is important will buy a sportscar like the BMW i8 that looks like a sportscar but they never buy a boring sedan like the Tesla model S if it’s important for them to get from 0-60 in 3 or 4 seconds. But carbon fibre saves weight, and saving weight saves energy/gas and this is key in automobile manufacturing since many years. And no, the BMW i3 and i8 can’t drive up to 275 miles (in a very very best case scenario) per one charge. But that’s not necessary with a hybrid car. And the “hybrid” approach will simply be the best approach as long as we don’t have a sufficient coverage of EV charging stations in the world – which means NOT in the next 30 years. This is why most of the big auto makers prefer the “hybrid” approach. And Toyota already sells more than 1 million of their Prius model EVERY YEAR. When Tesla is talking about their super-charger “Network” then this is simply a big PR joke. Who seriously would call 135 super-chargers (according to Tesla’s website) in North America (probably including Canada) a “Network”? With a pur EV you are simply a slave . 135 super-chargers versus 121.466 gas stations (2012 figure) only in the US – onehundredtwentyone THOUSANDS. And regarding Mr. Musks “BMW cooperation” interview: This is simply no serious behaviour in business. Before talking to the press about a cooperation with someone else you normally agree this with your “partner” (and in most cases both partners then launch a Joint Press Statement ..). Musk quite obviously ignored this and so BMW was forced to deny it.

      • MorinMoss
        Nov 30, 2014 at 2:38 pm

        “But for how many car buyers is it crucial to get their car to go 0-60 in 3.2 seconds??”
        Let’s face it, speed sells. Tesla garnered mindshare BECAUSE of their cars performance, certainly not their cost, and STILL people were saying, “My BMW / Audi / Merc is faster to 100 mph / has higher top speed”
        So Tesla upped the stakes again with the forthcoming dual-motor models.

        “When Tesla is talking about their super-charger “Network” then this is simply a big PR joke”
        Designing a high-power charging station with a relatively small & manageable connector and getting them approved & built in multiple countries is not a small task. By the end of 2015, that “PR joke network” will have ~300 charging stations of up to 135 kW.
        They have also been installing 80A chargers at hotels & restaurants, albeit with little PR
        http://green.autoblog.com/2014/09/04/tesla-quietly-installing-higher-speed-non-supercharger-network/
        Starting with the Roadster, they’ve provided charging kits & various adapters so you can connect to regular wall outlets, dryer circuits or outlets for RVs, generators, ACs and even an SAE J1772 connector.
        A CHAdeMO kit is also listed but not yet available; that would allow Tesla owners to use any of the 750 hi-power chargers of this type currently operating in the USA.
        http://shop.teslamotors.com/collections/model-s-charging-adapters
        So their slaves do have a choice of chains.

        ICE vehicles have the advantage of much faster refueling and only battery swapping will allow EVs to offset this competitive advantage in the near future. All Model S cars have this capability, which has already been demonstrated.
        It’s rumored but not confirmed that a few swap stations may open in CA soon because of the new refueling rules by CARB that has disqualified Tesla from certain ZEV credits but I don’t expect this to become commonplace before 2020-25.
        http://www.teslamotors.com/batteryswap

  3. Al Tinfoil
    Nov 28, 2014 at 6:07 pm

    Ah, the gullibility of those pretentious enough to think that by buying some gadget they are joining in a crusade that will save the planet. Join this with a huckster who peddles his gadget to the gullible like an evangelist. Snake oil, meet audience. Then add the speculators who bet on the price of the snake oil peddler’s shares. An arrangement made in Wall Street Heaven.

    • roddy6667
      Nov 29, 2014 at 8:12 am

      Couldn’t have said it better.
      The company is named after Nicola Tesla, a genius who was far ahead of his time. However, he was not a businessman, and could not make money. He died broke, alone, and almost forgotten. Maybe it is anappropiate name for the company.
      The car should be called the Tulip.

  4. LG
    Nov 28, 2014 at 6:50 pm

    First; the future of transportation is mass transit.
    Second; Musk knows he’s nobody and needs a partner bad!
    Third; Europe has a “saltwater” car and they’re also ready with the fuel cell cars.
    However as always there ate lots of political waters to paddle through.

    • MarleyChil
      Nov 28, 2014 at 7:33 pm

      The future of transportation has been mass transit….. The future of the automobile is EV….. We are all nobodies until someone takes notice……. Musk wants everybody to be a partner in building a better tomorrow. I know it corny, but true……. I agree that pushing the science of LCV is important. But the current process to extract hydrogen is inefficient and costly. For all practical purpose it is a hybrid with a high cost.

      Article issue: Musk is beating the drums to say look here’s more that can be or is being done. Speculators are the ones that are taking advantage of this to make a buck. Yes, with hindsight if this affect an agreement, he may have waited for a formal agreement.

    • MorinMoss
      Nov 30, 2014 at 2:51 pm

      If by “saltwater”, you’re referring to the nanoFlowCell / Quant e-sportlimousine by Nunzio LaVecchia, I’d take his claims & promises with a very large dose of salt(water).
      Let’s say his reputation is somewhat questionable and has never delivered a product.
      Say what you like about Musk but he actually accomplishes things and there are 10s of thousands of his cars in customers hands. Not to mention that his company’s tech has also been used by other well-established automakers.

  5. nobody
    Nov 30, 2014 at 11:24 am

    Tesla doesn’t need a partner. As long as other manufacturers compete with a comparable bev, Musk’s job is done. But until now there’s still too much reluctance to change. And change is what we want. I pay 10% of my income for gas alone. The sun is a fusion reactor and all we need to do is take it. He is the only one giving answers to long term problems. A real change.

  6. tman
    Nov 30, 2014 at 3:16 pm

    I would like to see the wolfs early take on Amazon.com.

    It is clear most posters here, including the wolf o witz who wrote the article, has never driven a Tesla Model S.

    Drive one. It is a life changing event. As to tax support, get a grip. We bailed out GM. Tesla repaid its loans. Tax incentives apply to all EV’s not just Tesla.

    Its all about air pollution. What are BMW, Toyota and GM doing to help?

    I do not work for or have stock in Tesla. I own a Model S. After 25K miles, I agree with Consumer Reports..Model S is the best car ever tested..cheap to own and operate..i.e. 5k down and a monthly payment. Little to no maintenance and fuel cost. Guaranteed 8 years, nothing to go wrong. The car won’t overheat, drop oil on your garage floor or kill you with its fumes or lousy construction. To date, not a single owner or owners passenger has been injured or killed in a Tesla, an unprecedented safety record. And its made in Fremont California, employing 5000 people there and thousands more throughout the world. Why do Automakers fear it? Their cars are long obsolete and they can’t catch up without helping Tesla. Gas cars are dangerous in every way..think not? Wrap your lips around that tailpipe in the garage with the engine running…you will soon grasp the wisdom of owning electric vehicles..be they Tesla, BMW, VW, Ford. The question is, why is any automaker still making gas engine cars?

    • Nov 30, 2014 at 4:15 pm

      tman, you make me smile.

      I like the S actually. Cool looking, but too expensive for what you get. So-so quality by today’s high-quality standards for such exclusive cars (check out the reports cited in my earlier articles, from Edwards et al). Nevertheless, I think the car is fine.

      In many places in the US, your clean Tesla is powered by coal :-]

      The problem with electric cars has been the battery. It’s a big part of what you’re paying for, but I don’t feel like paying for a battery; I feel like paying for a car. Someday the battery price may fall in line. But not this year, or next.

      The fact that you need tax incentives to sell the car at all is a bad sign. But that’s fine too. We subsidize a lot of other things, though it may be, as one of the commenters said, immoral.

      My problem is with hype, and how it has inflated the stock price. This is a finance website, not a car website. If you came around more often, you’d know that. I try to pull back the covers, show what’s underneath to give investors and people interested in reality a different take than the incessant hype.

      A company that makes 3,000 or so vehicles a month (and loses money on each one of them!) isn’t worth $30 billion over the long term. Forget it. Stockholders will someday feel that discrepancy in their wallets.

      Clearly, you’re a troll. But I published your comment anyway because it’s just too cute.

  7. tman
    Nov 30, 2014 at 7:25 pm

    No troll. Just saw a link to your article and responded to its content.

    • Nov 30, 2014 at 7:30 pm

      OK. Thanks for stopping by.

      • tman
        Nov 30, 2014 at 7:52 pm

        You haven’t driven the model s, have you?

        • Nov 30, 2014 at 8:22 pm

          In the past, there were thousands of cars I would have liked to drive but didn’t. However, I used to run a big car dealership, and so there were lots of cars I did drive, though I didn’t really want to drive them. I used to be a car fanatic. By now, driving cars isn’t important to me anymore. I’m more interested in the business and financial end of the industry. One of those things in life :-)

          So, no I haven’t driven a Tesla. However, I live in San Francisco and see lots of Teslas around. I like their looks. Then again, I like the looks of lots of cars….

          You don’t have to try to persuade me that electric powertrains are good. They’re not just good. They’re ideal – light, simple, flat torque curve, etc. The problem is, you guessed it, storing the energy on board. Someday it may all fall in line, be practical and cost competitive. If that’s the case, every manufacturer will build them. The best designer, manufacturer, marketer with the best dealer network wins. Just like with internal-combustion-engine cars. By that time, Tesla may or may not be around anymore. History is full of automakers that disappeared.

  8. tman
    Nov 30, 2014 at 9:32 pm

    I ask because your comments about the Model S not being well built are not true. It is the best car ever tested, the safest car with virtually no maintenance. It is more a rocket ship than a business class seat…not bad for an everyday driver. There is opposition from the industry because the gas and oil investors are also stock holders in the Big 3. They really don’t want to change though they must.

    It is not fair to comment on the car without first hand knowledge.

    As to the stock price, Elon Musk is an honest person. He agrees in public the stock is overpriced. People want this change to happen. They want clean air and are willing to support the movement. The Wright brothers made no money till their plane got off the ground.

    Commenting on the quality of a Tesla without driving one is like criticizing a movie you have not seen.

    Your audience deserves better reporting. Thank you for printing my comment.

    • Nov 30, 2014 at 10:08 pm

      Are you ready for the inconvenient truth? Maybe not. But here it is:

      Edmunds tested a loaded $105,000 Model S for over 30,000 miles. During that time, the car developed a long list of major and minor problems. Among them, the “drive unit” – the motor in regular cars – had to be replaced not once but twice. The most expensive part of the car, the battery, had to be replaced as well. And there were some “unresolved” mystery problems, like windows that lowered automatically.
      http://www.edmunds.com/tesla/model-s/2013/long-term-road-test/wrap-up.html

      Consumer Reports – which had fawned over the car previously – is having second thoughts after driving it for 16,000 miles. It had “more than its share of problems,” the statement said. Among them: “the center screen went blank, eliminating access to just about every function of the car.”
      http://www.reuters.com/article/2014/08/11/us-autos-tesla-motors-idUSKBN0GB23X20140811

      My site is not the place for Tesla propaganda. There are plenty of sites that do Tesla propaganda. Not here.

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