It may seem like an odd choice, but should Tesla buy Ford? Ford’s recent separation of its ICE and EV businesses makes it a strong contender for Tesla. The automaker has long had relationships with truck users and is well-versed in the construction and development of trucks.
Tesla, on the other hand, has issues with production. The combination of these factors may work out to the benefit of both companies. Ford and Tesla have some unique differences, but the benefits far outweigh these drawbacks.
For starters, Ford’s extensive experience in manufacturing vehicles and global supply chains makes them an ideal partner for EV development. Ford was able to develop a wide range of cars and SUVs in a relatively short period of time, all at different price points. Ford’s Mustang Mach-E was its first EV product and was the second-best selling electric SUV in the US, behind only Tesla’s Y.
But Tesla may have to be very careful about its acquisition. Ford has extensive pension and healthcare liabilities that are roughly 200% of its market value. The automaker’s pension obligations are so high that they support 2.5 retirees for every active worker. Moreover, the family controls the company. Any deal between the two companies could cause some friction. As of now, the deal is on hold. But the question remains: should Tesla buy Ford?
The auto industry is an incredibly volatile industry. Tesla, for example, has struggled to grow at a fast pace, and has suffered from a weak global economy. Ford is profitable, but its model of selling cars to customers does not align with that of Tesla. In addition, the company has a unionized workforce, which can result in lower margins. Moreover, it doesn’t invest in new production capacity at Tesla’s pace.
In a way, Ford has also been helping Tesla realize the full potential of EV adoption. Tesla is the leader in this space, and it’s been in business for fifteen years. Moreover, the company has global reach. While Tesla sells EVs around the world, Ford is mostly selling ICE vehicles in China. The company also has several other electric vehicles, including the Ford Lightning. The automaker is preparing for a new era of electric cars, but its ICE business remains profitable.
Nevertheless, the market value of the company has decreased considerably since the peak of the company in 2017. The market cap of Ford Motor Company is $36.4 billion, and Musk could easily purchase all Ford shares with his liquidated assets. And, if he had the money to do so, he might as well buy a majority of General Motors for a combined $49.1 billion. If this were to happen, Tesla would be worth twenty billion to $25 billion.
In addition, Ford’s fourth-quarter results were not impressive, resulting in a 4% share-price drop after hours. The automaker’s net income for 2021 was $17 billion, with almost half of the amount coming from a paper gain on the company’s stake in Rivian, which completed its IPO last November. Ford’s profits were also lower than analysts’ expectations. However, the company’s progress in developing electric vehicles has led to analysts raising their price targets by several percent.
Although there are no plans to buy Tesla, it may not be a bad idea for Ford to develop its own electric vehicle platform. Its Mustang Mach-E platform, developed with flexibility in mind, is expected to be the basis for future electric vehicles. The company also recently revealed the F-150 Lightning, a key model in its electrification strategy. The replacement for the F-150 Lightning will use a dedicated platform codenamed TE1, and it could also produce electric SUVs.