In 2013, Google Almost Bought Tesla For $11 Billion

April 20, 2015

Tesla Motors accounts for a tiny fraction of the world's car sales, but after just a few years in the biz, the small company has already had a huge effect on laws, public opinion, and the auto industry.

However, according to a new book by Ashlee Vance, things could've gone very different for Tesla. In an excerpt from Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future adapted for Bloomberg, Vance reveals that the company was almost bought by tech giant Google in 2013.

ALSO SEE: Terrified Of Tesla, NADA Launches Campaign To Tout Benefits Of Franchise Dealerships

START-UP STUMBLES

It's hard to believe that just two years ago, Tesla was having trouble selling its Model S electric car. Sure, lots of people were interested in the sedan -- they'd even placed pre-orders -- but few of those pre-orders were turning into actual sales.

The underlying problem was Tesla's limited resources. Staff knew that the Model S needed more luxury touches to compete with similarly priced rides. Its interior needed some upgrades for exactly the same reasons. Unfortunately, Tesla lacked the manpower and moolah to address those issues quickly.

As a result, reaction to the car from early buyers wasn't good. In fact, according to CEO Elon Musk, "The word of mouth on the car sucked". That kept people from following through on the orders that they'd placed.

In early 2013, things were about to hit the fan. Sales were off, and the company was hemorrhaging money, so the very demanding Mr. Musk took action.

MUSK MAKES MANEUVERS

In February and March of 2013, Musk did three important things:

1. He called in leaders from every department at Tesla and made it very, very clear that their top priority was closing sales. From engineers to human resource managers, everyone become a salesperson.

2. He devoted considerable resources to improving the company's cars -- both those that had been sold and those that were waiting to sell. He also guaranteed consumers that he would reimburse them from his own pocket if they couldn't re-sell the Model S for a sum similar to that of a comparable luxury ride. 

3. He called up his old pal, Larry Page, co-founder of Google, and began to negotiate a deal.

Items #1 and #2, most of us knew about, either directly or indirectly. But #3 should be news to many. And it almost came to fruition.

If it had -- and if Page had agreed to Musk's audacious demands -- Google would've coughed up a whopping $11 billion for Tesla. Roughly $6 billion of that would've been the true purchase price, with the remaining $5 billion committed to facility improvements. As part of the deal, Google would've also promised to keep Musk at Tesla's helm for at least eight years or until the automaker began producing a more mass-market vehicle, whichever came first.

To hear Vance tell it, the deal was nearly done in April, and it could've very easily gone through. (Neither Page nor Google have commented on the story.) However, at that point, Musk's sales drive paid off. Pre-buyers closed on their cars, new orders came in, and in early May, Tesla announced its first quarterly profit ever. Musk's offer to Page was suddenly off the table.

Which only goes to show:

1. The cult of personality around CEOs like Musk, Steve Jobs, and Richard Branson is a very powerful tool.

2. Google could've had a much hotter looking autonomous car.

Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future by Ashlee Vance will be published by Ecco on May 19, 2015.

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