Modern-day Renaissance man Elon Musk, 43, is a distinct exception to the old cynical phrase, “Jack of all trades, master of none.” While probably best known for his role as the CEO of electric-car manufacturer Tesla (TSLA), he is also simultaneously the CEO of space transport service SpaceX. In his spare time he serves as Chairman of SolarCity (SCTY), a company that is revolutionizing the accessibility of solar panels for the masses. He also co-founded eBay‘s (EBAY) PayPal. (Perhaps you’ve heard of it.)
In short, Musk has a pretty good track record of setting extraordinary goals and then expertly executing them with haste. So it was interesting to say the least when he mentioned today the possibility of a TSLA-Toyota (TM) partnership.
It wouldn’t be the first time. The two companies paired up on the RAV4 EV, which debuted two years ago. But the model was more reminiscent of Ford‘s (F) Edsel than the brilliant productions of an Edison or a Tesla. The electric vehicle sold roughly 2,000 units in two years.
The fact that the RAV4 EV was such an abject failure makes Musk’s comments today all the more strange. According to Bloomberg Businessweek, Musk spoke cryptically to reporters in Japan today, saying that within the next two to three years, “I would not be surprised if there was a significant deal with Toyota and Tesla.”
TSLA shareholders know that when Musk dreams big, it tends to pay off. Since going public in 2010 at $20 per share, TSLA stock has shot to stratospheric levels no one ever thought possible. TSLA stock trades around $280 today. So much for the naysayers.
When I say no one took Tesla seriously, I mean no one. Here is one real, actual headline from Bloomberg, dated December 2012: “Tesla Was Cash Flow Positive Last Week, CEO Musk Says.” Leading financial news media deemed it headline-worthy that the CEO of Tesla, a quirky electric-car company, alleged that said company was not hemorrhaging money for the period of a single week. The cynicism was reflected in TSLA’s stock price at the time, too — TSLA shares traded around $35 when that piece was written.
Today, no one doubts that Tesla can play ball with the big boys. And why should they? Tesla has politicians lining up at its doors, begging the company to bring its factories to their state, and promising enticing incentives along the way. Tesla scored just such a sweet deal last week.
Last Thursday, Tesla announced that it would be bringing its talents to Nevada, where it plans to build a massive battery factory aimed at dramatically lowering the cost of production for its vehicles, a necessity if Tesla hopes to make a more affordable electric vehicle for the masses. In return to bringing what could amount to 6,500 jobs to the state, Tesla was granted substantial tax incentives that could save the company up to $1.1 billion over 20 years.
So while the first Tesla-Toyota collaboration may not have had a fairy-tale ending, as batteries become cheaper and more widely available, a combination of Tesla’s expertise and Toyota’s raw manufacturing and distribution power is nothing to scoff at.
TSLA and TM shareholders, take note.
As of this writing, John Divine was long SCTY Jan 2016 $70 calls.
