Musk Almost Sold Tesla To Google For $11 Billion

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Would you turn down $11 billion on a bet for a better future? According to an excerpt published in Bloomberg from a new book called Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future, the CEO of Tesla Motors nearly sold the struggling electric automaker to Google for $11 billion, but walked away from the deal at the last minute.

Less than a year after the first Tesla Model S came out of the Fremont, California factory, Musk was talking to his friend and Google CEO Larry Page about selling the struggling automaker to the search engine giant. Tesla had yet to win a number of important accolades from the likes of Motor Trend and Consumer reports, and it was having a hard time getting auto parts makers to take it seriously. One example cited was the third-rate sun visors the Model S initially shipped with, which were later upgraded when a better supplier was located.

Another problem was turning pre-orders into actual sales. The Model S was not only delayed, but lacked important features like Autopilot, parking sensors, and other equipment considered standard by many luxury car buyers. Personally, I’m amazed how quickly people have become reliant on things like parking sensors and blind spot warnings, which pretty much didn’t exist just a decade ago. But I digress.

By February of 2013, Tesla sales had slowed to a trickle, and Musk quietly shut down the factory in an effort to conserve cash and save the company. Many Model S sedans were in the service center for bugs, and word-of-mouth was hurting Tesla sales as many pre-order buyers cancelled. Musk turned to his team and got them to start calling everybody who placed a pre-order and turn it into a sale. He also fired executives and put former Daimler executive Jerome Guillain to work fixing Tesla’s service problems.

Around the same time Musk was personally guaranteed the resale value of the Model S, he was secretly leading a negotiation with Page to sell Tesla to Google for about $11 billion; $6 billion for Musk, and another $5 billion in expansion capital. The deal would see Musk stay on as CEO for at least 8 years, or until the third-generation Model III made it into production. So even if a sale went through, Musk wanted a chance to fulfill his vision for an all-electric future. Google has since gone down its own autonomous electric vehicle path, making it clear that the search engine giant sees itself as a player in the auto industry, eventually.

So what happened? Well Musk’s emergency orders worked, solving many bugs with the Model S and turning all those pre-orders into real sales. In two weeks share values doubled, and the automaker posted its first-ever quarterly profit, leading a major turnaround in perceptions. By the end of the year, the Tesla Model S would be awarded some of the industry’s highest honors, sales soared, and value of shares would quadruple, infusing the company with much-needed capital. Rumors of a Google takeover emerged later in the year, but by then Musk had already walked away, convinced Tesla had turned a corner.

He was right. The Tesla Model S has become the standard by which all electric cars are now judged, and Musk’s $6 billion could turn him into one of the wealthiest industrialists in the world.

 

Christopher DeMorro

A writer and gearhead who loves all things automotive, from hybrids to HEMIs, can be found wrenching or writing- or else, he's running, because he's one of those crazy people who gets enjoyment from running insane distances.