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What Would a Tesla-BMW Deal Look Like?

Stocks in this article: TSLA GM

For Musk, vertical integration is not taboo. It is the opposite. It is religion.

Any automaker, let alone a foreign one such as BMW, would be extremely leery about engaging in a construction program along America's freeways, installing "BMW fueling stations for electric cars" in plain sight of every potential adversary. That's why when Tesla offers to do this for them it is like throwing the old automaker a lifeline.

So the case for an automaker such as BMW to take a supercharger deal with Tesla is pretty easy to make. The difficult one to explain is why Tesla would have any interest in entering into such a deal.

First, let's talk about money. It's obvious that a company such as BMW would have to pay Tesla for this. It could be structured in any of numerous ways, but it doesn't really matter in terms of Tesla's motivation. Tesla is not lacking for money. BMW might pay Tesla some sort of construction contribution, as well as usage fees when BMW cars utilize the network -- all very straightforward.

Basically, BMW would outsource this infrastructure project to Tesla. Outsourcing is good, especially for BMW in this case. It's like paying a maid or handyman instead of doing the work yourself.

So if it's not that much about money, what's Tesla's primary motivation?

Some will argue Musk is doing this out of the goodness of his shareholders' hearts, that he wants to change the world. There is probably some truth to that theory, but I don't think this means he will just roll over in a negotiation. Not at all. He wants something important from BMW. What is it?

Tesla is very proud -- and rightfully so -- of its charging connector. Everyone would agree that it is more elegant than the competitive solutions. There is no way Tesla is going to change it. If Tesla can get the rest of the industry to somehow bend in its direction on the charging connector -- even if supplying existing BMWs with an adapter -- it would mean a huge principled win for Tesla.

There are a variety of technical issues surrounding making non-Tesla cars work with Tesla's superchargers, many of which are well above my non-engineering pay grade. I have asked more knowledgeable people to speculate in terms of how this could be done, and there is simply no consensus on that subject.

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