As the automotive industry faces unprecedented pressure to transition toward electric and autonomous vehicles, a seismic shift in partnerships and alliances is on the horizon. Tesla, often viewed as the industry’s tech pioneer, is at the center of this shift, with legacy automakers eyeing potential partnerships to leverage Tesla’s cutting-edge technology. However, these potential alliances come against a backdrop of financial struggles, diminishing capacity at European car plants, and the failure of independent EV strategies by major automakers. So, will the likes of GM, Ford, and Volkswagen eventually bite the bullet and team up with Tesla for autonomy? Signs are pointing in that direction.

A Historical Pattern of Ambitious Plans Falling Short

“We’ve seen a pattern where companies initially set ambitious goals but then shift to partnering with each other when those goals fall short,” said Larry Goldberg, a serial entrepreneur and co-founder of Sapiens Decision. His observation reflects a broader trend within the auto industry, where bold proclamations of market leadership often give way to pragmatic partnerships. For instance, GM’s recent exploration of a global partnership with Hyundai highlights how even the most established automakers are looking to collaborate in areas like EV development and supply chain management.

In many ways, this move reflects the struggles of legacy automakers, particularly in Europe, where one-third of major car plants are running at half capacity or less. As Goldberg notes, “It’s really just a matter of time before these automakers won’t have any choice but to turn to Tesla.”

This has been the story of many companies in the EV race. Automakers such as Volkswagen, GM, and Ford initially set ambitious goals to lead the electric vehicle market, but as those ambitions encountered financial and technological barriers, the need to rely on external partners became more apparent. As Goldberg bluntly put it, “It’s time for these legacy companies to bite their lip and partner with the tech and global leader, Tesla.”

Tesla’s Role in Charging Infrastructure: A Harbinger of Bigger Deals

Tesla has already made waves by opening its Supercharger network to other automakers, a development that many see as the first step toward broader collaboration. Tesla’s North American Charging Standard (NACS) is quickly becoming the industry standard, with companies like Hyundai integrating Tesla’s technology directly into their vehicles.

“Hyundai is going NACS native,” explained Goldberg, “they’re putting Tesla’s port in their cars so they can use any Tesla charger without adapters.” This shift is a recognition of Tesla’s dominance in the charging infrastructure space, and the ease of integrating Tesla’s technology has automakers reconsidering their stance on autonomy partnerships.

As Goldberg pointed out, “Integrating the NACS into the car is an engineering task, but it is not anything heroic.” This suggests that while automakers might hesitate to adopt Tesla’s full autonomy suite, they are willing to begin with more straightforward integrations, like charging infrastructure. However, the bigger technological leap—autonomous driving—may be inevitable.

Struggling Automakers and Financial Pressures

Financial distress is another critical factor driving the need for partnerships. Automakers across Europe and North America are facing declining sales and production challenges. Volkswagen, for example, has been forced to cut workers and is considering shutting down two plants in Germany. Meanwhile, Volvo recently announced that it won’t be able to go fully electric by 2030, opting instead for a mix of hybrids and a smaller number of EVs. As Goldberg put it, “This is not serious business. This is trouble. Very serious trouble.”

GM’s situation is similarly precarious. Once boasting about a $2 billion dividend from its China operations, the company has now lost over half a billion dollars in the Chinese market. Goldberg didn’t mince words when describing the situation: “GM is not a serious company. They’ve been putting up announcement after announcement. Mary Barra [CEO of GM] has been at so many signing ceremonies, it’s laughable. GM will have to partner with Tesla at some point.”

This urgency is underscored by recent reports from Bloomberg showing that a third of Europe’s car plants are operating at less than 50% capacity, a situation that is likely financially unsustainable. As more automakers face these dire financial straits, the option to partner with Tesla becomes not just attractive but necessary.

The Hybrid Strategy: Fool’s Gold or Temporary Lifeline?

Another intriguing development is the renewed focus on hybrid vehicles, particularly in Europe and China. Hybrids, which combine internal combustion engines with electric drivetrains, have grown faster than fully electric vehicles globally. Yet Goldberg was adamant that this strategy is a dead end: “Hybrids are Fool’s Gold,” he declared. “The more brands glom onto this hybrid stuff, the worse they’re going to lose.”

Even BYD, the Chinese EV leader, has seen its hybrid sales grow faster than its EV sales. But Goldberg views this trend as a temporary distraction: “It’s going to take some time for this to play out, but hybrids are not the future.” As Tesla continues to lower the costs of its electric vehicles, legacy automakers relying on hybrids may find themselves even further behind.

Tesla’s Technological Leadership and OEM Tiering: The Future of Partnership

Tesla’s technological leadership goes far beyond charging infrastructure. The company has made significant strides in electric drivetrains, battery technology, and advanced driver-assistance systems (ADAS). Automakers who choose to partner with Tesla stand to benefit from these advancements, but such partnerships would involve deeper integration than traditional supplier relationships.

Goldberg described Tesla as what he calls a “tier 0.5 supplier,” meaning Tesla isn’t just providing parts but is actively involved in designing and engineering subsystems for its partners. This level of collaboration is unprecedented in the auto industry. “Tesla will come in and partner with an OEM to provide not only the design but support in incorporating that design into their vehicles,” Goldberg explained. This is a step beyond traditional tier 1 suppliers, who typically manufacture and assemble major components but don’t collaborate as deeply on the engineering side.

The Inevitable Shift: When Will Automakers Partner with Tesla for Autonomy?

The big question remains: when will automakers partner with Tesla for autonomy? According to Goldberg, it’s not a matter of if, but when. “At some point, some of the OEMs will have to partner with Tesla,” he said. The financial pressures and technological challenges are simply too great for many automakers to overcome alone. Goldberg believes that within the next two years, Tesla’s manufacturing costs will fall below that of internal combustion and hybrid vehicles, making Tesla’s technology even more attractive.

“Sometime in the next two years, Tesla’s manufacturing costs will fall below that of the ICE and hybrid vehicles. When that happens, the earthquake we’re seeing now will become a full-blown tectonic shift.”

As Tesla continues to pull ahead in the race for electric and autonomous vehicles, the rest of the auto industry may have no choice but to follow. For many legacy automakers, partnering with Tesla could be the only way to survive in a full self-driving world.