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Toyota, Mazda... Google? How a search engine could become a car company

Handout photo courtesy of the Nevada Department of Motor Vehicles shows a Google self-driven car in Las Vegas, Nevada, May 1, 2012.

Handout / Reuters/Reuters

Google created plenty of buzz with its self-driving prototype last week, a two seater that puts the search engine company on the road to using software and sensors to replace a steering wheel, accelerator pedal and brake pedal in your car.

This is not a silly pastime for Google. The company has been testing self-driving cars since 2009. Chris Urmson, Google's head of the self-driving car project, said in an online post, "We're going to learn a lot from this experience, and if the technology develops as we hope, we'll work with partners to bring this technology into the world safely."

One natural fit for Google is Tesla, the electric car company and Silicone Valley neighbour of Google. The Googleplex is in Mountain View, Calif, while Tesla HQ is a 14-minute drive away in Palo Alto.

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Now imagine that Google and Tesla join forces to create some of the most advanced cars in the world – battery car meets self-driving machine. Would they go it alone, build up their own global sales and distribution network, along with a comprehensive service support structure? Or would Google, or Google and Tesla combined, buy an established global auto company to quicken their plans for world domination?

Money isn't a problem. Google's market capitalization today is north of $370-billion, while Tesla's is more than $25-billion (all figures in U.S. dollars). Toyota is worth less than half of Google, with a market cap of about $180-billion.

Google isn't going to buy Toyota, but why not some other, smaller car company with a global footprint. That move would both legitimize and turbocharge a Google or a Google/Tesla move to reinvent the world's auto industry. Mazda, for instance, is worth slightly more than $13-billion, while Fuji Heavy Industries, the maker of Subarus, has a market cap of about $21-billion. Google or Google/Tesla could swallow either whole and instantly become real car companies with a global footprint.

As Urmson said, Google will work with partners if its self-driving technology works. Why wouldn't an acquired car company be one of those partners? That's a thought sure to keep many car company executives up at night.

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