Yra Harris, a trader at Praxis Trading, speculated in an interview with CNBC this week that General Motors might buy Tesla in 2014. Harris, known for his low-key, professional demeanor, noted that Tesla valuations are currently in "la la land," btu a purchase at a reasonable value would be a "deal made in heaven." While Harris's analysis that buying Tesla would get GM some advanced EV technology without too much development is reasonably sound, his comments that "Tesla would finally get the showrooms everyone is beating them up about," makes us wonder just how familiar he is with Tesla's non-traditional business model.
Tesla, guided by CEO Elon Musk, is proud of its outsider status, and has used it to build Apple-like reverence and allegiance among affluent buyers. Rolling the Tesla brand under the GM banner would run the risk of negating that cachet, and we can't imagine Musk's outsized personality flourishing in an environment where he doesn't call the shots. GM stewardship would, however, provide Tesla some insight to the ways of the traditional auto industry—wanted or not—and access to comparatively unlimited production capability. GM, on the other hand, would get a direct conduit of sorts to the action in the Silicon Valley, and, if development continues on schedule, a hand in Tesla's growing network of supercharger stations.
Of course, it's not as if Tesla is waiting for a savior. According to Forbes, Tesla production is currently running at 550 units a week, and the maker delivered 5500 units in the third quarter of 2013; estimates have the electric automaker finishing the year with 21,500 deliveries, beating its initial estimate of 20,000. The Model X SUV is being readied for a 2014 launch, and an entry-level model is in the brand's plans for the following year, too.
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Putting a hypothetical deal further into question is Tesla's bloated stock price, currently hovering around $150 a share. That's nearly a five-fold increase from its 52-week low of $32.11, and with those numbers, GM would have to be either cash-drunk or plain crazy to pursue the brand. A sale at these prices would earn Musk an estimated $5 billion in exchange for his nearly 30-percent stake in Tesla. This, more than anything, leaves us skeptical that such a deal could get done until Tesla's valuation falls into the realm of reality.
from Car and Driver Blog http://blog.caranddriver.com
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