GM to buy Tesla? Seems highly unlikely

A US analyst is convinced that General Motors are lining up to acquire Tesla in 2014. But it doesn’t make any sense.

Tesla is more like a technology company than a car maker, but it’s managed to turn out a very able car in the Model S; perhaps the only car made so far that really is an alternative to an ICE car.

That success has lead a US analyst – Yra Harris of Praxis – to declare that GM has Tesla in its sights as an acquisition target in 2014.

The rationale is that GM has a history of acquisition to grow its market – with forays in to Hummer, Daewoo and Saab – and its own EV adventure with the Chevy Volt has been a far from resounding success and that GM could dominate the luxury EV sector by gobbling up Tesla.

But history tells us that it was GM’s acquisition ventures that brought it to the verge of oblivion when the car market imploded and, tempting though it may be to try and buy-in EV advantage rather than grow it organically, the scenario just doesn’t add up.

For a start, Tesla is flying high with a share price that values it at over £10 billion, a valuation that relates to around 100 times its earnings. What company in its right mind would want to buy in to that, particularly one that has been badly burnt by acquisition in the past?

Then you need to factor in Elon Musk’s grasp on Tesla and his unshakeable belief that Tesla will continue to grow strongly with the arrival of the 4WD Model X SUV and its smaller saloon car in  years to come.

It’s a good ‘holiday period’ story, but one we think is about grabbing headlines and without any basis in fact at all.