Questions have surrounded Tesla since it emerged. As an outsider in the world of established automakers, there has always been doubt about how long Tesla would last. Tesla has answered many of its critics questions with amazing products and a stellar track record. But now a new question has merged: Will GM purchase Tesla?
Financial analyst Yra Harris of Praxis believes GM is on track to do purchase Tesla in 2014. According to USA Today, Harris stated on CNBC this week that he believes that the time has come for GM to acquire Tesla. This raises a couple of questions, first USA Today is still around? Who knew?
Second and more important, why would GM decide to do this? Harris cited the fact that GM’s own EV, the Volt, has suffered disappointing sales this year of just 19,000 units, a three-percent decline from last year. With the Model S receiving almost universal acclaim from virtually everyone, it could offer GM a great stepping stone to dominating the luxury EV field.
This might be particularly relevant to GM, because they have already demonstrated an interest in the segment with the launch of the Cadillac ELR extended range EV.
What’s more, GM has a history of expanding through acquisition. In the 1990s GM started Saturn, bought Hummer, Daewoo, and Saab, not to mention minority stakes in Isuzu, Subaru, Suzuki, and PSA Peugeot-Citroen.
I may not be a financial analyst, but that list says a lot more to me about why I don’t think this acquisition would happen. Over expansion, particularly into far too many brands, helped bring GM to the brink of extinction.
GM’s new CEO Mary Barra made her name, and earned the job, helping GM recover from its bankruptcy disaster, and probably has no taste for repeating it. Particularly because, despite all of Tesla’s success, the company is still losing money hand over fist.
Tesla has yet to turn a profit, and its market cap is more than 100 times its actual earnings. It may turn out to be a huge success, but right now its finances look a lot more like the Greek government than Google.
Besides, while it is a publicly traded company, I don’t think that CEO and Co-Founder of Tesla Elon Musk is ready to part ways with control of his baby. If he is resistant to acquisition, that could make the process very difficult even if GM or another company did come knocking.
So while this is definitely a story to keep an eye on, until we have more than the word of one analyst, I wouldn’t get too excited.