General Motors has had luxury electric automaker Tesla in its crosshairs for a long time now. The General has even been looking to build a fully electric vehicle that could compete with the award-winning Model S sedan, but if recent predictions are true, that will no longer be necessary.
Yra Harris of Praxis Trading has speculated on CNBC this week that Tesla could be sold to General Motors within the next year, Forbes reports. Given Tesla CEO Elon Musk’s seeming commitment to his company that might come as a surprise, but the billionaire entrepreneur has done something similar before when he sold PayPal to eBay in 2002.
Back then, much like Tesla today, PayPal was a smaller upstart in the grand scheme of things. eBay was trying to develop its own method of e-payments and e-transactions, but why do that if there is already a near perfect system developed that you could just buy? Which brings us to GM.
Why would GM spend the money to develop a Model S rival if they could just purchase Tesla altogether. Acquiring Tesla’s platform for the Model S would be much easier than developing their own. Tesla has a reason to do the deal too. They might appreciate the additional financial backing and market know-how that comes along with an experienced automaker like GM.
There is still some obstacles to overcome for a deal such as this to become reality, the largest being Tesla’s price. Currently, Tesla has an 11x price-to-sales ratio, compared to GM’s of 0.37x. With stock price that high, acquiring Tesla might just be a pipe dream for major automakers.