Tesla Speculated To Be Bought By GM, Likelihood Unclear
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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.
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The issue with paypal was that paypal and ebay became co-dependent on each other. Unfortunately the end result was in ebay’s favor. Because if ebay at one point decided to invest a large amount of money, they could have replaced paypal for ebay with their own. This is where Musk learned his lesson not to be dependent on others for your business. And this is why he insists on having multiple suppliers, build his own infrastructure and offer energy for that infrastructure. Effectively Musk is building an ecosystem centered around his products that work together.
GM on the other hand does not have the money to buy Tesla, and Musk would veto any such sale. The only time Musk will sell is if he thinks it is what is best for Tesla. And GM is the last company Musk would sell to after what they did with the EV1.
So where does this rumor come from?
I love GM, and I drive a Buick, but based on the lukewarm reception of the Chevy Volt, and considering the way the GM EV1 went back in the 90’s, I’d be surprised if Elon Musk sold to GM.
Also, consider how GM brought in once great brands like Holden, Saab, and Opel.
I have said Elon would dump the company on someone at some point. His pockets are not deep enough to keep this one flying as the stock prices are still artificially inflated due to his charismatic use of the web. He has almost turn Tesla into a religion with some folks.
To me this whole idea is a hoax or I pray it to be a hoax.
1 Tesla is way over priced and GM should not pay this price.
2 Other than image what does Tesla have technology wise GM either does not already have or could not do themselves? Nothing GM could so just what Tesla has done with little effort.
3 The only thing I could see if GM taking them in to keep someone else from buying them. But the price is even too high to do that. Who ever buys them will lose money as it would take years to make back what the asking price is.
4 A couple more fires the price tanks and then GM or someone could get a deal. It is a matte of time. I wonder if someone is saying this because they expect the bubble to bust on the stock price and Elon will have to bail or go down with the charge.
Tesla has yet to make money on just selling cars and it will be a while before they ever do. The tax credits are running out and the future models they have are still a ways off. They talk of a Cheaper Tesla but it is still Volt priced.
I am sorry I just do not see GM doing this. I also know Emperor Elon has no clothes.
@Brian – This is not a rumor even, it is just random crazy talk from Santelli. (He has no inside information). He is just making random guesses for 2014 and get paid to do it.
@scott – Musk has no plans to sell the company any time this decade. And Tesla has already been making a profit on selling cars for 3 quarters.
But we agree on one thing GM is not going to buy Tesla and Tesla is not going to sell to GM.
Based on GM’s track record with brands that aren’t their own, this will not go well for Tesla. I would rather Toyota or VW have Tesla.
I think GM will do just fine without tesla if the info is true about the next volt then tesla will have to find a new way to sell their shit boxes!
If GM doesn’t reproduce the same mistakes they committed with others like Saab, i would give it a go!
Weapon
Three months of profits has not even come close to covering the investment made into the company to make a real profit. They have a massive investment to counter before they can make a clear profit.
The capitalization of the company will take years of profits to pay off.
Tesla Motors’ second-quarter numbers are out, and depending on how you figure profit, the electric automaker either made $26.2 million or lost $30.5 million.
First, let’s talk profit. Tesla’s net income for Q2 was $26 million, an increase of 70 percent from Q1. However, that’s not using the Generally Accepted Accounting Principles (GAAP) math — or non-GAAP. If you apply GAAP, Tesla lost over $30 million. How?
Tesla included its lease accounting into this quarter’s results, something that’s not approved by GAAP. Slate explains that Tesla “rolled out an innovative loan/purchase/buyback scheme that lets people basically lease the cars but with Tesla getting all the money up front via a financing arrangement with Wells Fargo or US Bank.” Essentially, Tesla got all the cash for the expensive Model S sedans it sold and rolled that into this quarter’s income. That’s not allowed under GAAP, hence the discrepancy.
Even Deepak Ahuja, Tesla’s CFO, admitted early on in the earnings call that, “this is a confusing quarter.”
Overall revenue also took a slight hit due to the reduction in zero emission vehicle credits (ZEV) that Tesla sells to other automakers. Tesla reports it’s boosted output from 400 vehicles per week to 500 in an attempt to account for the reduction in ZEV credits. It also deserves noting that the automaker has announced plans to purchase a 31-acre parcel next to its Fremont factory for expansion, so expect that to put a hurt on profits in the future.
This was based on the quarter announced in August and the others were done with similar accounting. While Tesla is not bankrupt and doing OK they are not doing as well as they like you to think.
the real issue is they still have only one very expensive car, an MIA SUV and now a Cheaper car that will be in the Volt price range. Most good business people just do not see this as sustainable long term unless he finds a willing buyer or dance partner to finish what he has started. Elon has deep pockets but even his are not this deep. His Ego is also large and he will do what ever it takes to keep from looking like he has failed. One way is to pass it to another company and let them finish it and make him look good or fail and take the blame.
I really expect a automaker will buy them at some point that needs an electric program but the stock prices will drop before anyone will buy them.
This car is in a limited market and segment where once you sell these cars unless you have a diverse group of vehicles there will be little repeat business in the near future. Yes GM make money with the Vette but the Vette alone will not float Chevy long term.
What Tesla needs is a technology breakthrough that will make a battery that last longer and charges fast that cost less. It is the so called fountain of youth in the industry and they all are working on that. But as of now his electric motors are no better than anyone else nor is his batteries. So the long and short is he has a nicely styled car that sells at a price the others need an electric to sell at but figured no one would buy it.
I hope the car makes it as it would help the industry with acceptance but if it fails it could hurt every electric car to come in the near term. Just what we do not need is another Tucker, Delorean or Bricklin. Both of these were claimed to be cars to change the auto landscape but they never did as many others.
Just look at the 3 fires they have had. If and when he hits a real problem it could really be a fatal blow. With a company and product like this there is no second chance.
http://www.autoweek.com/article/20131003/CARNEWS/131009947
Dutch summed it up well and he is not the only one looking at things as they are.
As for the present story on GM I wonder if someone is just trying to manipulate the stock prior to some news that may not play well like a loss for the end year quarter. I am not sure if this is what it is but I have seen stranger things.
GM should pay back it´s depts first before purchasing Tesla.
The 10 billion USD to the US Government, the 3 billion USD to SAAB´s former owner Spyker cars. Then we see if they will have any cash left to brag about.
GM already paid it’s debt back! Paid in full!
YOU Brain Dead Asshole!
A buyout would only benefit tesla there is nothing GM couldn’t do without the purchase, stay clear.
Brian, do not feed the trolls
@62vetteefp:
May I correct your typographical errors?
You wanted actually to write: “Do not feed the troll Brian”, right?
????
I hope u are joking? Ivar is the troll.
Brian is a/the troll.
One of the obstacles to overcome would be the stake of Daimler in Tesla…
They are better off bringing back Pontiac and that’s not happening anytime soon
I find this all amusing. In my opinion GM knows Tesla can not survive on it’s own and will wait for the day Tesla is in dire strait. Then, they might acquire Tesla at a bargain price and what they do with it if this happens will be be interesting.
My brain is working fine and i am not sure i am the Asshole here. GM is the biggest Asshole on this planet. There is even a song about it that you can find if you search the internet.
GM have borrowed the money from the government to be able to pay back in full as you say. That´s why they still are in dept.
P.S. I am the Troll as secret mr 62vettefp say and do not need any food, but keep feeding me with GM fuck-ups. The latest is a 1,5 million cars warranty case in China. GM really need to buy back SAAB again.
Hands down 100% on GM buying back SAAB! However, the $10B that is mistakenly called “debt” was pre-projected to be well over $20B! The government knew the second they handed the check over to GM that they’d end up losing money. To add to that, the 1.2 MILLION American jobs we would have lost will pay back that $10B eventually!
It has come to the time when GM needs to “phase-out” Buick, bring back Pontiac and buy SAAB back! I think it’d be good for GM to have a sort of “foreign” brand (SAAB).
Chevrolet, Saab, Pontiac, GMC and Cadillac
I saw 3 Pontiac’s today! A 2007 GP GXP in Purple Haze, a 2010 G6 GT Sedan in White Diamond and a 2008 Torrent GXP in Sonoma Red. To be quite honest, they are some of the best looking cars (exterior wise) GM has ever produced. My Black 2004 Bonneville GXP is gorgeous too! Pontiac deserves to come back!
Buick is fighting the old grandpa stereotype to this day, something that SAAB can easily replace with some easy work. The 9-3 was/is an amazing car! My aunt and uncle have a 2008 9-3 Aero and a 2011 9-4X Aero! They are both awesome vehicles that still compete with top brands (i.e. BMW, MB, Lexus, Infiniti)! SAAB also deserves to come back; no brand should have to go away like it did. . .
Chevrolet: Economy, Sports and Utility
SAAB: Swedish Sports/Luxury
Pontiac: American Traditional Muscle
GMC: American Luxurious Utility
Cadillac: High-end Luxury
@EvanR, I think most people on this site would agree that there is absolutely no reason to bring back a division/subsidiary that screwed itself over.
You may be right to a point. But at the end of the day, GM screwed itself over. . .
Susan Docherty said that GM tried everything to revive Pontiac to grow it back into its performance roots. But lets think about that for a second. What did they really do? Oh yeah that’s right, they discontinued nearly every good model Pontiac had (aka GP, Bonny, T/A etc) instead of making them better and they re-badged pieces of crap Chevrolet’s to pass them off as a Poncho (G3 and G5)!
As for SAAB: Spyker didn’t have a good financial backing to really be able to grow without going bankrupt (which it did). I think if GM would have kept a chunk of SAAB (let’s say maybe 40%), SAAB/Spyker/GM would have done very well. The vehicles SAAB produced were great, it was the marketing that failed (same with GM’s marketing). My parents had no clue what the hell a Pontiac G6 was until it was discontinued! I can tell you exactly why: GM’s Marketing decided to only have commercials/ads for about the first 2 years it was out and when Pontiac was “phased-out!”
@scott
Investment costs are never covered with profit, that is because most growing businesses spend the money on growth or build up cash on hand. Most investments are covered by stock value, and pretty sure Tesla covered those well for it’s investors.
Pretty sure we have 3rd quarter numbers as well, but ok let us talk Q2. I am well aware of how GAAP and non-GAAP works. I am also aware why there is a discrepency. What your essensially describing is a case of why GAAP rules need to be updated, it is not uncommon for rules to be outdated.
As far as ZEV credits, the purchase and production is actually worked out in Q3 results. The ZEV credits dropped 5x in value and Tesla was still able to show profit and increase their gross margins. And I am aware of how Tesla is going, no body is worried about Tesla’s profits, at this point they are worried about battery supply constraints. That is why Tesla took a big stock hit after Q3 earnings. The most important thing for Tesla right now if growth and they are progressing at a very good pace.
What do you mean by “they still”? They only released their first mass production car a year ago. The SUV is not MIA, it is coming by end of 2014. And the cheaper car will be 35k, yes. What is not sustainable exactly? There is no reason to find a buyer or a partner, they are doing fine and on track overall. Again, the biggest indicator is growth and they are growing at a fairly rapid rate. Their demand is also growing as they enter more markets and build more superchargers.
They also do have partners in both Toyota and Mercedes. Who both license Tesla’s technology and buy Tesla’s drivertrains. Mercedes is releasing the electric B class in 2014 with Tesla’s drivetrain. They are also selling batteries to businesses who use SolarCity come 2014.
I don’t think any automaker is going to buy them, mostly since their stock will probably go up to over 200 in 2014 but also because Musk won’t sell. The market is not that limited because the market is growing every year. At one point smartphones were a limited market but look at it now. Keep in mind that selling 30k Tesla Model S is like selling 200k Toyota camry. The profit margins are much higher and the overall cost of the car is higher which means more revenue and profit. The Model S and X will provide enough revenue and growth for Tesla up to the Model E in 2016/2017. From then on they will most likely do another offering which will help them mass produce Model E and Model Y (35k sedan and suv).
Tesla does not need any breakthroughs, a breakthrough will help but incremental improvements are more than enough. Also, fyi, Tesla has the best batteries out of all the EVs. They have the best energy density. The motors are also actually the best out of all the current EVs. Will the other guys catch up? Of course. But that is why Tesla is building a competitive advantage in their superchargers, branding and etc.
And so far Tesla is not hurting the EV industry, actually the opposite. They are making it exciting for once. And we are not dealing with another Tucker, Delorean or Bricklin. I mean you are aware that Tesla already sold more cars than (Tucker + Delorean + Bricklin) * 5 right? A story of a car catching on fire is nothing new, a car catches on fire every 3 minutes in the USA. Once the NHTSA gives the ok and the novelty of a new hot product catches on fire wears off, it will become an issue of the past.
As for the present story, as I mentioned above. Some random analyst on cnbc just made a random prediction. And now all the papers are reprinting it as fact. Jalponik is having a field day with it and making random predictions for fun.