Tesla Motors, Inc. (TSLA) might become an acquisition target in 2014, if media reports are to be believed. According to market speculation, one of the “Big Three" Detroit automakers may purchase the electric carmaker. One veteran trader reportedly said that General Motors Company (GM) might acquire Tesla in 2014.
However, the news remains mere speculation as none of the automakers have clarified these rumors. In fact, it is yet to be confirmed whether Tesla CEO Elon Musk is willing to sell the company. Moreover, the high valuation of Tesla is likely to prove a hitch.
However, the acquisition of Tesla can be a good strategic move for General Motors. While the latter is one of the largest automakers in the world, it has not been very successful in terms of selling electric cars. General Motors’ Chevy Volt had sales volume of less than 19,000 units in the first 10 months of 2013. This implies a year-over-year decline of 3%. Moreover, the car has been experiencing fire-related problems.
Meanwhile, Tesla’s Model S car has been immensely popular. In fact, the demand for the car exceeds supply despite no advertising by the company. On the other hand, both General Motors and Ford Motor Co. (F), the manufacturer of Ford Focus Electric vehicles, spend significant amounts on discounts to attract buyers. Yet, Ford’s electric car has monthly sales volume of less than 200 units.
Tesla currently has a Zacks Rank #4 (Sell), while General Motors carries a Zacks Rank #3 (Hold). However, a better-ranked stock in the automobile market worth considering is Honda Motor Co., Ltd. (HMC), carrying a Zacks Rank #2 (Buy).
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