Currently, Tesla has a market capitalization of $62.71 billion, whereas GM is only valued at $48.58 billion. However, keep in mind that in 2009, GM fell to a value of $1.06 billion. Many economists are starting to predict another recession on the horizon. Moreover, self-driving taxis could take annual global demand for cars from 88 million to a notably smaller fraction of that. Even if that does not occur, the largest car market, China, is rapidly switching to electric. It appears that GM is flatfooted and not prepared for either scenario.
GM’s focus: just build more trucks and large SUVs. That’s fine as long as oil prices are low and nothing disrupts the economy. Is GM ready to scale down facing the headwinds of ridesharing, automation, recession, uncertain gas prices, climate change policies, and electrification? My take is: No, no, no, no, no, and no. Hence its recent layoff of 15,000 employees when the economy was actually below full employment.
The tricky question for Tesla, presuming this scenario comes to pass, is whether to take over GM and any required liabilities or just buy it in parts. Now, the latter seems much simpler and way less risky. However, imagine GM surviving the next recession either by going through bankruptcy or getting another bailout. That is assuming it gets that bad. Consider a third scenario were it drops down to around $10–20 billion in market capitalization. What would be the value in taking away the biggest competitor, a company that seems to be able to control both political parties at will? How would the view of electrification change if Tesla electrified GM product lines?
These considerations make a Tesla takeover of GM seem perhaps worth the risk that would come with its liabilities and the concerns of having a union. Of course, it goes without saying that the price and terms would have to be right. If Tesla wins the self-driving race, then it would make sense to immediately have factories and workers to much more quickly scale up. The profit margin on the physical car becomes much less important when you are rushing to get a few million self-driving taxis or shuttles onto the market. Time becomes so much more important, because a company with a lead can gobble up market share.
While this analysis has focused on GM. It could easily be switched to other manufacturers, or a combination of factories from a variety of different manufacturers. Tesla and any others in the race would have ample choice of used factories and laid-off workers to hire. But for the purposes of this article, it is fun to think of Tesla taking over GM.
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