Should Tesla Motors Inc (TSLA) Hook up With Another Automaker?

The model is so drastically different from Ford and GM that it is hard to compare the three. Tesla is valued at 22 times forward earnings, while Ford and GM are valued at 11.6 and 12.6 respectively. Tesla does have a lot more room to grow on a total auto sales basis, however the market for high-end luxury vehicles is a lot smaller than all of the markets both Ford and GM cater to.

If Tesla Motors Inc (NASDAQ:TSLA) were to merge with one of the larger automotive companies, the advantage could be huge. We could see more electrification of vehicles of all price points, reducing our dependence on oil, and the long-term cost of vehicles. This could translate into a boon for stockholders of Tesla, as the company’s stock seems to have gotten ahead of its fundamentals.

Toyota has already leased Tesla’s technology for their Rav4 EV, and it is the car company to beat, with a market cap of nearly $200 billion. Tesla’s technology and premium brand could be leveraged with the Toyota dealer network.

Foolish bottom line

Tesla’s owner is about as independent as they come. Elon Musk is always willing to talk and do business with the other auto companies, but he wouldn’t want his company to become just another brand. His sales model is revolutionary, and takes out the haggling process. Made-to-order cars is something that Tesla can do since it doesn’t have a legal obligation to not compete with a dealer network, like both Ford and GM have.

Short sellers have been squeezed by Tesla Motors Inc (NASDAQ:TSLA)’s stock defying gravity, but how long can it sour there? This stock is not for the faint of heart. GM has been trudging along; will offering up more EV models to the higher-end market be the shot it needs? Ford has been the stable player for shareholders, and pays a reasonable dividend to boot. Conservative investors would be wise to purchase shares of Ford if they are looking for exposure to the auto market.

The article Should Tesla Hook up With Another Automaker? originally appeared on Fool.com and is written by Wes Patoka.

Wes Patoka has no position in any stocks mentioned. The Motley Fool recommends Ford, General Motors, and Tesla Motors. The Motley Fool owns shares of Ford and Tesla Motors. Wes is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.