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Analyst Doesn't 'Put Much Faith' Into Google-Tesla M&A Report, Thinks Google Has Other Plans

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This week it was revealed that Google Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) had reportedly discussed a possible M&A deal with Tesla Motors Inc (NASDAQ: TSLA) in 2013.

The news may not surprise investors, who are well aware of Google's plans to enter the auto space. No one knows exactly how Google intends to make money from its self-driving car initiative, but Tesla could have been viewed as a source of profit.

"I don't put much faith in things like that," Tigress Financial Partners analyst Ivan Feinseth told Benzinga. "Google has obviously been working and testing autonomous driving cars. However, they convert other cars, which means, in my view, if they were to produce systems for autonomous driving cars, they would want to produce components."

Those components would be sold to other manufacturers. Feinseth said this could provide Google with a "bigger market for them to get into right away," instead of having to manufacture and sell its own self-driving vehicles.

"You could sell components to every manufacturer to make autonomous cars versus just making your own line," Feinseth added. "Then again, I'm sure everything gets thought about on every level by everyone, especially companies that certainly have the money, like Google or Apple, to pretty much buy anybody else. I don't really think that that's much of a possibility."

Related Link: Will Apple Watch Replace The Keys Of Your Next Tesla?

'A Firm Commitment'

Feinseth said that Tesla would have been a "pretty significant" purchase for Google, indicating that the company is willing to make "a firm commitment to produce automobiles."

"Now the thing that they speculate, could GM or one of the auto manufacturers buy Tesla?" Feinseth questioned. "You have to look at the build versus buy. The total R&D to develop the car was $4 billion. You'd have to pay over $26 billion to buy Tesla. They have a great brand name and a dealer network and all this other stuff, but GM also has a dealer network, so why couldn't they just add these cars to an existing dealership?"

General Motors Company (NYSE: GM) has already produced some electric cars of its own, including the EV1, which inspired the documentary, "Who Killed the Electric Car?"

"GM has two electric cars in the market, with another cheap one in development and I'm sure another high-end one in development," said Feinseth. He referred to the Tesla/Google report as "just another story."

"It is disappointing that we really have not had a greater push in electric cars going back years ago," Feinseth added.

"Unfortunately, the one negative of lower prices (which, of course, I love lower oil prices and want to see it go lower) is that it creates less of an incentive to create alternative fuel type of cars. The technology, as much as I love Elon Musk and the Tesla car and I think everything about the company and the car is phenomenal, the technology is 150 years old.

"That's why it's called Tesla, by the way -- right? After Nikola Tesla. That is the key point there."

Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.

Latest Ratings for GM

Sep 2016NomuraInitiates Coverage onNeutral
Sep 2016Morgan StanleyUpgradesEqual-WeightOverweight
Aug 2016JefferiesInitiates Coverage onHold

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Posted-In: Elon Musk Google Ivan FeinsethAnalyst Color News M&A Analyst Ratings Tech


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