Misgivings on a Tesla-Chrysler Merger


Interesting assessment but off the mark. A Tesla-Chrysler, Musk/Marchionne, team up makes no sense whatsoever.

Tesla is not really an automotive company. It is a tech company specialized in developing an energy management system that is presently used in cars. The company’s value lays in being able to use this technology – once it is main stream – in other applications. In other words, the company has a huge unexploited market potential.

Fiat and Chrysler are dinosaurs. As you state, their technology is not very competitive consequently their fundamental value is in the brands.

A combination of the two would result in limiting – if not amputating – Tesla’s market potential and consequently its ROI for investors by using the tech only in Fiat/Chrysler cars. Tesla shareholders will never go for it unless they got a huge premium. Fiat/Chrysler shareholders wouldn’t go for it because of the speculative nature of the tech; and, because it would mean declaring Fiat’s branding strategy is a bust, which would mean Marchionne’s fall from grace.

Sorry, this is the wrong strategy.