Transportation

VW Denies Plan To Take Tesla Stake, But Share Price Weakness Might Trigger Interest


Tesla shares jumped after reports, later denied, that Volkswagen planned to take a stake in the electric car pioneer, and analysts didn’t see much chance of a near-term deal.

Tesla’s share price made it too expensive to justify a takeover bid, or a smaller equity stake, they said. But if the share price dived to more realistic levels that might awaken interest from VW, or any other big auto maker seeking to bolster its electric credentials.

On Thursday, Tesla’s share price opened higher at $224.7 after news of the possible bid, dipped to $218.85 after the denial, and gradually moved up to close at $222.15.

German business publication Manager Magazin had earlier said VW CEO Herbert Diess had expressed an interest in acquiring a Tesla stake because it coveted its battery and software skills. VW later formally denied the report as “without merit”.

Reuters’ Breaking Views columnist Liam Proud said the alleged plan had logic, but would only materialize if Tesla’s finances deteriorated.

“It’s easy to see why (VW) would be interested. Electric batteries will be the most expensive part of future cars, and UBS analysts reckon Panasonic battery cells produced in Tesla’s gigafactory are 20% cheaper than the next-cheapest option. Meanwhile (CEO Elon) Musk’s company makes its own computer chips and can tweak features like a car’s suspension remotely through software updates. Diess could leapfrog his rivals with technology like that,” Proud said.

Citi Research, commenting on the reports about a possible Tesla/ VW relationship, didn’t think it was likely.

VW, despite being a huge and profitable company, would find it a stretch to buy even a part of Tesla because it had still had upcoming “dieselgate” liabilities and a big pension deficit, Citi Research said. This kind of move would be out of step with VW’s conservative tradition, and it had already spent huge sums on its electric car program.

Breaking Views’ Proud reckoned Tesla could use VW’s manufacturing expertise, and would welcome access to its massive financial resources, but doubted if CEO Musk would be interested.

“Musk is one of the few automotive CEOs to not show any interest in cooperating with rivals, let alone striking deals like VW has this year with Ford Motor. That would seem to rule out selling a chunk of the company to a rival,” Proud said.

VW and Ford agreed a deal which combined their efforts on vans and pickup trucks, and promised joint development of electric and autonomous vehicles. There was no equity involvement.

The report from Manager Magazin was published on the day VW was unveiling its new electric car, the ID.3, and talked about its plans for similar battery powered vehicles.

Volkswagen will launch the ID.3 at the Frankfurt car show in September, its first dedicated-to-battery-power vehicle. VW subsidiary Audi has already launched the E-Tron all-electric SUV, and its luxury sports car division Porsche’s Taycan will go sale in the 2nd half of 2019.

The ID.3 will provide the basics for a group of electric vehicles with close to twice or maybe three times the current range.

The ID.3 will have batteries available with power for as much as 125 kW, which will allow for a range of up to 350 miles. Buyers with more local needs can buy the cheaper 200 mile version. The shortest range ID.3 will have a 45 kWh battery and a long range vehicle 77 kWh.

VW is expected to unveil similarly equipped electric versions of the ID.3 in Frankfurt of its SEAT Mii and Skoda Citigo mass market brands.

According to French consultancy Inovev, the ID.3 will appear on the market next spring with prices starting at 40,000 euros ($48,800) after tax, and will be sold across Europe, but not in the U.S.

VW said it will sell the ID Crozz in the U.S., using ID.3 technology and built at its Chattanooga, Tenn., plant.

After launching the Golf-sized ID.3, VW will unveil the ID.1 a couple of years later, an electric iteration of the little Up city car, the ID.2 electric Polo sized sector in 2023, and the ID.4, matching the size of the sedan above the Golf in VW’s line-up. The ID.1 will be priced starting at 20,000 euros ($24,400) and the ID.2 30,000 euros ($36,600), according to Inovev.



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