Volkswagen AG would provide Tesla with a large scale unit base (approximately 11 million vehicles sold in 2019 compared to 370,000 Tesla vehicles sold) that Tesla could leverage in part to accelerate technology development by 1.) deploying Tesla’s technology across VW’s much larger fleet and 2.) utilizing VW’s cash flow to fund technology development.
Tesla ought to leverage its overvalued equity ($390 billion market value compared to $76 billion for VW) while times are good. All bubbles end. An all stock deal would work fine. VW Group CEO Herbert Diess has been very complementary of Tesla as of late as Tesla works to complete its new factory in Gruenheide, Germany. The Gruenheide factory would be Tesla’s first production facility in Europe and could potentially produce 500,000 units per year.
Further signs of a bubble: Luminar Technologies which we wrote about in 2018 is working to finalize a blank check (i.e. SPAC) deal at an equity valuation of approximately $3.4 billion. Luminar’s revenues are approximately $15 million – a 227x multiple on revenue. That’s a bubble folks!