Singapore markets closed

Why one auto watcher thinks Volkswagen buying a Tesla stake is a good idea

Grete Suarez

Although Volkswagen (VOW3.DE) quickly shut down media reports that it is considering buying a stake in Tesla (TSLA), at least one auto market watcher thinks it would be a good idea.

On Thursday, Tesla’s stock briefly spiked on a report that the German auto giant was weighing an investment in the embattled car maker. Yet in a statement to Yahoo Finance, a Volkswagen spokesperson called the speculation “unfounded.”

However, that doesn’t mean it’s not a good idea to mull over, according to Greg Migliore, editor-in-chief of Autoblog. He told Yahoo Finance that a Tesla stake could actually help the German carmaker.

“I think it would be a brilliant move for Volkswagen to really look at buying Tesla,” Migliore told YFi PM.

“It’ll give them access to platforms, software technology, charging technology… that could really give Volkswagen really this critical edge in this saturated marketplace,” he added.

A ‘halo’ effect

Tesla's Model S and X deteriorating sales trajectory may be due to competition from Jaguar's I-Pace and Audi's e-tron, particularly in Europe. (AP Photo/Hussein Malla)

That may be a strategic move, because Tesla is apparently losing market share as traditional carmakers catch up with electric vehicles of their own.

According to research by Bernstein senior technology analyst Toni Sacconaghi, Tesla’s Model S and X face tough competition in Europe, particularly from Jaguar (TTM) and Audi.

“Almost everybody has some form of electric car program...from Audi to Jaguar to Chevy (GM) to Nissan (7201.T),” said Migliore. “I think what you’re looking at is that companies are hedging.”

With rising gasoline prices and uncertainty surrounding oil supplies, carmakers are looking to diversify their options. That means the electric car space is likely to get more competitive.

“This is ultimately going to be good for consumers, and I think it could be good for Tesla,” Migliore said. “Simply because all this attention in the electric space, is going to make the market grow.”

Yet he said Tesla is more than the software technology and the electric car - it’s also perceived as a “cool brand” with a passionately loyal base of fans and clients.

“Certainly buying [Tesla] gives Volkswagen more than just a car company or technology,” he said. “It would give them an image, it would give them a halo— I think that’s actually what they would be looking for.”

He added that Volkswagen already has a robust electric car program, so they don’t necessarily need Tesla.

“But the image boost that Tesla could give them I think can really help them against other companies like Ford (F), Toyota (TM), and General Motors,” said Migliore.

Grete Suarez is producer at Yahoo Finance for YFi PM and The Ticker. Follow her on Twitter: @GreteSuarez

Read more:

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, YouTube, and reddit.