Could Tesla Be Swallowed Up By a Big Three Automaker?

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When 24/7 Wall St. listed its 10 brands that will disappear in 2014, Tesla Motors Inc. (NASDAQ: TSLA) was not among them. However, veteran trader Yra Harris of Praxis Trading told CNBC this week that he predicts Tesla may be sold to General Motors Co. (NYSE: GM) in the coming year.

GM, like the other Big Three automakers, has had only limited success with electric vehicles. By the end of October, GM had sold less than 19,000 of its Chevy Volts, down almost 3% from last year. Ford Motor Co. (NYSE: F) sells fewer than 200 Ford Focus Electric vehicles each month. Both companies offer steep discounts to lure in buyers.

Would Tesla be a good fit for GM as Harris suggested? The luxury electric vehicle maker currently has a market capitalization of more than $18 billion, after shares rose more than 5% on Tuesday on news that its Model S had kept its five-star safety rating from the National Highway Traffic Safety Administration. A few reported engine fires in the Model S had spooked investors. The share price fell more than 20% from its peak back in September.

Tesla reported a record 5,500 Model S deliveries in its third quarter, as well as record production, a rising gross margin and expansion of its stores, service centers and charging stations. Per-share earnings have been better than consensus estimates in the past three quarters. But share trades at a hefty 100-plus times forward earnings.

Still, as Harris said, there would be no reason for GM to reinvent the wheel when it comes to electric vehicle technology. The Model S is critically acclaimed, while the Chevy Volt has had its own issues with car fires. But it all may come down to the valuation of Tesla — and whether Elon Musk is ready to part with it and move on to his next project.

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