BY CHRISTOPHER THOMPSON

Electric-car maker Tesla is worth an eye-popping $540 billion despite a puny 0.8% global market share. It’s an opportunity for boss Elon Musk to use the company’s hyped-up stock to merge with an old-line business, just as AOL did with media titan Time Warner 20 years ago amid the dot-com bubble. Mercedes-Benz maker Daimler is the best fit.

Analysts’ earnings projections for Tesla in 2021 have fallen by nearly one-fifth since their peak in August 2018, according to JPMorgan. Yet the company’s shares surged almost sevenfold in 2020 alone, most recently boosted by its coming addition to the S&P 500 Index. Musk’s company is worth more than the next four most valuable global automakers combined, led by Toyota Motor, while producing only around 500,000 vehicles annually against more than 10 million in 2019 at Toyota and Volkswagen.

Speaking at a conference in December, Musk himself seemed open to the idea of a deal with another carmaker. Tesla’s existing aspirational customer base might best suit a luxury marque. And one with a low-voltage electric-vehicle strategy could allow Musk to add most value.

U.S. rivals Ford Motor and General Motors hardly fit the former criterion. Europe’s VW, meanwhile, is all-in on EVs. BMW might be Tesla’s most obvious fossil-fuelled counterpart, but family ownership probably rules out a takeover.

History shows the difficulty of buying any big Japanese company, while a supercar producer like Lamborghini, which VW may soon offload, would be too niche. One name remaining is $74 billion Daimler, the world’s biggest-selling luxury carmaker, whose shares have trailed the benchmark STOXX Europe 600 Auto index over the past 5 years.

Tacking on a largely combustion-engine business would dilute Tesla’s pure-play EV credentials. And Musk would have to grapple with the constraints of a German governance structure. But adding Daimler could increase Tesla’s global car output around fourfold. And the German group’s deep foundations in Europe and China, the two biggest battery-vehicle markets, would reinforce Musk’s electric offensive. Daimler even had a small stake in Tesla for a time.

There’s a kicker, too. Under U.S. stock-exchange rules, Tesla would only need shareholder approval if it increased its outstanding shares by 20%. At Tesla’s equity value, Musk could theoretically snap up a target worth $100 billion or more. With a luxurious 40% premium, he could buy the Benz empire without even asking permission.

First published Dec. 3, 2020