Can General Motors Release Its Inner Tesla?

Markets are wild for electric vehicles—unless they are made by companies that also make regular cars. Squaring this circle won’t be easy for General Motors.

Tesla’s market value rose 11% to a record $342 billion Monday. There was little obvious cause, apart from an analyst lifting his target price, but investors are used to that with Elon Musk’s company. More unusually, GM shares rose by almost 8%, the most since the wild volatility of April.

A notion is gaining currency that GM can spin off its EV operation into a separately valued entity better able to compete with—and be valued like—Tesla. On Friday, Deutsche Bank analyst Emmanuel Rosner put some heady numbers on the value of a spinoff. GM hasn’t closed down this discussion, which has grown in line with Tesla’s stock price this summer.

“Nothing is off the table,” said Chief Executive Mary Barra following GM’s second-quarter report in July.

The appeal for the company, particularly after this year’s costly shutdowns, is access to cheaper funding. GM stock is trading below the $33 it fetched in its postbankruptcy initial public offering, effectively barring it from selling shares to bring in cash unless it is outright distressed. Tesla has no such problem: In February it raised $2 billion by issuing shares.

For GM, a better valued EV subsidiary could help level the playing field in a very expensive race to master a new technology. For GM’s shareholders, there is the added hope that some of the tech luster might rub off on the parent company—particularly if the subsidiary were publicly listed, giving it a very visible live valuation.