I have never been a big fan of mergers and/or acquisitions. What looks good “on paper” invariably ends in a much-less-than ideal situation. I can count on one hand the mergers I have seen or been involved in that had a semblance of success. I can’t calculate the number I have seen fail.
So, with that disclaimer, let me lay out the reasons I think it is a great time for Apple to buy Tesla.
- Tesla is a consumer technology company. Apple is a consumer technology company. Both companies are making high-end gear that has comparatively high profit margins. It’s a perfect fit.
- Tesla needs a White Knight. Elon Musk is a character and has done what no other human could, single-handedly changing the automotive industry and focusing the world’s attention on renewable energy as the future for transportation. But, as is the case with many founders, he has reached his capacity to govern. And with myriad other interests (The Boring Company, SpaceX), his attention span is spread thinly. Tim Cook knows operations. He can make Tesla work and make it work economically so that it can scale. And Apple has the deep pockets to make that happen.
- Speaking of Tim Cook, he needs a visionary, or at least a vision. Elon has laid it out for Tesla: to accelerate the world’s use of sustainable energy for transportation and the home and beyond. It’s simple, it’s bold, it’s brilliant, it’s do-able. Tim can get it done. And here’s the beauty of this scenario: Tim doesn’t need Elon to make it happen. Tim has already proven that. It has been 8 years since the inimitable Steve Jobs passed away. And Tim has done quite well by the vision that Jobs laid out. The problem is, that vision has reached the end of the road and Tim needs a new one. Tesla would set the company on the right path.
- So what is that vision? It’s all about the home. That’s right. Tesla gets Apple in the home. Tesla is much, much more than a “car” company. It’s ultimate vision, with Solar City and Powerwall and Tesla is a system of renewable energy from home to auto and beyond. Apple has been a laggard in getting into the home. Amazon has Alexa. Google has Nest. Apple is a follower in this space. No other company has the holistic view of providing these kinds of technologies to the home owner.
- It’s all about the car. OK, so No. 4 was a bit of a click-bait. Yes, acquiring Tesla gets Apple into the world that is rapidly heading to autonomous transportation. This is a no-brainer. It’s exactly the holistic systems approach to a whole new market that Apple needs. It’s way, way behind Uber, Google and others that have been investing heavily in this arena. Apple needs to not only catch up, but leapfrog the competition.
- Closed ecosystems. Apple has built the largest consumer tech company on a closed ecosystem. As much as it pains me to say so (coming from the world of Unix and open source), it is a brilliant strategy. By controlling every aspect of its hardware, software and services, Apple can provide a user experience that is unparalleled in the industry. Mind you, I have many, many complaints — as do we all — about shortcomings that Apple needs to fix (iTunes, iCloud are woefully outdated, for starters). But it is showing promise. It’s now on a run-rate with services to be over $40 billion in revenue a year. That’s something like No. 236 on the list of Fortune 400 companies if Apple Services were a stand-alone entity. Meanwhile, Tesla has built its own ecosystem with massive reams of data on users’ miles driven. It can provide over-the-air updates based on Big Data analysis of what customers want and need. It is unbeatable in the automotive market today for continuous improvement. And this gives it a long, long lead in the world of autonomous driving.
- Fiercely loyal customers. Ever talked to a Tesla owner?
They are proud, they are excited, they are adamant. Same with most Apple users, although this has dipped as of late. But each company has locked their users into an ecosystem. And the users love it, because the highly-integrated experience it provides cannot be matched by their respective competitors.
- It’s all about “showing me the money.” Tesla is scrounging for funding, while Apple has a big, big problem to the tune of about $245 billion that it needs to invest wisely. How many stock buybacks can the company do? Investors want to see those funds used to increase their shareholder value. Apple could pay a super premium and purchase Tesla outright for about $100 billion and still have more money than most countries in the world. But more than that, it would be able to, pardon the pun, shine the headlights on the future.
Full disclosure: I own no shares personally in either company. My spouse is a former Apple employee and acquired shares during her tenure. I don’t know how many and don’t care to ask.
8 thoughts on “Eight reasons for Apple to buy Tesla”
Are batteries sustainable? Renewable energy?
Otherwise, I think it’s a great idea for Apple to buy Tesla.
Would Tesla’s battery engineering improve Apple’s iDevice battery life?
“… it’s do-able”
On what basis do you make this claim? I can see no evidence of this. Almost every major car manufacturer has tried, but every product is overpriced and under performs. Battery technology is close enough to the theoretical maximum that it is unlikely to go far enough to suffice. Motor technology is very mature.
There is no point to this, and no reason to think it can do better.
Fine as far as it goes, but Tesla is a car. Someone who knows how to manufacture cars to a high level of efficiency and quality needs to be involved.
Yes, both are battery dependent, too.
If Apple tossed 10B at Tesla, both would benefit immensely. The price is a lot more right, but Tesla’s troubles are deepening. Waiting a bit more will likely give them a lower entry, Musk’s recent Twitter wink notwithstanding.
Apple using its cash reserves to buy Tesla would make sense – except that it would require resolving some tough issues.
Apple’s mission is basically to satisfy its shareholders by maintaining or capitalizing Apple’s current advantages (esp in its fight vs Google, Amazon and Microsoft); Tesla or rather Elon Musk’s mission is to accelerate the transition to the inevitable electric future (vs fossil based) and develop a contingency for when/if the planet earth gets wiped out (by an asteroid or whatever) .. also to help prevent possible catastrophic events in case AI gets out of hand ..ah and the Boring company .. well really to save the planet from preventable wasteful or catastrophic outcomes. And the reason Elon has financially successful companies is … because it is necessary in order to have some impact.
Elon would certainly be capable of directing Apple’s technological advances, but what would be his motivation? Incidentally, as a reminder he did figure out how to get the AI tech required to leapfrog all the other self driving outfits (Uber, Google’s Waymo etc.) by being able to enlist the best chip designer (Jim Keller) as well as the best computer scientists and create the fastest/ most performing AI system for self driving tech…
Elon also had the chops to figure out how to create a 21st century car factory – unlike the current car companies, Tesla is as completely integrated as possible (vs sub contracting engines, seat, etc from a myriad subcontractors).
In order to succeed Tesla also needs to have its CEO able to make huge “bets” (in quotes because they are not really haphazard, just huge decisions which make sense but are not 100 certain, nothing is). Same with Space X… and probably for Apple as well. like when Steve Jobs developed the iPhone, and stuck with the Motorola as long as it did (while always being prepared to switch to the intel platform, which it eventually did.. even tho till the last minute touting the advantage of its proprietary approach, BTW).
So what are the odds of some sort of Apple/ Tesla melding happening? It would require also most Apple shareholders figuring that Tesla is *also* on course to make huge amounts of profits if it continues to grow the way it has so far. This means for many to understand basic elements of physics which I am not sure can happen. (no amount of wealth or power can help if one is not open to learning).
Having said all that, I’m still optimistic for both. The alternative is too depressing to entertain.