Eight reasons for Apple to buy Tesla

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.

The Carbon Footprint Game

Let’s get one thing straight: There is no such thing as “zero emission.”

Fortunately, an analysis at Seeking Alpha has raised awareness of this today. It’s one of two reports that came out that coincidentally made comparisons between Tesla and Toyota.

(Let’s dispense with the more fun one first: The guys at Marketwatch claim it’s cheaper to own/lease and operate a Tesla Model 3 than it is a Toyota Camry.)

Now, on to the more serious topic of carbon footprint.

To be clear, I’m a big fan of the rapid ascent of EV autos in the world. I do think Tesla has spurred the makings of a revolution and the big manufacturers are falling right in line.

But, just as companies exploited the “Green” label by slapping it on everything and anything, (they might as well have added “Gluten Free”) the claims of “zero emission” are spurious at best and misleading to boot.

What the Seeking Alpha article finally points out is that we have to look holistically at the Tesla — or any electric vehicle — when analyzing the carbon footprint. And in this case, according to the report, the Tesla Model 3 is, overall, a bigger polluter than a Toyota Camry.

Ouch.

Now the argument here, while thoughtful and meticulously researched, has drawn fire a la the comment section. I am not going to claim I can dispute the position of the author or the uproar in peanut gallery with any level of authority.

But what I do appreciate about this report is that for the first time, at least that I’ve seen, someone is analyzing EV car manufacturers’ carbon footprint based not just on the “tailpipe” emissions or lack thereof, but on:

1. The overall cost of manufacturing the vehicle

2. The fact that the electricity used to charge the batteries has to come from somewhere and more often than not that is a coal-, gas-, or oil-fired plant. The emission at the tailpipe might be zero but really it just means the emission has been moved elsewhere.

Certainly, solar is offsetting some of that. Many EV owners are eco-conscious and putting solar on their roofs. This is a good thing.

But it still must be taken into account that it all vehicles — in fact everything that is produced, requires raw materials that are extracted, transported and refined (using carbon-spewing vehicles and machines). It requires energy to power the manufacturing process. It requires oil and gas to transport the finished product via air, rail, road or sea.

So here’s my point: I like the Seeking Alpha article for raising awareness around the need to look holistically at how what we buy and use contributes to the overall carbon footprint.

It is one of my peeves are the “Zero Emission” bumper stickers and branding the EV car companies exploit.

Nothing in this world that humans touch or use is zero emission. Nothing.

In it for the short haul

There’s lots of focus on the next generation of long-haul trucks, with Tesla, as usual grabbing most of the attention.

But there’s an enormous benefit to tackling the short-haul vehicle market first. Everything from grocery delivery vans, postal trucks, UPS-type vans for your daily delivery of Amazon packages etc. etc.

Converting these vehicles to electric (or more accurately, replacing these vehicles), will reduce air pollution in congested areas, where traffic lights leave vehicles idling and spewing out diesel fumes. And they are always within close proximity to home base for charging.

These vehicles probably need a range of 100 miles tops vs. the 400-hundred or 500-hundred needed to make the 18-wheeler-electric feasible.

Looks like Daimler is out ahead on the short-haul market.