Why Apple Inc. May Just Buy Tesla Motors Inc

Why Apple Inc. May Just Buy Tesla Motors Inc
ElisaRiva / Pixabay

By acquiring Tesla, Apple can turn one of the biggest potential rivals into an ally

Ever since reports surfaced that Apple was secretly working on an electric car project, there have been a lot of speculations whether the iPhone maker would be interested in buying Tesla. Serial entrepreneur Jason Calacanis even predicted that Apple would buy Tesla for an eye-popping $75 billion by 2016. Apple paying $75 billion for Tesla makes little sense considering it cost Elon Musk a total of $3.1 billion to build Tesla from scratch.

Tesla just fits the bill

But there are a number of things that suggest that Apple may just buy Tesla. Apple’s secret car team has hundreds of engineers. Reports suggest that the company has hired experts from Tesla, Johnson Controls, Panasonic, Samsung, and A123 Systems. The iPhone maker is serious enough about the car market to build a team of hundreds of engineers.

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The Cupertino company has been poaching Tesla employees by offering them 60% salary hike and $250,000 upfront bonus. If Apple acquires Tesla, it will get a premium brand, a highly talented team, and wonderful products, says Michael Graham Richard of TreeHugger. Most importantly, Apple will be turning a potential rival into an ally.

Apple is probably the only company that can afford to buy Tesla at any premium to its current valuation. The iPhone maker’s commitment to electric cars may help convince Elon Musk that his company would be in good hands at Apple. Further, Apple has the capital to fund Tesla’s growth as it grows into a mainstream company. Tesla will face huge problems scaling up, and it may run out of capital. But if it has access to Apple’s cash reserves, capital won’t be a problem.

Apple and Tesla have the similar corporate culture

Tim Cook has repeatedly showed his commitment to clean energy. Earlier this month, Apple signed a $848 million deal with First Solar to build a solar farm in California. Tesla also has similar interests. So, it would make more sense for Apple to invest in an electric vehicle company than a gasoline car company.

Finally, corporate culture is one of the most important things when it comes to integration of two different companies. Elon Musk has officially stated that Apple was a model for the Palo Alto-based EV maker. Both are highly innovative companies. Both are centered around engineering and design. Both have a strong brand and customer support experience. If Apple buys Tesla, there won’t be a culture clash.

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  1. If there were other big shareholders it would be a different story, but the next biggest shareholders are 10% ish, so they don’t carry much individual muscle.

  2. Then when you consider that stockholder votes never achieve 100% participation, that figure rises higher than 69%. In practise, it would be close to impossible to get a stockholder vote against Musk for pretty much anything.

  3. Yes, but he owns 27% (ish) of the stock.

    So other investors would need a 69% vote in favour to carry a motion that Musk didn’t support. That’s really very hard indeed to achieve, particularly when the CEO is recommending against.

  4. That’s a little bit dumb, if you don’t mind me saying so. He owns over 25% of the company and therefore has over 25% of the votes. He’s also the single biggest shareholder, by some margin. Most importantly, he’s the CEO and so sets the direction. He only needs to persuade 1/3 of the other shareholders to agree with him and he’s got more then 50% of the votes.

    So yes, what Musk thinks is extremely important when it comes to selling Tesla.

  5. what the eff

    “What would concern me is if another company, bought Tesla with the full intention of shutting it down”

    What kind of logic is that. Who spends 200 billion to lose all of it.?

    Why wouldnt exxon just buy tesla and then buy power companies.

  6. My electricity is generated by burning……”Coal”. It’s very interesting that people have no problems hooking in their personal houses, and seeing corporate owned skyscraper office towers, etc wired into the power grid. But as soon as someone else plugs a car in, they suddenly have an issue with the other guy/girl. If we want to ‘save the planet’, populations need to stop heating, and electrically lighting up buildings NOW !

  7. What would concern me is if another company, (whether it be Apple, or Exxon) bought Tesla with the full intention of shutting it down, and mothballing it. If Tesla were bought, is there anything to stop it from getting the Gordon Gekko treatment?

    Tesla has an excellent product here, but they have to get the cost down to where an average consumer can afford the thing. I would love to drive one; it would suit my needs perfectly. I would love to skip the gas station, then pull into my garage, and plug in, but not for a cost in excess of $120,000.00 for a brand new P85D. I can buy a five year old stripped down Chrysler, for 1/10th of this, and drive it with a few repair bills. I can burn alot of gasoline for many years with that remaining money. Tesla quit taking so long to get the Model 3 out there, and more people will buy you’re cars.

  8. The purported abundance of oil and natural gas is highly overrated. We need to be looking at renewable energy, which hopefully can make us a little more responsible in our usage of natural resources. Even though there may be an abundance of resources, the world population has grown significantly, and as a result, the amount assignable to each individual on the face of the earth is less and less.

    If there is the opportunity to harness renewable energy somehow, we should most certainly look into it diligently and fervently.

  9. Apple can also buy ship loads of horse manure. That does not mean they should buy. Apple car strategy is not clear. Tesla’s business model is still unproven. The commercial viability of battery technology is still unproven. World is awash with oil and natural gas. For the business to scale it should be able to compete without subsidies and make profit. To speculate Apple will sink anywhere in the region of 25-30 billion is ridiculous.

  10. “Both Apple and Tesla Motors are using high-end products to help finance more affordable products.”

    Apple trying to create more affordable products? That’s complete BS.
    Being “affordable” is not to Apple’s credit. The carriers are subsidizing the high priced iphones. That’s the only reason why naive people think they are “affordable”.

    “…there is nothing slave labor about them. It takes an application process to get a job there…”

    It also takes an application to get a job at Wal-Mart and McDonalds.
    What type of people apply there? The young, naive, unskilled no experience types.

    “…and people can leave if they want to, but most people in China would say only idiots would consider working in a primitive farm in a rural area getting a much lower salary to be a better job than in a modern factory.”

    That doesn’t support the fact that Chinese contract manufacturers have a very high employee turnover rate.
    After the employees wise up, gain some skills and experience, they leave for better jobs.

    “Foxconn in Shenzhen has its own television station, fire brigade, and hospital. It has its own brand coffee and even Foxconn branded sewer lids. In the Longhua factory compound in Shenzhen, over ten tons of rice are consumed every day at lunch, over 3000 new staff are hired on a daily basis…”

  11. well my electric vehicle design does not come with a battery. How does one get a hold of the executive staff of Apple as I tried tcook@apple and no reply not that I would really expect one.

  12. I’d really like to see the portfolios of some of the pundits in these comments. But I guess that gives them too much credit, they probably don’t understand investing, either. Their jealousy and anger is understandable in that context.

  13. My goodness people can’t you see the writing on the wall. I don’t think Apple is into making an Apple car, it does not make sense. Is either they go into a joint venture or Apple buys Tesla as simple as that. The same thing that happened with “Beat” is the same thing that will happen with Tesla IMO.

  14. When you have polarization between cultures, this is where divisions and spin offs come in handy to not only allow hybridizing of talent but also creating added value and new market share. I’m surprised Humvee is not thrown in the mix for another high end market revenue source.

  15. Apple and Tesla have a very different corporate culture in terms of publicity and openness. Tesla is loud and chatty. They post blogs, they show off their factory, they share failures as well as successes. They are open.

    Apple never talk about product before release. They never really blog. They have an incredibly tight culture of secrecy. Musk has talked again and again about how Tesla’s secondary mission is to encourage other manufacturers to build electric cars. He wants to profit, sure, but there’s an ideological element to the man himself. I’d be very surprised if he agreed to sell.

  16. I don’t think they should or will buy Tesla. I rather believe that Apple will use Tesla as a supplier of batteries for their future vehicles. I even suspect them to already have such an agreement. It is known that Tesla and Apple have been in talks with each other. But up ’till now the subject of these talks remains unknown.

  17. but you can still use the battery for home power. or unload it to someone who can.

    How much is a BMW 540 engine replacement cost?

  18. the hyper loop is already being worked on by a large group of engineers volunteering their time and resources.I think it was in texas.

  19. SpaceX is Spruce Goose? Your analogy is insane. SpaceX is actively, as in on an ongoing basis, resupplying the ISS. It has also already dramatically reduced the cost of delivering payloads to orbit, and when it is able to reuse the rocket stages, it’ll reduce the cost further by an order of magnitude.

  20. Over and over again mds, you show everybody you are such an apple fan/fool boy.

    “…it is impractical for most due to the charging issue; which is a scam in that people are under the impression they will no longer have fuel bills. Ask someone who owns a Tesla what their electric bill looks like.”

    The 85kwh Model S can go about 265 miles on a full charge. At $.14kwh, it take less than $12 to “fill” the battery. That comes out to 4.5 cents a mile.

    Compare that to a car that gets 20mpg and the price of gas at $2.75 a gallon, it would cost $36.43 to drive the same distance. 13.7 cents a mile. That’s more than 3x the cost of electricity!

    “And guess what folks………electricity is generated by burning…….wait for it……..”GAS”.”

    That depends on where you live and where you charge.
    The top 5 states – Idaho, Washington, Oregon, South Dakota and Maine produce 78% to 60% of their electricity from renewable sources.. 6th and 7th are Montana 42%, California 30%.

    As time goes on, more solar farms are being built causing the production of electricity to become cleaner and cleaner. Also people are installing solar panels on their homes.

  21. The smartest move by Apple would be to license technology and utilize solutions and manufacturing capacity from Tesla Motors. Specifically, the Model 3 platform might be an excellent foundation for a future Apple car providing a great compromise between performance and cost. Apple is known for being fabless using ODMs (e.g. Foxconn, Quanta and others), and I doubt that Apple wants to own car factories in the future but rather wants to use an ODM like approach also for cars, if they actually will end up making cars.
    Already today the ODM model for automotive is used to some extend in China and India. Apple is the perfect ODM customer in a future of EV manufacturing and initially Tesla Motors could evolve into offering ODM business, perhaps even with manufacturing capacity overseas. Certainly their coming battery Giga factory will point in this direction also.
    Utilizing the Tesla Model 3 platform (or a subsequent derivative) is obvious to me and I don’t see why Apple would want to become experts in EV drivetrains, power electronics, brakes, battery packs and other such technology areas.

  22. @one percenter, Apple is being copied extensively and need to use legal means in protecting themselves. Tesla Motors would do the same if they were exposed to the type of copying Apple is. Without legal means, the USA would see an extensive influx of phones that are almost true copies of the iPhones, for example. In China you can find such phones today.
    Both Apple and Tesla Motors are using high-end products to help finance more affordable products. In Apple’s case they have models of iPhones and iPads with maximum memory costing relative more. And iPods are cost-down derivatives of previous iPhone models without the radio part.
    And the labor doing the Apple manufacturing e.g. Foxconn in Shenzhen make relative good salary of typically US$400 per month. The workers get free housing in dorms and generally have far better conditions than in their hometown (typically from rural areas of China). Chinese labor costs have been on the rapid rise in the last several years and no other than Foxconn and other Apple ODMs have been pushing the trend. In fact, part of the reason why Apple has helped salaries to rise in China is because Apple products cost more allowing it.
    Every consumer electronics company nowadays is using primarily Chinese ODM. Windows laptops, Android phones, cameras etc. all are manufactured in these same contract manufacturing companies (ODMs) and there is nothing slave labor about them. It takes an application process to get a job there and people can leave if they want to, but most people in China would say only idiots would consider working in a primitive farm in a rural area getting a much lower salary to be a better job than in a modern factory.

  23. They do not have the same corporate culture.

    Apple uses lawsuits and lawyers to keep it market share. Tesla open sources it patents to INCREASE competition. Apple uses outsourced slave labor to build its expensive products. Tesla is using its high end cars to finance mass production of AFFORDABLE electric cars. Musk said he wants millions of EVs on the road and expects 100 gigafactories to supply them. Apple would be happy with a few expensive cars with high margins.

  24. Tesla stock is so high, it is priced like Tesla will become bigger than Ford. It is priced for a one in a thousand possibility. The management at Apple is anything but dumb. It is not going to happen.

  25. I respect the Apple brand but it’s not for everyone and they might actually hurt sales if they force you to use an iPad in the center console. This acquisition would be too limiting and just warrant more ridiculous Apple markups. A better pairing would be with Google considering the OS being used in the touchscreen.
    I’ll be reluctant to buy these products if Apple corporate starts dorking up what Tesla started. They’ve got money, they should just buy the best battery tech available from Tesla and come up with their own weird/unique design.

  26. Tesla would be a perfect fit, but it’s just too expensive. Apple probably did the math and decided that developing their own car for 10 billion is better than buying Tesla for 50.

    Or they are leaking those rumors to drive the price down.

    IF this is true in the first place …

  27. SpaceX is very funny and analogous to the Spruce Goose project. Guess Elon’s idol is Howard Hughes. (Yea he was a nut job too)
    A high speed rail from SF to LA will never happen either. The estimates to build it did not include land!
    If Elon thinks CA will provide eminent domain laws to “give” him the land; he is breathing his own rocket fumes.
    Tesla makes nice cars that will take very long to be mainstream. And Elon does not have the mechanisms in place to mass produce and be competitive.
    Anyone can afford an I-Phone. Few can afford a Tesla. It is not only elite; it is impractical for most due to the charging issue; which is a scam in that people are under the impression they will no longer have fuel bills. Ask someone who owns a Tesla what their electric bill looks like. And guess what folks………electricity is generated by burning…….wait for it……..”GAS”.
    This is not solar…… Which raises the point of First Solar; who AAPL is spending $850M with for a solar farm; versus Solar City which is Elon’s other company.
    I think that says a lot about any possible partnership between the two companies.
    That was a major slap in Elon’s face.

  28. My design of a electric car does not come with a battery, or uses solar panels. It does not wind up, is not nuclear and does not operate as the old electric trolley buses use to. A battery replacement cost of a electric car is well over three thousand dollars. So do you really save, no. I have tried contacting Tim Cook, I starting to believe that his on line email address is bogus.

  29. Never gonna happen. Tesla, based on Elon’s overambitious goal of going from 10 to 55K cars this year still shows they won’t turn a profit until 2020.
    No way the board would approve that even if Tim was interested.
    Now…….This rumor has been chewed, spit out and chewed again 50 times in the last week.
    Any more and we will all puke.
    PLEASE…….stop now. It’s more than tired.

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