Barclays analysts think Tesla bulls will start suggesting that the EV manufacturer will be bought out again—and they already have
Tesla Motors and Apple have been the center of comparisons for some time, and it’s been suggested time and again that Apple might buy Tesla. So would Apple really just buy out the automaker rather than making its own car? And what about competition in the EV space?
Barclays analysts weighed in on the rumors about Apple working on its own car.
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Competition for Tesla on the rise
In a report dated Feb. 17, Barclays analysts Ben Reitzes and Brian Johnson and their teams said perhaps the most significant thing for Tesla if Apple enters the car industry is competition. Indeed, the two companies’ luxury brands do bear some resemblance in how they win over fans.
They point out that many Tesla bulls are basing their theses on the automaker’s expectations for significant expansion in its margins. However, they believe if Apple did enter the auto market, this thesis would erode “to some extent.
The Barclays team also thinks that traditional automakers might speed up their plans for electric vehicles if Apple dives in. Clearly Tesla hasn’t been enough of a competitive threat to do that, but they think Apple might be.
Apple’s CarPlay rollout may be frustrating
Of course Apple has already dipped a toe into the waters of the auto industry with its CarPlay infotainment system. The Barclays team thinks that so far, the experience has been “frustrating” for Apple and automakers alike.
Apple is not only very secretive, but at least one automaker apparently wasn’t able to learn the last names of the Apple contacts it worked with. Because of these frustrations, the Barclays analysts think this may be one of the reasons Apple is interested in building its own car—either as part of a plan to sell the car or perhaps as a way to create a “hands-on learning lab” for CarPlay’s next generation.
Would Apple buy Tesla?
The Barclays team suggested that Tesla mega-bulls might start singing the buyout song about Tesla again. Indeed, within a day of their report stating that someone would suggest that Apple will buy Tesla, one firm did put out a new report with that suggestion, stating that it will happen within 18 months.
But in light of Apple’s rumored car-making efforts, it seems even more unlikely that the company would buy Tesla. Any mega-bulls who raise this suggestion again, are probably way off base. Apple tends to build its own hardware and acquire smaller startups for their technologies and as acqui-hires rather than hardware. Tesla just doesn’t fit the bill for an Apple acquisition.
Granted, the Beats Electronics deal brought some hardware with it, but Apple also got rap star Dr. Dre and Jimmy Iovine, and the company was much smaller than Tesla is.
Apple to face the same battles as Tesla
For all the similarities between Apple and Tesla, the Barclays team notes that there is one big headache Apple will probably face if Tesla isn’t successful in beating back auto dealerships. They think Apple would be just as frustrated with the auto dealer franchise model as Tesla is.
This certainly seems likely as Apple sells its products in its own stores but also sells them in third party stores. This type of setup would be interesting to see in the auto market, as the exception to the rules that applies to Tesla wouldn’t apply to Apple unless the company follows a different strategy with its car. Tesla doesn’t currently have any third party dealers.
Of course by the time Apple brings its car to the market—if it actually does—Tesla could have already blazed a trail and perhaps even eliminated the requirement for third party auto dealer franchises.
As of this writing, shares of Tesla Motors were up by 0.26% to $204.88 per share, while Apple stock was up by 0.21% to $128.10 per share.