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Should Apple Buy Tesla? Or Would Ford Be A Better Buyer?

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Tesla Model S with DISRUPT license plate, March 2013 [photo: Sam Villella]

Tesla Model S with DISRUPT license plate, March 2013 [photo: Sam Villella]

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Electric-car maker Tesla is on a roll--its first quarter was profitable, its stock price is soaring, and Consumer Reports gave its Model S a rave review.

That has led many writers to compare the company to Apple Inc. [NSDQ:AAPL].

Now one analyst has taken it further: In a Bloomberg column, Chamath Palihapitiya suggests that Apple should simply buy Tesla Motors [NSDQ:TSLA].

And, Palihapitiya writes, if Steve Jobs were still alive, he would have done so. He argues:

The right move would be for Apple to enter the car space, buy Tesla and make Elon Musk the CEO. Cook could move back to COO. Obviously this will never happen. The market is too big. Tesla is too good, and Cook is probably too weak to do something this radical.

Apple has designs on your dashboard, granted, and it is working with carmakers to integrate its Siri Q+A service into car infotainment systems.

Apple also has the money: Even assuming a 100-percent price premium over Tesla's current market capitalization of $8.8 billion, buying Tesla would cost Apple only 12 percent of its $145-billion cash hoard.

So it's doable.

But it would probably be a spectacularly bad idea.

Writing about Apple's rumored plans to enter the television market, Palihapitiya writes, "TVs will probably turn out to be a very difficult product category."

So cars, meanwhile, would be easy?

Apple designs remarkable consumer electronic products that share the following characteristics:

  • Product cycles of 18 to 36 months
  • Superb, sometimes revolutionary user interfaces
  • Outsourced manufacturing in developing countries
  • Core technology is low-power consumer electronics
  • Size is small enough to carry; weight is a few ounces to 30 pounds

Tesla's designs, on the other hand, differ rather a lot from Apple's:

  • Product cycles of 3 to 7 years
  • User-interface innovation confined to infotainment; steering, brakes, accelerator all conventional
  • Manufacturing done in-house by automakers of scale
  • Core technology is energy storage in battery, and high-power electric motor-generator plus power electronics
  • Size is more than 16 feet long; weight is more than 2 tons

The similarities and shared expertise are ... where, exactly?

Sure, Apple tends to enter new categories within its core industry.

'Revenge of the Electric Car' premiere: Tesla Motors CEO Elon Musk on red carpet

'Revenge of the Electric Car' premiere: Tesla Motors CEO Elon Musk on red carpet

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But we'd suggest that going into carmaking would be roughly as smart as Apple going into, say, deep-sea oil exploration--another industry where electronics and sensors are increasingly key to success.

We've long argued that Tesla is not likely to remain independent as a carmaker. At some point, we believe, it will be bought by one of perhaps a dozen global automakers.

By far the most logical candidates are Daimler and Toyota, each of which owns a minority share of Tesla. An outlier might also be its lithium-ion cell supplier, which also has a stake in the company.

But may we suggest a different acquirer? What about Ford Motor Company [NYSE:F]?

Ford is at best lackluster about the prospects of battery-electric vehicles.

Its Ford Focus Electric is apparently only a compliance car, and the company has said in the past it doesn't expect it to sell well--a self-fulfilling prophecy, apparently.

But we note that company chairman Bill Ford (whose name is on the building) recently expressed his admiration for Tesla and its recent successes.

"My hat’s off to them,” Ford said at a Los Angeles conference last Tuesday, although the company needs to be "mindful as they scale.”

1903 Ford Model A Rear Entry Tonneau and Bill Ford, Jr.

1903 Ford Model A Rear Entry Tonneau and Bill Ford, Jr.

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Of the big global companies, Toyota has placed its bets on hybrids (Ford makes some too, but only a fraction of Toyota's volume). GM has its Chevy Volt, Nissan its all-electric Leaf and other battery cars coming, and Volkswagen is doing a bit of everything.

It's a sign of Detroit's inherent conservatism that Ford jokingly called himself as a "Bolshevik" for pledging that the company would raise fuel efficiency 25 percent from 2000 to 2005--a commitment it did not keep.

If Ford came to see plug-in electric cars as necessary to comply with increasingly stringent global fuel-efficiency rules, buying Tesla could catapult it to the front of the crowd.

That makes more sense, at least, than an Apple acquisition.

As Ford cautioned, “Running a car company is different than running a tech company.”

+++++++++++

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Comments (39)
  1. Apple and electric cars = Better Place.
     
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  2. But Apple devices don't have changeable batteries!
     
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  3. Hehehe. Good point. They are pretty locked down however.
     
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  4. Tesla, running on iOS = Sweetness!
     
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  5. Interesting article John. I think Tesla would be a nice fit for any of the 3 car manufacturers you mentioned. My thought was Toyota as the most likely of the 3, being they collaborated on the RAV 4 EV. Also, Tesla would merge very nicely into a sub-niche car sold at select Lexus dealers. As for Apple, I wouldn't count them out of anything. But, Apple's "style" seems to be do everything themselves. Like the supposed Apple iTV coming, they would likely do all of the development in house. Not buy a company out right. I don't see Apple buying Tesla for those reasons. Interesting to think about though.
     
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  6. Toyota + Tesla = WIN!!!

    But I don't see Tesla being bought out anytime soon. Apple has the most cash for out-right purchase and the fact that the Model S' 17-inch touchscreen would be a "blank canvass" for "iOS for cars"...I just don't see it see it happening since Apple seems to like off-shore manufacturing with intellectual property in-house. (Can you see Teslas being "Made in China"??)

    And Ford -- or ANY of the domestic car-makers! -- would be a good fit. But given Bill Ford's and Alan Mullaly's "bungling" of BEVs like the Focus Electric--AND the company's push for Prius-beating PHEVs... Again. Ain't gonna happen! (Thankfully!)

    No, if Tesla is bought (and Musk sells-out!) completely, I think it'll be to a foreign maker.
     
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  7. I don't see Tesla being bought out by anyone any time soon either. EV's in general are way too young of a player in the automotive world. Tesla is one of the very, very few to seem to have made a go of it. It will take time for Tesla to prove itself over and over again that its cars are durable, well made, well designed, an that they can consistently make profits selling these cars. With all that said, themain thing that would keep me up at night if I were Tesla would be the potential for a big, mainstream company to come out with their own All-electric meat of the market car. An All Electric Fusion or Camry for $30 grand could be the death of Tesla.
     
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  8. Guess what, Camrys have been around for decades and Audi, Mercedes and BMW still manage to sell cars! Guess there is hope for Tesla after all.
     
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  9. If Apple bought Tesla, I'd have to look elsewhere. I don't buy Apple products.
     
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  10. Perhaps Google should be in the running :-)

    They are working on self driving car technology, have amazing GPS software, and I can envision Google Glass technology being embedded into the windshield.
     
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  11. While I agree that Google services would be fantastic folded into Tesla's cars, I think Google should be focusing on those services instead of getting into the hardware business. I like their model of partnering with hardware manufacturers, but sticking to the software side, ala Nexus.
     
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  12. This is easy - Apple should buy Ford, or at least do something to replace the dreadful myFordTouch software - an unholy union between Sony and Microsoft; two companies the really don't like their customers much!
     
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  13. I once owned a Sony Ericsson phone. It was then that I realised Sony Ericsson and Monsanto must be somehow linked in their equal hatred of humanity.
     
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  14. I would rather have Ford buy Tesla than Apple why? Because all Tesla models will have the Apple premium pricing for the exact same thing on top of the Tesla premium pricing (mostly a joke though.) However Apple will make people buy iPods or iPhones if they wish to use the full advantage of Tesla's control panel, cutting off Android, Blackberry and Windows Phone users, also what good can Apple do to Tesla? Ford on the other hand can make some sense (I rather Tesla stay independant but it's inevitable I suppose.) I mean Ford has a lot of supply lines and manufacturing plants so perhaps we can see a price reduction on the next models from Tesla, or be like GM and just kill it off (the Nimh batteries.)
     
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  15. My suggestion would be Google since the culture of the Google company is one of acceptance and innovation; plus, they have the money and a CEO with vision. all attributes missing from Ford. Additionally, Ford is tied to the politics of the current corrupt Washington system that is run by The AAM (Alliance of Automobile Manufacturers.

    Tesla, under Ford would be just another Mercury. In fact Tesla under any Detroit company would be just another "Tin Lizzy" and would greatly slow down the progress of electric cars.

    BTW, Tesla has made the right moves with the use of the current restrictive technology available in batteries. Think what the company will be when battery technology improves.
     
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  16. Google's co founders Larry Page and Sergey Brin were actually among the early investors in Tesla.
     
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  17. Apple should stick to what it does best. Tesla is where it's at today because of the vision and tenacity of Elon Musk and his passion for transitioning the automotive world to electrics in spite of seemingly insurmountable obstacles in that pathway. The core business of every other auto company is selling ICE vehicles. If Tesla was acquired by one of those, I truly believe that would be the end of the EV revolution as we are watching it unfold today. Beyond a few compliance cars to satisfy government imposed mandates, there is no incentive for them to promote or invest in Elon's vision.
     
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  18. Wow. Everyone misses why Tesla is a success. Elon Musk is it's visionary and chief. You would have to "buy" Elon Musk and I don't see that happening. This is why we don't have more companies like Tesla and Apple. NO VISIONARIES ALLOWED. Big Corporations like Ford don't want one guy to steer and run the company. They like committees, research and endless study groups to tell them what is popular and good. A Visionary is not a team player. He just does. If you take Tesla out of the hands of Elon Musk you will have Apple. No Visionary. Who's the guy that will bring consumers the next big unexpected fantastic product? What company will he need to do his work?
    Everyone gets this backwards.
     
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  19. While I agree with your points Jeff, I still wouldn't rule out a takeover of Tesla by a Ford or Toyota. The reason being, both Toyota and Ford have not fully signed on to EV's philosophically. They (especially Toyota) subscribe to the hybrid as the answer to everything. Therefore, buying Tesla and adding it as a specialty niche brand to add to the company fold would be a lazy (for lack of a better word), way to get the street cred. Either Ford or Toyota could offer a full portfolio of green vehicles of every stripe. And the early homework in full battery electric propulsion would already be done, hence the distinction of being "lazy".
     
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  20. Toyota could, but they are afraid of cannibilizing their hybrid market. Ford has never wanted the EVs. They do it because they have to, not because they want to. They'd buy Tesla only to destroy it.
     
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  21. My article from June 2012: "Would Apple acquire Tesla?: http://www.thestreet.com/story/11595438/1/would-apple-acquire-tesla.html
     
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  22. Apple should buy Intel before it buys Tesla.
     
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  23. Toyota would be an acceptable owner, but no way will Tesla let Ford F up there cars.
     
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  24. How about if Google bought Tesla?
     
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  25. Apple is actually not a bad candidate once you realise that EVs will fully transform the carmarket. Cars will be like iPads: nobody will care any more what's under the hood or where it's made: just how it performs and interacts with you. Anybody will be able to build a quiet smooth and reliable ride using generic parts from China, its stuff like design, refinement and user interfaces that will set you apart, the sort of thing Apple excels in.

    That said currently this game is all about the battery so Panasonic is definitely a better match for Tesla than some ICE age dinosaur looking to save a bit on R&d for the EVs it really doesn't want to do and its dealer network really doesn't want to sell.
     
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  26. If Apple buys Tesla, instead of getting less range while cold, it will be constantly overheating...

    I wouldn't want an iOS version of the Tesla. So, when the app crashes, it will just disappear for couple secs and re-appear later? No, thanks.
     
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  27. John's right to try to explain why it's crazy to think of a technology company buying Tesla. Ford might be a good candidate to use Tesla technology and styling to re-invigorate Lincoln. One of the most important factors is cultural compatibility. Somehow, Daimler + Chrysler was a disaster. What would be the fit between Tesla and the prospective firms?
     
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  28. I hate to say it, but this is the stupidest hypothetical article I have read on GCR. Even putting this idea out there that tesla could be sold this early in it history shows they know very little about Elon Musk. This is not a business like paypal, he is too passionate about it to sell and he is far from dire-straits. He is also too smart to be taken over by a "big oil interest" like ford. Apple make no sense what so ever, and I say this as a proud republican.
     
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  29. No company should buy Tesla, I mean... Unlike almost every company, especially those in the title, Tesla actually CARES about people and the world future; while Apple is still trying to hide the fact that chinese people suicide in it's factories... Shall Tesla follow that path? Definatly no!
     
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  30. I would hate to see any car manufacturer buy Tesla. I think that that would be the end of innovation for the Tesla. And Apple? No, never. Keep Apple as far away as possible.
     
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  31. Interestingly, with Tesla's stock currently trading at $87(!)it would be cheaper for Ford to buy Fiat. Or Mazda.
     
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  32. So as I'm reading about electric cars the ultimate irony occurs as my mouse pointer glides over the "fuel efficiency" link article only to reveal a BP Oil ad. As far as the article, I'm still trying to figure out why Apple would even consider acquiring Tesla. I understand that both are perceived as progressive, forward thinking organizations, but these are two completely different product segments.
     
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  33. Neither! Tesla should remain independent, otherwise progress will freeze in motion, for sure! Don't trust Apple or Ford to keep with the pace of innovation Tesla has set for itself. Please don't mention such a stupid idea again.
     
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  34. Really? This is silly. Elon Musk does what he does to support his vision of how the future should be, taking on incredible challenges from the status quo. Creating a profitable car company out of thin air would be a pretty steep climb, but an *electric* car company? That's insane. Oh, and for an encore, how about a rocket company to make us a multi-planetary species featuring reusable launch vehicles. Or Solar City...The point is that Elon's NOT in it for the money (per se.) And he couldn't have done these crazy-cool things unless HE was the one in control. It's still waaaay too early in the "electric car game," & we're not past the tipping point where Detroit/Big Oil wouldn't pull an EV-1 on us. Give up any control? Aint Gonna Happen.
     
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  35. While an early sell is consistent with Musk's past, its not with his present. It would be heartbreaking if Tesla were to be sold to a legacy automaker, and also antithetical to every stated goal Tesla has (hasten sustainable energy consumption through the coming ubiquity of all electric car sales, and to make the best cars, electric or ICE).  Toyota, Ford, etc, will surely foul up the cars so completely that they won't sell; most likely on purpose because it's in their interests, but as easily on accident/incompetence; for example, just look how GM ruined Saturn.  There's no way these organizations have the management or engineering skill to match Tesla... otherwise they would have made great EVs already. 
     
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  36. Almost any large established company that was to acquire Tesla would either buy it to bury it or completely stifle its innovation and kill Tesla by incompetence.

    If Panasonic (the battery supplier) were to buy Tesla, then Tesla would not be free to move to a better battery when another company brought out a significantly superior one.

    Existing auto companies are not about to dramatically change how their cars work and interface with the driver. They each think that is where their expertise is and have customers to prove it. Tesla would be a niche product to them that does not fit into their mainstream business.

    NADA or an oil company would buy them just to destroy.

    Elon is too smart to allow his company to be purchased at this time.
     
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  37. If Nasser was still President...yes. However, Ford has repeated stated is commitment to its brand (the Blue Oval) and Hybrid Vehicles. Note this is why Ford has divested itself of JLR, Hertz, Aston Martin, etc. Tesla would be a destrouctive technolgoy relative to the current way of doing business. Besides, Teslea may lose its luster as a "Luxury" vehicle globally if owned by an American OEM.
     
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  38. Apple they have the $$$. I say buy Tesla hire Elon Musk to be there next CEO. No other tech company have the cash like Apple.
     
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  39. Oh yes, Ford by far is your best bet. Ford would be in front of it all and with all the experience in public interest and research area's Ford has it all and it just fits! Go for it all. Steve
     
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