3 Reasons Apple Won't Buy Tesla

3 Reasons Apple Won't Buy Tesla

Apple probably won’t buy Tesla, no matter how badly shareholders want to see the pair unite.

Two Apple shareholders suggested to CEO Tim Cook earlier this week that the tech goliath buy the electric automaker, amid unconfirmed rumors that Apple is developing an electric car of its own. Cook avoided the question, saying only that he hoped Tesla would adopt CarPlay, a new feature that integrates the iPhone interface into cars.

Apple’s $178 billion cash reserves are more than enough to afford Tesla — which has a roughly $24 billion market cap — the move is highly unlikely, analysts told The Huffington Post.

“It doesn’t necessarily match,” Neil Cybart, an independent analyst who founded the firm Above Avalon, told HuffPost. “The playbook that Apple typically relies on wouldn’t be used or wouldn’t be followed if they went out and bought Tesla.”

Neither Apple nor Tesla responded to requests for comment.

Here are the three major reasons why this deal probably won’t happen:

1. Apple develops and designs its most significant products in-house

Apple buys other companies to absorb their technology. For example, the company launched its own maps application in 2012, two years after buying and shutting down mapping startups Poly9 and Placebase.

“They tend to buy technologies that they then develop and make into other things that they’re doing,” Jan Dawson, the analyst behind the firm Jackdaw, told HuffPost.

Releasing an Apple car would be a huge deal, and the firm would likely not put its brand on something that was entirely developed outside of its control. Besides, it’s still unclear that Apple even wants to be in the automotive business.

2. Apple’s products are assembled at third-party factories. Tesla builds its own cars and batteries.

Tesla manufactures its flagship Model S sedan at its factory in Fremont, California. That’s part of why it chose to locate its Gigafactory, a massive battery-making facility currently under construction, in Nevada — it’s close enough to easily ship lithium-ion packs westward for use in cars. Hellbent on igniting an electric car revolution, CEO Elon Musk has kept a tight grip on Tesla’s supply chain in hopes of ensuring relative perfection with each model.

Apple operates differently. Though each iPhone or iPad declares that it was designed in California, the company’s gadgets are built in third-party plants in China. It seems unlikely that Apple would alter its manufacturing structure for a singular product, analysts said.

3. Elon Musk won’t sell.

Tesla’s billionaire chief executive isn’t just in it for the money. The company embarked on a spending spree this year, doubling down on expanding its fleet of battery-powered vehicles and building its Gigafactory. Musk said he doesn’t expect Tesla to turn a profit for at least five years.

He wants to spark a revolution that ultimately replaces fossil-fueled combustion engines with rechargeable lithium-ion packs. To achieve this, Tesla keeps a tight grip on its business — refusing, for example, to franchise its stores despite opposition from dealership groups in certain states. Ceding control of Tesla’s future to Apple would run the risk of derailing the progress Musk has made in the electric car industry.

“He just simply wants electric cars to be popular, he wants people to drive them,” Cybart said.

If he and Tesla shareholders decided to sell, and Apple proved to be a poor steward of the car company, he’d have to start all over.

Besides, if the two companies were looking to join forces, why would their human resources departments be at war poaching each other’s talent?
Source: Huff Post



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