Tesla Motors co-founder and CEO Elon Musk’s profile was raised in the Apple community last fall when he was called “the Steve Jobs of automobiles,” and reportedly Mr. Musk refers to the Tesla Model S electric vehicle as his “Macintosh. Now, CNNMoney’s Virginia Harrison reports that German investment bank Berenberg analyst Andaan Ahmad thinks Apple should make it official by buying Tesla and finally making an iCar.
Ms. Harrison reports that Mr. Ahmad argues in an open letter to Apple CEO Tim Cook last Friday that Apple shifting into the auto sector could give the company the kind of revenue growth that won’t be sustainable from just smartphones and other mobile devices over the longer-term.
Mr. Ahmad also considers Elon Musk to be an innovative presence like the late Steve Jobs, and suggests that by buying Tesla Apple would obtain in the person of Elon Musk a new iconic partner to lead Apple’s innovation drive. It would be analogically similar to the company buying NeXT in 1997 and getting Steve Jobs back as a bonus.
Of course, many naysaying commentators can cite reasons why they think an Apple takeover of Tesla wouldn’t work, but then many commentators also predicted that Elon Musk would never be able to make Tesla work.
Mr. Musk proved the skeptics wrong by making the Tesla Model S the most successful EV ever produced. Ms. Harrison notes that Tesla shares are up nearly 400% this year, with the company’s market value estimated at about $20 billion. Automobile Magazine named the Tesla Model S its 2013 Automobile Of The Year, and it was also chosen as 2013 Motor Trend Magazine Car of the Year. Car and Driver Magazine’s Csaba Csere succinctly observed that the Model S is “not just a good electric vehicle, it’s a good car.” The Model S also received praise and a recommended rating from Consumer Reports.
Independent testing by the National Highway Traffic Safety Administration (NHTSA) awarded the Tesla Model S a 5-star safety rating not just overall, but in every subcategory without exception (approximately one percent of all cars tested by the federal government achieve 5 stars across the board). NHTSA does not publish a star rating above 5, but safety levels better than 5 stars are captured in the overall Vehicle Safety Score (VSS) provided to manufacturers, where the Model S achieved a new combined record of 5.4 stars. The graphic below shows the statistical Relative Risk Score (RRS) of Model S compared with all other vehicles tested against the exceptionally difficult NHTSA 2011 standards.
In a In a Bloomberg opinion piece earlier this year, Facebook executive, founder and managing partner of the venture firm the Social Capital Partnership, co-owner of the NBA’s Golden State Warriors, and Apple fan Chamath Palihapitiya contends that Apple should buy Tesla Motors and make Elon Musk Apple CEO, with Tim Cook going back to being COO. He observes that people love cars, and that an Apple iCar would be beautiful, connected, and intelligent, doing all the little things that delight you and make you fall in love with your car, and that he would buy one.
Addressing the issue of Tesla as a potential acquisition target, Mr. Musk told Bloomberg’s Alan Ohnsman in an interview last May that while he doesn’t expect any takeover to happen soon, he was willing to discuss some hypotheticals with Mr. Ohnsman and his editor. Possibly another car company? Mr. Musk noted that Daimler and Toyota Motor are already Tesla investors.
What about Apple? They do have a lot of cash, Mr. Musk observed, adding that he figured any takeover would come from outside the auto industry, and would have to be from a buyer with a very large cash position. Apple qualifies on both counts, and Mr. Musk’s evident willingness to entertain the notion indicates it’s not as far out as some suggest. However, he won’t be in a position to sell Tesla until the company repays its debt to the U.S. Energy Department, which it expects to complete by December 2017. In the meantime Mr. Musk’s focus is on increasing Model S sales and starting up mass production of the Model X to bring out an electric car priced close to $30,000 that most families could afford.
There have long been rumors and speculation about an Apple iCar. Steve Jobs was an automobile aficionado, and a number of hints over the years were dropped about Apple possibly moving into the car market in some way. Jobs even met with a high-ranking Volkswagen executive at one point to discuss possibilities, although nothing evidently came of that. In an interview with The New York Times‘ John Markoff not long before his death, Jobs noted that if he had more energy, he would’ve liked to take on Detroit with an Apple car.
Increased computerization of the automobile—and especially the re-emergence of electric vehicles (which represented about one- third of the automobile market in the early 20th Century)—has enhanced technical commonality between the two sectors, especially in areas like batteries and touchscreens. So, should Apple buy Tesla? It’s fun to speculate, especially for those of us who are crossover Apple and automobile fans.