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Six Reasons Why Apple Should Buy Tesla

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Six Reasons Why Apple Should Buy Tesla

Rumors have been circulating that Apple might acquire Tesla after the San Francisco Chronicle reported that Elon Musk met with Apple’s mergers and acquisitions lead, Adrian Perica.  Since this was reported, Tesla’s shares have surged to a new all-time high.

Adrian Perica, while not a household name, does get around quite a bit. Over the past year and a half Perica has been on a buying spree, traveling around the globe, acquiring a wide variety of companies that make everything from mapping software, to search engines, to semiconductors.

Last month, Apple revealed that it spent $525 million on acquisitions in the last quarter, which is almost double what it spent the entire previous year. Even so, Apple is flush with cash, sitting on around $160 billion. So it can definitely afford Tesla, which is valued at nearly $25 billion.

It is an easy merger to imagine.

They are both brilliant design companies. Tesla is an automotive company that is very digitally savvy; Apple is a computer company with extraordinary industrial design expertise. A move into the auto industry is not far-fetched for Apple. In, fact several years ago, Steve Jobs met with Volkswagon CEO Martin Winterkorn to discuss some sort of iCar. And Mickey Drexler, CEO of J.Crew and Apple board member, said Steve Jobs’ “dream before he died was to design an iCar.”

So Apple’s move into the auto industry is not outlandish. In fact, it is probably inevitable. The question is not if, but when.

Here’s why it makes sense for Apple to move now and acquire Tesla.

They Share History

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The two companies share a lot already, from location to aesthetics to executives. They are both iconic Silicon Valley brands.  They have both made their mark in their respective industries by superior design and user experience, leapfrogging competitors. The similarities are more than coincidence; they also shared executives, George Blankenship being an important one. After leaving Apple, he designed the retail stores for Tesla.

It Would Boost Apple

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As growth in iPhones and iPads slow, Apple needs its next killer move. The iPad, Apple’s most recent new device, debuted in 2010. And in the most recent holiday shopping quarter, Apple reported weaker-than-expected revenue forecasts. Diving into a new industry and partnering with or acquiring Tesla would certainly give Apple the boost it needs. As Andaan Ahmad, a financial analyst who penned an open letter urging Cook to acquire Tesla, argues that Apple needs an out of the box move to enter a new market. If they don’t do something like this, he fears, “the key debate will always be about your ability to sustain these abnormal margins in your iPhone business.”

It Would Disrupt The Auto Industry

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Apple has a history of radical moves. This could be its next.  But the change would not alter Apple as much as it would irreversibly change the auto industry – for the better. This would reignite and give direction to the entire auto industry. Much as Apple set the standard for the computer industry, Tesla would be able to establish itself as the definite lead in the industry. Apple has deep pockets that would allow Tesla to grow faster and be more innovative.

Siri

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Already, Apple is moving to strengthen its presence in automotive infotainment systems. Since iOS 6, Siri Eyes Free lets users text, play music, and their access calendar and addresses by using voice control. Apple plans to ramp this up to integrate more of its operating systems, such as the Maps app, directly into car consoles. Already, GM, Toyota, Honda, Audi, Mercedes, BMW and Jaguar have or announced a plan to link Siri with their cars. But Apple has to move fast in this field as Google has its hands in everything – including driverless cars.

It’s A Real Power Play

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Elon Musk has confirmed plans to build the world’s largest battery factory in the United States. Such a factory would more than double world-wide lithium-ion battery production. Apple is likely to partner in this factory as it has an enormous interest since it uses the batteries in all of its products. Both Tesla and Apple are powered by and dependent on this type of battery. An investment in this technology will only bear greater returns as both the tech and auto follow the lead of these companies.

Elon Musk

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The best thing to come out of a deal would for Apple to bring on Elon Musk. Musk is a visionary, much like Jobs was. They built very similar brands in the face of a lot of skepticism and adversity. They both beat predictions. Both are or were radical individualists and creative and technical genuises. It is easy and exciting to imagine what Musk could with a seat on the board of Apple.

Apple is going to expand. It is going to change, and continue in its attempt to revolutionize gadgetry. It has the money, the talent, the history, the culture. The brand value is high; it is one of the most trusted, most admired brands on the planet. Bringing on another company with much the same style, as well as its charismatic founder, could only help in Apple’s quest for tech innovation.

An aside: while the properties would remain separate, building close ties with Musk would potentially gain Apple an avenue into what is sure to be a lucrative industry in the coming years: space. Musk’s SpaceX is one of the best-regarded private space companies around, poised to capitalize greatly on the coming Space Race 2.0. With Musk on board with Apple, it’s a guarantee that SpaceX would return Apple’s calls. Though HAL 9000 made a bad name for itself, it’s always possible that Siri would get along better with astronauts looking to expand humanity’s reach through the stars.

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