When Apple (didn’t) met Tesla
Tesla CEO Elon Musk has revealed that he tried to sell Tesla to Apple for a bargain-basement price of $60 billion
The paths of two techs giants converged this week as Apple let slip that it would be moving into the manufacture of electric vehicles or EVs by 2024.
Rumours of an Apple car are nothing new and Apple has devoted time and resources to exploring the sector since 2014 without committing to creating a product but the latest stories sound different. They are more detailed and contain a potential road map to production for what’s known internally at Apple as project Titan.
A decision to enter the EV space will put Apple in direct competition with another darling of the technology sector Tesla. However, it’s transpired that this isn’t the first time that the two organisations have crossed swords. Tesla CEO Elon Musk has revealed that he tried to sell Tesla to Apple for a bargain-basement price of $60 billion but Apple CEO Tim Cook was non-plussed and according to Musk refused to take a meeting with him.
The fact that Musk had tried to interest Apple in buying the company is not that much of a surprise given that Musk had already said in a 2015 biography that he had reached provisional terms with Google’s Larry Page about a possible purchase of the auto manufacturing start-up in 2013/14.
When Tesla was experiencing problems with sales of its model three electric car. Google of course at that time was experimenting with autonomous driving systems and the artificially intelligent software needed to control and manage the driverless vehicles.
According to Musk’s biographer Ashlee Vance, the deal was called off after a Tesla marketing and sales drive boosted demand and orders for the forthcoming Model S. Which enabled Tesla to reboot its finances and put its self on a firmer footing. Although the business still has a rapacious appetite for cash to this day.
We will never know what might of have happened if Tim Cook had taken that meeting and had greenlit a purchase of Tesla. Would that have diluted the almost the cult-like status that Musk and his businesses are held in by many investors? Or would that have been strengthened further under the umbrella of the world’s premier technology brand?
We can only speculate of course, but Elon Musk probably isn’t cut out for the conservative corporate life and under the radar lifestyle led by top Apple executives and key staff members.
Would buying Telsa have boosted Apples share price and investor returns I wonder? Well over the last five years Apple shares have returned an impressive 345.92% according to Barchart.com data.
However, that has been totally eclipsed by Tesla’s 1233% gains in that period boosting its market cap to $606 billion. Ten times the valuation that Musk was prepared to sell to Apple for back in the day. Of course, Tesla is still valued at just a fraction of Apple which is capitalised at more than $2.24 trillion.
Buying Tesla would have taken Apple in a different direction but it probably would not have made that much difference to its overall business and financial performance, though it may have reduced the size of Apple’s cash pile which earlier this year was running at $192.80 billion.
Apple Cars proposed launch date of 2024 will give the company plenty of time to ensure that complementary technology such as 5G networks, LIDAR sensors and new battery packs that it intends to use are well-established and ready for a full-scale manufacturing run.
Though unlike Tesla Apple is not intending to make the cars itself but instead will look to use a third party to assemble them. Perhaps in a similar way to the way it uses Hon Hai Precision and others to assemble and ship iPhones and iPads.
I think we can say that that EV space became a whole lot more interesting this week.