Should Apple Acquire Tesla, Appoint Elon Musk as New CEO?

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The world’s most valuable company of 2016, Apple Inc. (NASDAQ:AAPL) is in trouble, and there is no denying that. Despite all of its cash reserves that could buy the world’s top 5 most valuable tech startups, years of innovation and a brand name as universally well known as the iPhone, Apple as a company is faltering. The iPhone has run its course, and iterative updates are no longer driving sales figures and imaginations of Apple loyalists as it once used to. The writing that has been on the wall for quite a while has just been etched in a little deeper. To have a chance of winning back, it’s former glory days; Apple has to make an investment into the future. For quite a while, the voices in the know have shouted the name of Tesla. Today, however, a new report says it cannot ever be Tesla.

On paper, this acquisition makes perfect sense. Tesla’s current market evaluation stands at around $30 billion and with recent announcements by their CEO Elon Musk about the budget Model 3, the automotive company looks ready to take off. However, some doubts remain as Tesla, till now a luxury car maker, is stepping into the commercial car market for the very first time. Musk has himself admitted that fulfilling the $11 billion preorders in the constricted time frame would be a daunting task. With the help of Apple and their gigantic cash reserves, Tesla could easily funnel money into productions and complete their goals in time. And with Tim Cook, a master strategist regarding supply chain management at the helm, Tesla, and Apple seems destined to rise above and beyond. But sadly that will in probability remain all but a pipe dream. And in today’s analysis, we will explain why!

Why Should Apple Invest In Tesla?


2016 has not been kind to smartphones in general with global shipments for the industry plateauing. However, for Apple, they have had one of its worst quarters in fiscal Q2 2016 as the growth rate dipped drastically to a 13 year low. While we have discussed in great detail the reasons why Apple’s future looks bleak in the upcoming quarters in one of our previous articles, we will briefly reiterate some of the points so that the groundwork for our analysis on this topic is firmly laid.

In comparison, Tesla has gone from strength to strength in the last few years. Posting the greatest growth rate among any automobile company in the world, Tesla’s net worth is currently around $ 30 billion. In comparison, two of its fiercest competitors, Ford’s has their market cap at $52 billion and GM’s market cap is at $47.7 billion. As fossil fuels become ever more scarce, the automotive industry is undergoing a sea change and at the helm of the electrical car, revolution is Elon Musk and Tesla.

Now, why would Apple want to buy Tesla? The first point is because it is one of the few companies with enough cash reserves that it actually can buy Tesla. But that’s not the only factor that must be taken into consideration; Apple has been looking to diversify the business beyond the smartphone segment for a while and make their way into the daily lives of their consumers in a more intrinsic way. With Apple’s effort on autonomous cars being already in full swing, the addition of Tesla and their Autopilot technology would give a significant boost to Apple’s efforts. Making the transition from smartphones to automobiles isn’t easy and with Tesla under its wing, Apple can worry about the interior experience of the autonomous car while the more mundane yet essential aspects of the car can be handled by Tesla. Apple has made their intentions clear that their next area of interest lies in the automotive industry with their recent $1 billion investment in Didi Chuxing, and acquiring Tesla should be the next logical step.

In the past, Elon Musk has often praised Apple for their design and craftsmanship and has gone as far as to say that Apple entering the car market would actually be a positive for the automotive industry on the whole. Yet having refused Apple’s offer of a take over once in the past and having snubbed Google as well, what could make Musk possibly consider selling off Tesla? We find that out in our next segment.

Does Tesla Really Need An Apple Bailout?


Tesla has been through some times in the recent past having missed shipment targets in their December Quarter. Before the announcement of the Model 3 at the end of March, Tesla’s stock options looked rather grim having been in free fall since the start of 2016. However, with the announcement of the Model 3 at $35,000, Tesla received a huge cash injection as pre-orders began pouring in for the budget electronic sedan. While Tesla looks to be in good shape for the time being, here are a few pointers that will keep them on their toes.

With the little over $220 billion cash reserves that Apple commands, most of these problems will be solved in an instant as the need of more money and requirement to accelerate productions will not even be a source of worry. Musk, however, had declined to sell Tesla in the past even when the company was on the verge of bankruptcy. Why is this important? Because Musk has a dream of changing transportation as we know it and any company that looks to interfere with that vision will never get their hands on Tesla.

But there is one thing that could convince Musk to sell Tesla. If, and this is a very gigantic if, Tim Cook were to step down from the position of CEO, then Musk as the CEO of Apple as well as Tesla might lead the combined companies to newer heights in the future. The caveats? We leave that for our final section!

Final Thoughts

Often, in the world of business and giant industries, it all comes down to human nature and ideologies. As we saw in the Dell-EMC merger, more than synergies and opportunities at vertical integration, in the end, the multi-billion dollar deal boiled down to the simple fact that two companies saw eye to eye in terms of their future. And for this very reason, Apple may never be able to acquire Tesla.

Since we are moving away from numbers and economics to basic ideologies and fundamentals of the two companies and thus their respective CEOs, it becomes imperative that we discuss these two figure heads a bit more on a psychological level. Apple under the Steve Jobs had reached its heights of technical brilliance, but it is Tim Cook who is single-handedly responsible for this giant stockpile of cash that Apple is now sitting on. Tim Cook is by no means an ordinary man, but his genius lies in supply chain management and not technological innovation. He has wrung the iPhone series dry for every last bit of profit that it’s worth, but he doesn’t have the maverick nature of Steve Jobs nor his legendary foresight.

On the other hand, we have Elon Musk, one of the brightest minds of our generation, creator of PayPal, and self-taught rocket scientist. Musk does not run after money and under him Tesla will look to create technological breakthroughs and create history. One of the salient points of Musk’s forward thinking is the fact that Tesla has released all of its patents for general use while Apple still now fights over lawsuits about vague design choices and UI animations.

There is a massive rift in the way of thought between the two CEOs, and Musk would never make way for Tim Cook. And while a $700 billion evaluation might have at one time seemed like an imaginary number, with Musk at the helm of Apple’s resources and Tim Cooks astounding abilities to mass produce, distribute and market a product, the Apple-Tesla merger could turn out to be one of the most formidable companies in the entire history of mankind. Will the new and exciting make way for the old and methodical? Only time will tell!


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