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Wednesday, February 25, 2015

Will Apple Buy Tesla?

On first glance, it doesn't seem likely. But, there are actually some great arguments in favor of this deal happening.

First of all, Apple has a cash war chest that needs to be invested in the next big product after iPhone. Otherwise, the stock could be hitting a wall where margins fall due to market saturation.

Where are we heading in terms of the next big product out of Silicon Valley? As we've written in recent articles, the autonomous electric car is the next big thing. So, while Apple could certainly build a car company from scratch, buying an existing company really makes a lot of sense—and timing could be critical since many other auto manufacturers are working on their own autonomous cars. Whoever gets to market first with a complete product is going to take home all the marbles.

Elon Musk has stated that his shares in Tesla would be the last to be sold. But, if he feels that the future of autos is safe in Apple's hands, then he might just recommend that Tesla's shareholders sell to Apple. Certainly, Tesla is going to need a huge war chest to scale up production. And, it's going to need the best and brightest to engineer the first truly autonomous car. Apple has been poaching Tesla's designers by offering to boost their salaries by 60% and include a quarter-million-dollar signing bonus. Joining forces could ease the salary pressure on both companies.

It all comes down to Elon's assessment of whether Apple could carry the torch to the ultimate goal.