Let me start out with three important disclaimers:
- I have no inside information.
- I hold no shares of Tesla or Apple*.
- I do own two Teslas and spend $3k per year on Apple products personally (at least).
OK, now that those disclaimers are out of the way, let me break down what I think will happen in the next 12 months based on what we’ve heard so far about Apple’s interest in electric cars.
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For background, there are reports of a massive project at Apple, with hundreds of executives working on an electric minivan. Additionally, an Apple self-driving car has been spotted on the roads.
Elon has been very public in saying that in order to complete the mission at Tesla he needs to get the third generation car out. He has also been very public about creating the sexy Roadster for early adopters ($125k, only ~2k produced), the Model S for the early majority ($60k, project hundreds of thousands will be produced), and the Model 3 for everyone ($35k, projected 1m produced).
Now, historically, Tesla Motors generally announces cars about 24-48 months before they drop (someone correct me if these dates from Wikipedia are wrong).
Roadster Announced: July 2006
Roadster Delivered: Spring 2008 (24 months after being announced)
Model S Announced: June 2008 (24 months after Roadster announcement)
Model S Delivered: June 2012 (48 months after being announced)
Model X Announced: Feb 2012 (48 months after Model S announcement)
Model X Delivery Expected: Q3 2015 (~30 months after being announced)
Model 3 Announcement (guess): Q2 2015 (36 months after Model X announcement)
Model 3 Delivery (guess): 2018 (36 months after being announced)
What this means to me is that Apple would be desperate to buy Tesla between when the Gen 3 is announced but before it is delivered, because once the Model 3 hits the road Tesla’s market cap would make a deal with Apple a merger — not an acquisition.
Additionally, some things that make Apple the likely buyer of Tesla in the next 18 months:
- Giga factory has been announced, so making the batteries for Model 3 at scale will be a lock, as well. Apple uses a lot of batteries.
- Apple’s Tim Cook very much wants to pursue the kind of “our-shoring” (I made that word up), that Elon has mastered. In fact, Apple wants to build an all-renewable energy production facility in Mesa, AZ (anyone know the latest on that?), and they are building the Mac Pro (the sexy black mini-cylinder) at their Texas facility.
- Tim Cook is obsessed with renewable energy, so much so that he told climate deniers to not hold Apple stock, and he is investing $850m to build a giant solar farm to power Apple’s new HQ.
- Tesla is going to take the 5-inch thick battery from the Model S and plant it on people’s garage walls, according to reports, so that they have enough battery power to last a week. This means they could charge their batteries by solar (Solarcity! Elon is chairman!) for rainy days, or they would charge their battery at night when there is cheap power and take load off the grid (making electricity even cheaper).
- The Model S has a giant iPad in the center console — essentially — but it doesn’t have many Apps (and no App ecosystem). It would be trivial for Apple to power the center console with a retina display, and exceptionally easy for developers to create Tesla dashboard-aware Apps (think: Pandora, Waze, Apple Maps, iTunes, Beats, Spotify, etc).
- You could charge $50 to $150 per App for the dashboard of a car — people are used to paying a bucketload to upgrade their car hardware.
- At this rate, Apple could buy Tesla at 3x its market cap (the cost I believe they would need to hit), with a year of profits from their phone business.
- Apple stores would look really F#@$%ing sexy with a car in the middle of them, no?
- Self-driving cars will be in the market in 7-10 years in a major way (you’ll test one in the next three years, of course), which means that with Apple and Tesla’s combined progress in this market, they could have the entire line refreshed and ready for a makeover for the coming driverless revolution.
- No other car company can catch up with Tesla — it’s already game over.
- Google is another likely buyer, but Google can’t compete with Apple’s war chest.
- No one else in the world could actually make a run at Tesla, because they either don’t have the cash and, most importantly, they don’t have the ability to give assurances to Elon that they won’t f@#$ it up. Apple’s design team, software, and global distribution would actually LEVEL Tesla up.
- Google’s design and global distribution (for products) just sucks, and they are all over the place. I can’t see Google buying Tesla and making it that much better. Sure, they have some data and some technology, but it feels like that isn’t as important for Tesla right now.
- When cars become driverless you will have every passenger sitting there with nothing to do in front of a piece of glass that is massively larger than any screen Apple currently makes — and for hundreds of hours per year. Can you imagine the number of Apps that will be downloaded when we’re all sitting in our cars, with no need to drive?!?! App store revenue gone wild!
- Apple would need at least seven years to get a car on the road: three or four years to design it, followed by three to five years of building factories capable of any sort of modest capacity.
- Elon Musk as the CEO of Apple? Wow. Doubt he would want to do it, but I could see him being the Chairman — and that would be kind of special.
- Reports are 100+ Apple former employees are working for Tesla.
- Tesla’s Model S is considered the greatest car ever made — something Apple can relate to (having had Walt Mossberg anoint them the greatest phone, tablet, and laptop ever made).
- Perhaps we will hear a spring surprise: Apple is a partner in Tesla’s Giga factory?
Bottom line: $75b combined with Apple’s reputation, an announced Model 3 and 100,000 pre-orders for it, and we’ll see Tesla be the big acquisition we’ve all been waiting for Apple to make.
What do you think? Should Tesla Motors sell?
PPS – The LAUNCH Hackathon just broke 900 developers — we’re moving to a wait list!
PPPS – I added the word “prediction” at the end of the title because three folks were confused by the word “will” and “18 months” — and they didn’t click on the post and read the opening where I say I have no inside information. Oh yeah, they apparently thought I had a time machine and could predict the time and amount that Tesla would sell to Apple specifically (gosh!)
[ * I don’t trade public stocks, but I do have a bunch of low-fee mutual funds in my perfectly balanced portfolio over at Wealthfront — and I’m a shareholder in Wealthfront (and that company is AWESOME)… signup for .25 fees instead of 1%+. ]