Apple could and should buy Tesla. Why? Money is the issue. Or, rather, money is a number of issues. It’s not that Tesla is expensive. Apple can afford a premium. TSLA is about where it was a year or so ago. So is Apple. What Apple needs to help prop up APPL is growth.
Apple is a hardware company and the only hardware with growing sales are accessories. Watch is an accessory to iPhone. AirPods? An accessory; mostly to iPhone. Apple’s hardware has fallen on hard times, money wise, because sales have been mostly flat in recent years.
First, Tesla is the most Apple-like of car makers. Tesla has figured out how to make a little profit but needs more capital to expand the line into lower priced vehicles and trucks. Apple has the capital.
At what cost?
Every business has a few large numbers that determine success or failure. Apple sells a few hundred million iPhones each year and makes more per phone than all other smartphone competitors combined.
Mac, iPhone, accessories, and Services all make money hand over fist, but combined they equal about half of what the iPhone brings in to Apple’s growing coffers.
Where’s the big number? For Apple, it’s iPhone (which accounts for nearly 60-percent of company revenue). How much money do carmakers bring in? Relative to iPhone, not much. TSLA is valued higher than Daimler (Mercedes-Benz) at just over $61-billion. General Motors stock is now about where it was nearly five years ago, and the company’s market cap is just over $52-billion.
Ford’s stock is way down from five years ago, with market cap under $38-billion. Relative to Apple’s iPhone, none of the major car company’s would add much to Apple’s bottom line.
So, back to the original question.
Financially, Apple buying Tesla makes no sense. Tesla is not making money. Tesla needs to spend more money to succeed. Apple has money to burn, but futurists say the future won’t be selling cars. Instead, we will summon a car when we need it, so selling cars to individuals doesn’t look promising for the longer term, does it?
Emotionally, Apple buying Tesla makes sense, regardless of how much money Tesla is losing, and how much it needs to remain the darling of the automotive industry. Tesla is on an emotional roll for investors. Apple is not. Tesla, with sufficient capital, could become profitable– but nothing like iPhone, Mac, iPad, or Services at Apple.
It makes sense for Apple to buy Tesla if the motivation is emotion and growth. It does not make sense for Apple to buy Tesla for financial reasons other than shareholder value.
What should Apple do?
Buy Tesla and make everyone happy.