The law remains the same, but Tesla may be able to change that.

Yet Again, Pundits Call on Apple to Buy Tesla: Here’s Why We Disagree

One is the seventh biggest company in the world by corporate earnings, and the largest consumer electronics company in the world. The other is America’s newest and smallest bone fide automaker. One sells mobile telephones, personal electronics gadgets and computers, all of which run its special proprietary software. The other makes the world’s fastest production electric cars.

They’re both high-tech companies from Silicon Valley. They both have driven, intelligent CEOs. And they both need large amounts of lithium-ion batteries to secure future production.

Apple may have promoted the BMW i3 in a recent event, but that's a far cry from buying Tesla.

Apple may have promoted the BMW i3 in a recent event, but that’s a far cry from buying Tesla.

Beyond these simple facts, there’s little that joins Apple [NASDAQ:APPL] and Tesla Motors [NASDAQ:TSLA] together, but that doesn’t stop financial pundits from expressing a belief every six months or so which suggests Apple is in the process of acquiring Tesla, or suggesting that it does so. But while it may seem like a marriage made in heaven to masses of tech journalists and financial pundits, we’d like to point out just how Apple and Tesla really aren’t made for one another — and how a recent Business Insider post completely misses the mark when it posits that Apple could help Tesla fix its mass-production woes.

Making a car is nothing like making an iPad

It’s a stream of logic we’ve heard plenty of times before: Apple manages to produce and sell massive quantities of computers, iPhones, iPads and iPods every time a new model is released. As well as ensuring there are enough models for those trademark queues on launch day, Apple manages to ensure — with a few notable exceptions like its recent Apple Watch announcement — that products aren’t unveiled until they’re actually ready to go to market.

If Apple can do it, posit the pundits, why can’t Tesla?

Despite a recent proclamation by IHS Automotive which deemed the Tesla Model S more iPad than car, the process of manufacturing a car involves far more discrete steps than manufacturing a consumer electronics component. As well as requiring more space due to the physical differences in size, building a car requires attention to mechanical as well as electronic and ascetic details on a level not found in an Apple production line. And while no one can argue that Apple’s designs — often incredibly challenging from a manufacturing point of view — really do push engineering boundaries, cars have hundreds — or thousands — of moving parts which have to work together in harmony to produce a finished vehicle. Despite the Tesla Model S having far less moving parts than a similarly-specced gasoline-powered vehicle, the mechanical engineering of any vehicle is well beyond that of a consumer gadget.

What’s more, because of the economies of scale involved and the cost of the final product, it’s far easier for Apple to write-down any faulty or incorrectly-produced products that it is for an automaker to do the same thing.  And that’s long before we even consider things like crash-test and safety systems, something Apple has no experience of.

Making a Tesla electric car is nothing like making an iPad.

Making a Tesla electric car is nothing like making an iPad.

Then there’s design cycles: in the electronics world, entire ranges can be completely redesigned every year. In the automotive world, designs have to last for eight years before the next model comes along.

Apple doesn’t actually make its products

The next point we’d like to make about Apple and its manufacturing process is that for the most part, Apple doesn’t actually produce its own products. Instead, it subcontracts production to a number of companies around the world, most noticeably in China, where labour is cheap and production costs are low.

It does this to keep its bottom line healthy. Spend less on production, and you can spend more on what’s inside the product, like faster chips, improved graphics or larger capacity storage.

Despite this, Apple still retains overall control of its production processes, which we’ll admit does mean that it still understands how its products are made. But unlike Apple, Tesla makes everything from its body panels to the drivetrain, sub-contracting out smaller components for custom-manufacture or parts supply.

This in-house manufacturing ethos — further expanded when Tesla’s Gigafactory comes on line — allows Tesla the kind of control over its production process that Apple doesn’t have. And as Tesla recently demonstrated when it started producing autonomous-drive capable cars, Tesla’s in-house method allows it to quickly implement changes to production in a way that Apple cannot.

Elon Musk isn’t ready to leave

Spend much time with Tesla CEO Elon Musk, and it’s clear to see that he is one driven CEO. Like the late Steve Jobs, Elon Musk wants to change the world as well as make some money doing so. But unlike analysts who suggest Musk would allow the acquisition of Tesla by an electronics giant like Apple, cashing in on the deal in order to focus his attention elsewhere, we think Musk is in it for the long run.

Elon Musk has more than profitability on his mind at Tesla.

Elon Musk has more than profitability on his mind at Tesla.

That’s because time and time again, during everything from one-to-one interviews to annual shareholders’ meetings, Musk reiterates his desire to see the world weaned off oil and onto something more sustainable. Like all great CEOs, Musk believes explicitly in his product, and it shows. What’s more, Musk has said time and time again that Tesla’s goal isn’t just to bring luxury electric cars to the privileged few: it’s to bring about a future where everyone can afford to drive a clean electric car.

That single wish currently drives Tesla, a wish which has not only given rise to the Gigafactory, but the promise of the first-truly-affordable, 200+ mile electric car in the 2017 Tesla Model ≡. 

Delays and setbacks to that timeframe aside, that goal — of affordable, mass-produced, long-range electric cars — is what keeps Musk at Tesla. And while Tesla may not be the first to achieve that goal, Musk has openly admitted several times in the past that the end goal — electric cars for everyone — is more important than Tesla being the company to make that happen. Until that goal is reached however, we don’t see Musk going anywhere. Consequentially, we don’t see an acquisition happening until that point, either.

With electric cars far from mainstream, we think that particular event may take a while to happen.

Some skills translate: others take an age to learn

Making a car is easy. Making a good car is extremely hard. Turning that car into a sustainable, profit-making business endeavour from nothing is night-on impossible, and the history books are strewn with hundreds of would-be car companies who tried — and failed — to bring a vehicle to market.

In fact, before Tesla, the last U.S. car company who survived the transition from startup to mainstream brand was Chrysler. Every other car company, from Delorean to Fisker, has declared bankruptcy and faded from the history books as a consequence. Many of these companies were founded by auto-industry insiders, people who understood the automotive world. Yet they still failed to reach profitability.

Apple has none of this knowledge, and while an acquisition of Tesla by Apple would obviously come with a massive injection of auto-industry insiders into Apple’s ranks, it doesn’t equal success.

Our point? Just because Apple can make consumer electronics does not mean it can build a car. Even with Tim Cook — Apple’s self-proclaimed supply and manufacturing wizard, who famously helped Apple reduce the cost of its iPad through shrewd manufacturing deals — Apple would face a mammoth task to simply understand and assimilate all of the regulatory and procedural requirements each and every automaker has to manage day by day.

Tesla's recent Gigafactory investment may help Tesla achieve its goals of affordable plug-in transport for all.

Tesla’s recent Gigafactory investment may help Tesla achieve its goals of affordable plug-in transport for all.

Need more proof? Take one look at the boards of every major automaker in the world today. Most, if not all major automotive executives started their careers in the automotive industry, working their way through the ranks to become board members. Very few have come to the automotive world from elsewhere. Even Tesla’s board and senior management staff have an extensive background in the automotive world, despite it being a young company.

Being into cars doesn’t make you a ‘car guy’

In his recent post at Business Insider, Jay Yarow argues that Apple’s board is already full of car guys. From Apple CoFounder Steve Jobs — who said he wanted to design an iCar before he died — through to Apple SVP of Internet Services Eddy Cue and Apple’s SVP of Marketing Phil Schiller, Apple has plenty of car-fans.

CoFounder Steve ‘Woz’ Wozniak even owns a Tesla Model S.

Yet being a car fan doesn’t make you a car guy like Bob Lutz or Carlos Ghosn. Loving the experience of driving and appreciating a good car design, or perhaps even indulging in the occasional bit of racing does not make you an auto-industry executive.

Years of blood, sweat and tears do. Years of automotive design cycles, endless testing, and hard-graft engineering.

Do you agree with our take on Apple and Tesla? Do you think we’re wrong? Or do you think there’s some other reason we’ve missed that explains why Tesla won’t be purchased by Apple any time soon.

Leave your thoughts in the Comments below.


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  • Excellent article Nikki. I have first hand experience of much of this – from Audi through to various start-ups – and from within Ricardo too. The challenge and relative complexity within the auto sector for both ICE and NICE is indeed far greater than for the majority of consumer electronic products. I believe the ‘Tesla Grand Plan’ needs a marriage at some point in order for it to be fulfilled – and as the connected car is rapidly presenting a critical path, I can envisage a suitable partner coming from within that domain within a few years. China Unicom are already holding hands with Mr Musk, and Telefonica seem close too…

  • Edward Casey

    I can only speak on how I see things and I am no expert. However, I do share the dream that Tesla has and am passionate about learning things, so I have read about how Tesla has a step by step plan to drive costs down and make a cheaper product that more people will be able to afford. I am aware that the company battles against entrenched dealer networks to sell its car from factory showrooms. There is established auto industry push back against Tesla, sad to say. But I do believe Tesla will be successful in spite of mainstream car industry obstruction.nnnWhat I do not know is how the public will accept Tesla. How that plays out remains to be seen. I have talked to many people who never even heard of Tesla.nnnI am about certain that Apple and Tesla are far too different companies to share any DNA. The, “pundits,” who supposedly have more information to analyze and work with than I do seem to miss some, what to me, are basic, common sense views they seem to be blind to.

  • Esl1999 .

    I’m okay if my iPad crashes but not my car. What isnwith the fascination of forcing Tesla down Apple’s throat. They maybe sharing the same stove, but they are cooking a different meal.

  • lad76

    Ha!, you fell into the trap. You thought Tesla was a car company. No, Tesla is a battery company who is creating their own market. by building EVs. Watch it happen as they develop the traction battery market over the next three years and start calculating their market cap in the trillions.

    • heltonja

      You do realize that Tesla buys its batteries from Panasonic and Panasonic will be the company building the batteries at the gigafactory

      • lad76

        Sure do; Panasonic will be building batteries inside a Tesla Giga Factory. They will not be the only company building batteries for Tesla as Tesla builds more plant sites; forget what you think you know about how companies operate, Elon Musk is also changing those models as he goes.

  • Kenneth_Brown

    Nikki, you might want to get a copy of “Make it in America” by Andrew Liveris, CEO of Dow Chemical. The price of labour in China is nearing world levels from a cost of living standpoint. The biggest incentive to have products built there are fewer regulations and environmental controls. Also, when Chinese labour was cheap, they built a supply chain for consumer goods while at the same time actively destroyed the same supply chains in the US and Europe. With the exception of a couple of boutique manufacturers of high end products, magnets are not made in the US anymore. It’s like the targeted raids on German ball bearing manufacturing during WWII. A very simple product that underpins many products. So, manufacturing in China is based much more on the ability to get the products made at all as much as the unit cost.nnnI agree that Apple and Tesla are not a good match. Tesla is massively overvalued and in an industry far removed from Apple’s core competency.

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