Money isn’t the issue. The future is the issue. Tesla has enough good vehicles on the road that it should be able to attract the capital it needs to survive– and perhaps, prosper– so what is keeping Apple from jumping into the all electric, mostly-autonomous vehicle craze?
The Future Future
Apple can buy Tesla. Over a year ago I wrote that Apple Should Have Bought Tesla. My colleague, Jeffrey Mincey, an admitted automobile buff, wrote, Seriously: Apple Should Buy Tesla. Sorry. It’s too late.
Why is it too late? Why doesn’t Apple just fork over $60-billion to Tesla shareholders (or, buy a controlling interest), slap on an Apple logo and be done with it?
The problem is the future. No one knows exactly where it is going, but as with all futures, we won’t know what it will be until we get there, and the future always– always— comes with surprises.
I suspect Apple is coasting along on Project Titan for logical reasons. Apple doesn’t know exactly what the future brings for semi-autonomous, mostly-autonomous, all-electric or hybrid electric, or even solar powered transportation. Obviously, Apple wants to be in the mix but once it makes a decision two or more years will be required before manufacturing begins to churn out products, and as the road to the future often does, things change.
Apple isn’t moving too quickly toward the future because Apple isn’t sure where the future will end up.
Does that make sense?
If you thought the 10 years after iPhone was introduced in 2007 have moved quickly to a mature and advanced state, just wait for the next 10 years of automobile production where the insides of each new vehicle will be as complicated and more capable than what is inside your iPhone.
Apple can and will not buy Tesla because there is no return on investment, no ROI, so to speak. How so? Relatively speaking, there is no money in creating automobiles. Do the math. If Apple could ramp up to 250,000 all electric automobiles priced at an average of 50,000, that constitutes a $12.5-billion dollar industry.
Apple’s Services group is pushing the $40-billion run rate already– App Stores, iTunes, Apple Pay, Apple Care, et al, and the gross margins are– when compared to the auto industry– well, gross. Volkswagen and Toyota compete with Apple on revenue– more than $270-billion the past year. Yet, Apple’s profits are more than three times Volkswagen, more than double Toyota.
What does that say?
There isn’t much money in making cars unless you make many, many cars.
The challenge here is whether Apple should, 1) just jump into the industry and manufacture a moderately priced electric vehicle of the semi-autonomous nature of Tesla, or, 2) just buy Tesla, or partner with another manufacturer who already knows how to churn out vehicles, or, 3) do something different and daring with hardware and software– Apple’s forte from the past and present.
I’ll go with what’s behind door #3. We’re just not ready for the future. Yet.