A few days ago rumors of Apple/Tesla meetings resurfaced, and conclusions were once again leapt to about a possible acquisition. It’s unfortunate that most people writing about the topic seems to have nothing but mergers and acquisitions (M&A) on the brain. I think there is absolutely no chance that happening and what's more — I think there are far more interesting possibilities to consider here.
As much as people want to see Apple enter new product categories, I don’t think it makes any sense for them to start making cars. None. But there is a huge area of potential common interest, and that’s batteries. I’m a big fan of Tesla, and I’m also a shareholder so I follow the company closely. If they are to even reach 1% market share in the global car market they probably need to obtain lithium ion battery supplies that represent something like 10x today’s world production. Tesla would like to create its own huge battery factories to accomplish this goal. Obviously the biggest current use of such battery technology is from mobile gadets, and Apple is a huge buyer of batteries. So just as Apple has become more vertically integrated on the hardware side of things with making its own processors, it’s entirely possible that it would want to get more involved with battery production.
That brings us to cash. Apple has gobs of cash. Tesla … they’ve got nowhere nearly enough money to build several gigantic battery factories. It makes complete sense to me that Apple would get involved with a smart and useful project such as growing the global supply of lithium ion cell production by an order of magnitude or more.
I don’t think investors are silly enough to actually believe Apple wants to (or plans to) buy Tesla. Shares of the electric car maker were up about 2% on Tuesday following the completely unfounded M&A rumours, and that’s a drop in the bucket considering the volatility of the stock on a normal day.
I do think investors are smart enough to look towards the future, because that's exactly where both Apple and Tesla are looking.