4 Reasons Apple Won't Buy Tesla Motors

By Markets Fool.com

Continue Reading Below

Don't expect to see the Apple logo on a Tesla's nose anytime soon. There are good reasons that an Apple acquisition of the Silicon Valley automaker is unlikely to happen. Image source: Tesla Motors.

Should Apple buy Tesla Motors ?

Some Apple shareholders are fond of the idea. At the company's annual meeting this past Tuesday, two shareholders told CEO Tim Cook that they would love to see the acquisition happen -- and pushed him to comment.

Cook carefully gave a non-answer, saying he'd love to see Tesla adopt Apple's in-car infotainment system, CarPlay. However, he stopped short of opining on the question itself.

I'm not sure why Cook didn't just come out and say that an acquisition of the high-tech carmaker isn't in the cards, because it doesn't make much sense for Apple to consider buying Tesla Motors. Here are four reasons.

Continue Reading Below

No. 1: If Apple wants to build a car, it doesn't need Tesla
Several recent reports have suggested Apple is at least exploring the idea of building a car. Such a car would presumably be a battery-electric-powered high-tech showcase with "gotta-have" styling and features.

And that arguably describes Tesla's Model S, right?

It does. Tesla has hiredauto-industry veterans from around the world to help develop the Model S, bringing in crucial carmaking expertise that had previously been lacking in Silicon Valley.

Apple is already doing the same thing. The Wall Street Journalreported that the 1,000-employee team working on Apple's car is led by Steve Zadesky, a former Fordengineer. The company also recently hired the chief of Mercedes-Benz's North American research and development operation, Johann Jungwirth.

According to the Journal, Apple has also connected with giant auto-industry supplier Magna International, a significant source of auto-development expertise and one of the very few companies able to provide contract manufacturing of automobiles.

Apple doesn't need Tesla's talent, in other words. And with $178 billion in the bank as of the end of 2014, it doesn't need Tesla's factory or resources, either -- it can handily build its own.

No. 2: Tesla is way overpriced, from Apple's perspective
Tesla has a proven product, many devoted fans, and a great brand that communicates upscale, high-tech cool. A buyer would get all of that.

But here's the thing: Apple doesn't yet have a car that has proven itself in the marketplace, but it already has the rest. It has the brand, the design chops, the ready-to-go global distribution network, everything it would need -- and almost everything it would get from Tesla.

Right now, Tesla's market cap is about $24 billion. An acquirer would presumably have to pay a premium above that; some potential buyers would no doubt think that a fair deal.

But that isn't going to be Apple. I recently explained how Apple, which already has the money and the brand and could easily acquire the talent, could duplicate everything else Tesla has done for less than $10 billion, possibly much less.

Simply put, it makes no financial sense for Apple to buy Tesla at anything close to the current price.

No. 3: Apple probably can't buy the most important part of Tesla anyway
"But what about the Beats Music acquisition?" a reader recently asked me. Apple could have easily launched its own headphone line and music service, so why did it spend $3 billion to buy Beats Music and Beats Electronics?

First, $3 billion isn't the $30 billion or more it would likely take to buy Tesla. But more to the point, the Beats acquisition included a deal under which Beats' co-founders, Dr. Dre and Jimmy Iovine, joined Apple.

What are the odds that Tesla CEO Elon Musk would join Apple as an employee? Approximately zero, I'd say. Musk doesn't need a job at Apple (to say the least), and he might well find it confining.

Remember, Musk is also CEO of SpaceXand the chairman of SolarCity'sboard of directors. I don't see him going to work for Tim Cook anytime soon.

To be fair, if Apple were to bring Tesla co-founder and CTO JB Straubel and his team on board, that would be a significant coup --if Apple is intent on building an electric car like Tesla's.

But Apple likely has something a little different in mind.

No. 4: Apple may be looking to leapfrog Tesla, not compete with it
A couple of weeks ago, I discussed why I thinkApple isn't actually looking to build and sell a car. Instead, I believe it might be working on a car service, an automated ride-sharing operation akin toUber, but with autonomous Apple cars rather than crowdsourced drivers.

If that's true, then paying big bucks for Tesla makes even less sense. Sure, Tesla knows a lot about battery-electric cars, and more than a little about self-driving technology -- but again, Apple is probably already duplicating that expertise.

Beyond the self-driving car technology, the big challenges here would be the algorithms that govern the service (which is to say, software) and the overall shape of the customer experience. In other words, design.

Tesla is good at both software and design, it's true. But if any company has the "software" and "design" bases extremelywell-covered, it's Apple.

The article 4 Reasons Apple Won't Buy Tesla Motors originally appeared on Fool.com.

John Rosevear owns shares of Apple and Ford. The Motley Fool recommends and owns shares of Apple, Ford, SolarCity, and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.