Should This Terrify Tesla Motors, Inc. (NASDAQ:TSLA) Stockholders?
Elon Musk, Tesla Motors, Inc.’s (NASDAQ:TSLA) charismatic CEO, had some harsh words for Apple Inc. (NASDAQ:AAPL) recently, suggesting two things. The first is that Musk probably does not use an iPhone. The second is that he fears that Apple may want to buy out Tesla stockholders, one of the undisputed stars of Silicon Valley, one day in the near future.
When Elon Musk criticized Apple in a recent interview with Germany’s Handelsblatt newspaper, he did not pull any punches. (Source: “Elon Musk: Apple hired the Tesla engineers we’ve fired,” Endgadget web site, October 8, 2015.) Meanwhile, Tesla stock is trading at its lowest levels in more than six months.
Nevertheless, even allowing for his trademark bluntness, Musk himself may wish he censored himself, despite the competition that his Tesla Motors is feeling from Alphabet Inc. (NASDAQ:GOOG, previously Google Inc.) and Apple to be the most successful at developing driverless electric cars.
Apple is reportedly preparing to sell autonomous (driverless) vehicles before the end of the present decade and expects to have a working prototype ready in 2019. Apple has not confirmed this information; however, Silicon Valley is ripe with rumors that Apple has been poaching employees from many automotive manufacturers, including Tesla itself.
For the record, Elon Musk was not complimentary toward Apple, deriding it for hiring the people his company fires, referring to Apple as the “Tesla Graveyard.” “If you don’t make it at Tesla, you work at Apple,” Musk said, making clear that he was not joking.
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As for Apple’s alleged car, Musk scoffed by pointing out the Apple Watch, insinuating it is a failure of design and function: “Did you ever take a look at the Apple Watch? No, seriously. It’s good that Apple is moving and investing in this direction. But cars are very complex compared to phones or smartwatches. You can’t just go to a supplier like Foxconn and say, ‘Build me a car.’ But for Apple, the car is the next logical thing to finally offer a significant innovation. A new pencil or a bigger iPad alone were not relevant enough.”
This was last week. After the weekend, either Apple made him an offer he can’t refuse in the style of the first The Godfather movie or, perhaps under the suggestion of his board, Musk found some modesty and remorse. Indeed, Musk waxed poetically about the Apple brand, via his Twitter account: “Yo, I don’t hate Apple. It’s a great company with a lot of talented people. I love their products and I’m glad they’re doing an EV.” (Source: “Yo, Elon Musk Doesn’t Really Hate Apple,” PC web site, October 12, 2015.)
Whether or not Musk’s retraction is sincere, what is certain is that he fears the potential competition from Apple. The company could emerge as a Tesla rival, and one with much more money in the bank, given the Cupertino-based company’s gigantic market value and profits.
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Elon Musk is clearly concerned about Apple and maybe TSLA stockholders should be, too. His mockery is actually nothing less than an effort to cover up the production delays of the new “economy” compact electric for the masses (starting at $35,000), known as the Model 3, and the Model X SUV, which was unveiled to the public last month. In fact, given the delays, Tesla should be trying to retain as many engineers as possible, rather than suggesting locations where they may retire for eternity.
The rumors about Apple’s car are that the iconic company plans to bring 1,800 people to work only on the Apple car. (Source: “Why Tesla is poaching Apple employees,” Macworld, February 6, 2015.) Apple can afford to offer Tesla’s many incentives, including some $250,000 in bonuses to attract them to Cupertino; Musk said few accepted. But even if only a fraction of that number made the shift, Tesla has much to worry about.
Musk runs the risk that a majority of Tesla engineers could have been seduced by the notion of developing the “iCar.” Alternatively, more simply, Apple might take over Tesla Motors outright. Musk’s company may be more financially vulnerable than the boss lets on and the South African born billionaire might even have gotten bored by cars, preferring to focus on deploying the first manned mission to Mars through his Space X company. Nothing in Silicon Valley is impossible, they say.