The Apple and Tesla Alliance That Could Work

While Apple probably won't be acquiring Tesla, there is one alliance that could make sense for the two companies.

Mar 4, 2014 at 9:30PM

Apple (NASDAQ:AAPL) will probably not be acquiring Tesla (NASDAQ:TSLA). But that doesn't mean the companies couldn't work together. In fact, they have one common factor that could lay the foundation for a long-term partnership: batteries.

Tsla Battery

Tesla's fully electric Model S uses a lithium-ion battery. It is installed on the floor of the car.

Apple has the cash, Tesla has the batteries
"Apple and Tesla need about the same tonnage of batteries this year," explained Monday Note's Jean-Louis Gassee. Given the companies' common interest in massive amounts of lithium-ion, Jean-Louis explores the idea of an alliance between Tesla and Apple based on batteries.

Tesla CEO Elon Musk did admit in an appearance on Bloomberg TV that the electric-car maker met with Apple's head of acquisitions, Adrian Perica, last spring. But Musk said any purchase would be "very unlikely."

Musk continued:

We need to stay super focused on... creating a compelling mass-market electric car. And I'd be very concerned in any kind of acquisition scenario, whoever it is, that'd we become distracted from that task which has always been the driving goal of Tesla.

But Gassee, who was a high-level Apple executive in the eighties, proposes an alliance founded on the companies' common interest in lithium-ion and that it could make sense. In an article on Monday Note, he writes:

A more likely explanation for Apple's conversation with Tesla might be something Apple does all the time: Sit with a potential supplier and discuss payment in advance as a way to secure supply of a critical component.

Of course, neither Tesla nor Apple will comment. Why should they? But a partnership born of their comparable needs for battery volumes makes a lot more sense than for the two companies to become one.

Tesla's recent announcement that it will be building a massive battery mill called the Gigafactory, which will cost between $4 billion to $5 billion, is an excellent reason for Tesla to look to Apple for a potential alliance. A few billion-dollar investments from Apple in exchange for a supply arrangement with the world's most scaled lithium-ion supplier could make sense. The investment wouldn't even budge Apple's cash hoard.


Rendering of Tesla's planned Gigafactory. Image source: Tesla.

A way for Tesla to diversify?
The biggest problem for such an arrangement would be the obvious difference in a vehicle battery compared to the batteries used for Apple's increasingly thinner devices: Producing much larger vehicle batteries would require a different manufacturing process than that used for producing small consumer electronics batteries. But supplying gadget batteries could be a way for Tesla to diversify while also paving the way to making a separate business out of supplying batteries for various purposes.

Wired author Marcus Whohlsen recently chimed in on the topic, too: 

If Tesla really produces batteries at the scale it's promising, cars could become just one part of what the company does. One day, Tesla could be a company that powers just about everything, from the phone in your pocket to the electrical grid itself.

Apple will probably not acquire Tesla. But that doesn't mean the companies couldn't work together.

A strategy for finding growth stocks that works
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

Daniel Sparks owns shares of Apple and Tesla Motors. The Motley Fool recommends Apple and Tesla Motors. The Motley Fool owns shares of Apple 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information