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The Apple and Tesla Alliance That Could Work

By Daniel Sparks - Mar 4, 2014 at 9:30PM

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

Apple ( AAPL 2.28% ) will probably not be acquiring Tesla ( TSLA 1.64% ). 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.

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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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