Apple and Tesla set to take world on wild ride
The week has seen the emergence of several narratives in the media characterizing the relationship between Apple and Tesla. These are the two most glamorous companies in Silicon Valley, and arguably the world; thus, people tend to sit up and take notice when a flood of stories headlined “Apple” and “Tesla” are unleashed in a matter of days.
Furthermore, several of these stories seem to be at odds with one another. On the one side, Forbes says that Tesla has poached 150 people from Apple, in order to further expand into consumer electronics. Business Insider, on the other side, says that Apple has poached people from Tesla in order to build an electric car of its own.
Apple and Tesla have always traditionally avoided each other, holding a grudging respect for the other’s dominance in their respective fields. It seems as if the two companies are finally getting into each other’s crosshairs. Why is this happening now? And what does this mean for the industry as a whole?
The San Francisco Chronicle*reported that last Spring, Apple’s chief of mergers & acquisitions Adrian Perica met Tesla CEO Elon Musk. Such a high-level meeting suggests Apple was interested in buying, or at least getting involved in a major partnership, with Tesla. Elon Musk, in a later interview with *Bloomberg, did not deny having spoken to Apple about an acquisition. Needless to say, nothing was announced, indicating that whatever was being planned fell through.
Automobiles are a massive market, arguably the only consumer market larger than cellphones. Furthermore, even a minority market share at the high end can lead to an enormously profitable business. For evidence, consider BMW, Mercedes, or Jaguar-Land Rover — all highly profitable players that thrive on good design and a small number of extremely loyal customers.
Right now, everyone in that segment is worried about Tesla, the young scrappy American upstart that is only poised to grow as electric car charging facilities become more widespread. If reports are to be believed, soon they may also have to worry about Apple, which is one of the largest companies in the world and the only one with the design chops to outclass even Tesla.
According to the Wall Street Journal, Apple has hundreds of employees working on an electric car project meant to compete directly with Tesla. And when did this project start? Approximately a year ago, around the time Apple’s Perica met Musk, to no avail. For this project, Apple has poached experts from a variety of automakers, including Tesla.
On the other side of the fence, Tesla is trying to ramp up production. With the imminent arrival of its budget option, the Model 3, Tesla needs to scale its supply chain very quickly. Apple is famous for a supply chain that is as massive as it is efficient. It would only be logical for Tesla to want to poach some of Apple’s talent in the field.
Apple and Tesla are both examples of vertically-integrated, design-centric, high-margin success stories born in the Silicon Valley. All said and done, the entrance of both in the auto industry should hopefully shake things up for the better.