Musk says Apple passed on Tesla acquisition three years ago
December 23, 2020
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by admin

Robotic arms surround an incomplete sedan.
Enlarge / A Tesla Model 3 is seen in the general assembly line at the Tesla factory in Fremont, California, in July 2018.

A few years ago, Elon Musk tried to interest Apple CEO Tim Cook in buying Tesla, Musk said in a Tuesday tweet. “He refused to take the meeting,” Musk added.

According to Musk, this occurred in the “darkest days of the Model 3 program”—most likely sometime in late 2017 or early 2018. Musk recently revealed that at one point early in the Model 3 manufacturing process, Tesla was “about a month” away from bankruptcy.

“The Model 3 ramp was extreme stress & pain for a long time — from mid 2017 to mid 2019,” Musk wrote in November. “Production & logistics hell.”

While the Model 3 was not Tesla’s first car, it was the company’s first attempt to build a mass-market vehicle—one that could sell for less than $40,000 and therefore win hundreds of thousands of customers every year. While the car was cheaper, the equipment required to manufacture it at a larger scale was more expensive than Tesla’s previous production lines.

Musk had an ambitious plan to automate the Model 3 production process, using robots for tasks that were traditionally done by human workers. But things didn’t work out the way Musk hoped they would. Building the necessary robots was more difficult and expensive than expected. Some didn’t work right. So Tesla was ultimately forced to scale back its automation plans and build a more conventional assembly line.

“Excessive automation at Tesla was a mistake,” Musk admitted in 2018. “Humans are underrated.”

Designing the Model 3 and setting up its production line was so expensive that Tesla’s survival depended on the Model 3’s success. If Tesla wasn’t able to start selling the Model 3 in volume by mid-2018, it would have run out of cash and likely could not have serviced its multibillion-dollar debt.

Tim Cook wasn’t interested

Apparently, at some point during this process, Musk became so worried about Tesla’s survival that he considered selling the company. Apple would have been a logical candidate. It was (and is) one of the largest companies on the planet, with more than $70 billion in cash and short-term investments. It easily could have afforded Tesla’s $60 billion market valuation.

Apple and Tesla also have similar design philosophies. Both are known for their vertical integration, creating their own hardware and software and selling their products online and in company-owned stores.

But according to Musk, Apple CEO Tim Cook wasn’t interested. When Musk reached out to Cook in 2017 or 2018, Cook declined to even take a meeting on the subject.

At the time Musk contacted Cook, Apple had been working for several years on a car project called “Project Titan.” Titan reportedly began as a plan to build an “Apple Car” but then got scaled back to creating self-driving software to license to existing automakers. On Monday, Reuters reported that Apple was once again working on creating its own car.

With the advantage of hindsight, it seems that buying Tesla in late 2017 would have been a good deal for Apple. Tesla’s market capitalization today is 10 times what it was in 2017. After the rocky rollout of the Model 3 in 2017 and 2018, things started to go more smoothly. Tesla launched the Model Y on schedule, built a factory in China, and is now working to build two more factories in Texas and Germany.

Musk’s offer to Cook wasn’t the first time he considered selling Tesla. According to a 2015 biography of Musk by Ashlee Vance, Tesla had a similar crisis in the first quarter of 2013. The Model S had been launched the previous year, but early sales were so sluggish that Tesla’s survival was in question.

According to Vance, Musk struck a “handshake deal” with Google founder Larry Page in March to buy the company for around $6 billion. But while the lawyers were haggling over the details, Model S sales improved enough to get Tesla out of immediate danger. Tesla posted an unexpected profit for the first quarter, and Tesla’s stock price soared. Tesla remained independent.

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