Tesla keeps getting hammered, and if the beating doesn't stop, it may need another tech giant like Apple to save it, experts say
- Tesla's stock price has plummeted by 35% since the beginning of this year, as of Wednesday when markets opened, reaching levels it hasn't hit since the end of 2016.
- Even in the worst-case scenario, Tesla is unlikely to go bankrupt, the Center for Automotive Research's Brett Smith and Morningstar's David Whiston said.
- Instead, it's more likely another company would take a major stake in Tesla or buy it, Smith and Kelley Blue Book's Karl Brauer said.
- One possible investor could be Apple, which made an offer to buy Tesla in 2013, according to the Roth Capital Partners analyst Craig Irwin.
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Tesla is feeling the pain.
The company's stock price has plummeted by 35% since the beginning of this year, as of Wednesday when markets opened, reaching levels it hasn't hit since the end of 2016.
The electric-car maker's shares have been volatile since the company went public in 2010. This most recent dive may be the result of investor concern about Tesla's debt levels (the company had $10.3 billion (R143 billion) in debt at the end of March and sold $1.6 billion (R23 billion) in convertible bonds this month) and a leaked internal email in which CEO Elon Musk said a capital infusion of over $2 billion (R28 billion) would last for only 10 months at recent spending rates, the Morningstar automotive analyst David Whiston said.
"This is just the same old thing that's been going on a long time," Whiston said. "They keep burning cash. They're always able to raise more money and everything's forgiven. Lately, though, after this last capital raise, it wasn't really forgiven as much."
Investors may be realizing that car companies do not make profits as quickly as software-based tech companies, said Brett Smith, the director of propulsion technologies and energy infrastructure at the Center for Automotive Research.
"Tesla has worked so hard to tell the world they are not a car company - they are a technology company," Smith said. "At the end of the day, you know what? They're a car company."
And for car companies, particularly young ones, financial troubles are not unusual. Nearly every major automaker has had them at some point, Smith said.
"It's really hard to be a car company," he said.
Bankruptcy is unlikely, even in the worst-case scenario
But even in the worst-case scenario, Tesla is unlikely to go bankrupt, Smith and Whiston said. Instead, it's more likely another company would take a major stake in Tesla or buy it, Smith and Karl Brauer, the executive publisher at Kelley Blue Book, said.
Tesla has a number of assets, such as its motors, drive units, and brand equity, that another company may find valuable. But political tensions could make it difficult for a foreign company to invest, and many traditional automakers have decided to develop electric vehicles in-house, decreasing the appeal of a large investment in Tesla.
"If [Tesla] does decide that it cannot go alone anymore, finding somebody may be a little trickier than it would have been in the pre-Trump era," Smith said.
One possible investor could be Apple, which made an offer to buy Tesla in 2013, according to the Roth Capital Partners analyst Craig Irwin. A major investment from Apple would make sense because its customer base is similar to Tesla's, Brauer said.
"You have a lot of people who are Tesla fans who are Apple fans, and vice-versa," he said. "It would be very easy for people who are fans of both companies to grasp them coming together."
Business Insider's Matthew DeBord wrote in 2018 that by acquiring Tesla, Apple could position itself to capitalize on potentially lucrative new business models, such as ride-hailing and self-driving cars, that could define the future of transportation. According to The New York Times, Apple has been quietly working on autonomous-driving technology since 2014 but has narrowed the project's scope from building electric self-driving cars to creating the technology for an autonomous shuttle to be used by its employees.
Tesla did not respond to a request for comment on this story.
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