Tesla may need investment from company like Apple, 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, said the Center for Automotive Research's Brett Smith and Morningstar's David Whiston.

Instead, it's more likely another company would take a major stake in Tesla or buy it, said Smith and Kelley Blue Book's Karl Brauer.

One possible investor could be Apple, which according to the Roth Capital Partners analyst Craig Irwin made an offer to buy Tesla in 2013.

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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 caused by investor concern about Tesla's debt levels (the company had $10.3 billion in debt at the end of March and sold $1.6 billion in convertible bonds this month) and a leaked, internal email in which CEO Elon Musk said a capital infusion of over $2 billion would last for only 10 months at recent spending rates, said the Morningstar automotive analyst David Whiston.

“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.”

Read more: Nothing Elon Musk has done has stopped the bleeding at Tesla — and things look like they're going to get worse

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.”

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, said Smith and Karl Brauer, the executive publisher at Kelley Blue Book.

Tesla has a number of assets, like 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 according to the Roth Capital Partners analyst Craig Irwin made an offer to buy Tesla in 2013. 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, like ride-hailing and self-driving cars, that could define the future of transportation. Apple has been quietly working on autonomous-driving technology since 2014, according to The New York Times, but has reportedly 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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