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Would Apple Acquire Tesla?

Stocks in this article: TSLA AAPL GM F

NEW YORK ( TheStreet) -- In this article, I deal with two related issues:

1. Driving the Tesla (TSLA) Model S for the first time, why are the investors so surprised that it is so awesome?

2. Should Apple (AAPL) expand its product line into TVs -- or cars?

Last Friday saw Tesla's first customer deliveries of its Model S to non-insiders. The goal is to ramp production from one car per day now, to 80 cars per day by November, for a total of 5,000 delivered by the end of the year. Next year, the goal is to deliver at least 20,000 cars, probably with some upside from the Model X minivan, which launches at the end of 2013.

The Tesla investment-expectations setup to Friday's event was a barbell's worth of extremes. On the one hand, some people were extremely optimistic and enthusiastic about the prospects for the Model S. I am clearly one of them.

Yet others were extremely bearish on Tesla. Short interest is said to have been as high as 24%. The question is why? Why were so many people so extremely bearish about the Tesla Model S?

I think I've figured it out. It wasn't that the bears were so pessimistic about Tesla as a company, or specifically the Model S. It was that they didn't think electric cars -- any electric car -- could be successful. And with Tesla being the market's pure play on electric cars, how could you go wrong in shorting it?

Here is what I found: Most critics of electric cars have never driven one. They confuse the entirely different issue of political aversion to subsidies and other interventions in the market -- that I agree are always bad -- with the notion that an electric car can have overwhelming positive performance attributes.

Alternatively, they are skeptical of new technology in general, always magnifying a few narrow drawbacks of a new technology, while ignoring the revolutionary implications of looking at "the whole forest."

For an almost perfect analogy, I remember the smartphone debate back in 2000 and 2001: Being an early BlackBerry user, I said almost everyone would want email on their phone, as well as a great keyboard on which to type. I was told that this might be a market for a few thousand Wall Street bankers, lawyers and high government officials, that's all. The 1%.

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