For some analysts, a Tesla smartphone would ring true

The blurred lines between smartphones and connected cars could materialize as a smartphone with the capability to run AI applications by using the Tesla's compute power, said Morgan Stanley analysts.

Kelsey Ziser, Senior Editor

June 14, 2024

3 Min Read
Man holding smartphone
(Source: JeongHyeon Noh/Alamy Stock Photo)

Morgan Stanley analysts believe there's a strong chance that Tesla will develop a smartphone that could be a pocket-sized version of the car.

"Will Tesla Do a Phone? Yeah, We Think So," said analysts in an emailed note to investors this week that Morgan Stanley shared with Light Reading.

Based on discussions with automotive management teams and industry experts, analysts assessed that the smartphone and connected car are blending together: "The car is an extension of the phone. The phone is an extension of the car. The lines between car and phone are truly blurring," said the Morgan Stanley analysts.

With its 15-inch touch screen and Tesla app, the Tesla is already essentially a "giant iPhone," dubbed as such by The Washington Post back in 2018.

For several years, Morgan Stanley has been writing about Tesla's potential to expand into edge compute areas outside the car, they added. That forecast includes "last October where we described a mobile AI assistant as a 'heavy key.' Following Apple's WWDC, Tesla CEO Elon Musk re-ignited the topic by saying that making such a device is 'not out of the question.' As Mr. Musk continues to invest further into his own LLM/genAI efforts, such as 'Grok', the potential strategic and user experience overlap becomes more obvious." Grok is an AI chatbot developed by Elon Musk's AI company, xAI.

Related:AI iPhone lands with a 'meh'

Tesla's Musk expressed security concerns this week on X/Twitter over Apple's recent integration with OpenAI's ChatGPT. X users mused whether Musk's reaction meant he could be considering a smartphone launch, to which he responded that the idea was "not out of the question."

Musk sang a different tune in November 2023 at the New York Times DealBook Summit, stating "I don't think there's a real need to make a phone. If there's an essential need to make a phone, I'll make a phone. But I've got a lot of fish to fry."

Currently, phones with a Near Field Communication (NFC) capability and the Tesla mobile app can be used to lock and unlock the car, according to Tesla's Model 3 Owner's Manual. A Tesla smartphone could be an extension of this, functioning as a 'heavy key.'

"Any Tesla owner will tell you how they use their smartphone as their primary key to unlock their car as well as running other remote applications while they interact with their vehicles. The 'action button' on the iPhone 15 potentially takes this to a different level of convenience," said Morgan Stanley.

The blurred lines between smartphones and cars could materialize as a smartphone with the capability to run AI applications by using the Tesla's compute power, added the analysts. After all, for the Tesla, "the incremental global unit sold is a car that can perform OTA updates of firmware, has a battery with a stored energy equivalent of approx. 2,000 iPhones, and a liquid cooled inference supercomputer as standard kit."

However, edge compute and AI have also brought to the forefront the practical challenges of running AI applications on smartphones by placing a strain on battery life, latency, device temperature and more, said Morgan Stanley analysts.

In addition to Tesla cars having the compute power to support AI applications on a Tesla smartphone, Telsa would also be in a position to integrate SpaceX connectivity into its own phones. Last month, SpaceX said it plans to launch direct-to-cell service with T-Mobile this fall in the US.  

"The service promises to potentially connect all of T-Mobile's customers to SpaceX's Starlink satellites in areas where the operator does not offer terrestrial coverage, regardless of the users' phones. That could potentially eliminate all of T-Mobile's outdoor dead zones," reported Light Reading's Mike Dano.

Morgan Stanley analysts didn't comment on when a Tesla smartphone might materialize. This would be difficult to gauge as Musk has a history of promising big things and then kicking the can down the road. In 2022, WSJ reported on how Musk's Boring Company "repeatedly teased local officials with a pledge to 'solve soul-destroying traffic,' only to back out."

About the Author(s)

Kelsey Ziser

Senior Editor, Light Reading

Kelsey is a senior editor at Light Reading, co-host of the Light Reading podcast, and host of the "What's the story?" podcast.

Her interest in the telecom world started with a PR position at Connect2 Communications, which led to a communications role at the FREEDM Systems Center, a smart grid research lab at N.C. State University. There, she orchestrated their webinar program across college campuses and covered research projects such as the center's smart solid-state transformer.

Kelsey enjoys reading four (or 12) books at once, watching movies about space travel, crafting and (hoarding) houseplants.

Kelsey is based in Raleigh, N.C.

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