While Apple has never made any formal announcement, there's been quite a few clues pointing to an electric car.
It's hard to hide something if you hire more than one thousand engineers to do it, Musk told the BBC.
One clue: The domain registry site WHOIS lists Apple as the owner of the online domain name www.Apple.Car.
Another: In September, in a statement to CNBC, the California Department of Motor Vehicles confirmed a meeting with Apple to review autonomous vehicle regulations.
Musk says he doesn't see a potential Apple car as a threat to Tesla, but rather an opportunity to expand the nascent industry. He sees a future where all cars will be electric and autonomous.
As of now, Tesla only produces luxury electric model cars, and its founder said unless there's an affordable car, Tesla will only have a small impact on the world, according to the BBC report.
Apple did not immediately respond to a request for comment from CNBC.