Wednesday, December 24, 2020
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In the next few years, you could be driving an Apple car
Like aliens, Bigfoot, and the Loch Ness Monster, the long-fabled Apple (AAPL) Car is once again said to be on its way. According to Reuters, the tech giant is now targeting 2024 to build its own self-driving, electric-powered passenger vehicle that could pose a threat to Tesla (TSLA).
While there are obvious reasons why a “Tesla-crushing” Apple car won’t exist, as Yahoo Finance’s Brian Sozzi wrote, Apple still has plenty of incentives to pursue it. For one thing, with iPhone sales over the last few years slowing, Apple could benefit from the estimated $9 trillion the auto industry is expected to be worth by 2030.
And as some analysts point out, a self-driving car would give consumers more time behind the wheel with little to do except sign on to Apple’s subscription-based services ranging from infotainment to vehicle upgrades. That could boost Apple’s services segment, which the tech giant has increasingly been leaning on revenue growth.
Of course, Apple will have to overcome logistical and regulatory hurdles to get a vehicle on the road — but the tech giant has more to gain than lose from its electric vehicle efforts, known as Project Titan.
Apple could change the auto industry
Apple has been reportedly toying with entering the automotive industry for years. In 2019, Craig Irwin of Roth Capital Partners told CNBC that Apple had sought to acquire Tesla in 2013 for $240 a share. The deal, however, never came to fruition. On Tuesday, Tesla CEO Elon Musk claimed via a tweet that he sought to sell Tesla to Apple for $60 billion, but that Apple CEO Tim Cook refused to take a meeting with him.
Still, Project Titan and Apple’s prior interest in Tesla is enough proof for some analysts to see an Apple car as a near eventuality.
“We continue to view this as a likely scenario, given Apple has invested in mobility for the last seven years, and the auto market is massive and at the cusp of a transformation,” Gene Munster of Loop Ventures wrote in an analyst note following the Reuters report.
It would fit Apple’s modus operandi for it to enter a nascent industry like electric vehicles and completely revolutionize it, Munster pointed out. Look no further than smartphones, wearables, or even headphones for proof of Apple’s ability to take a new product to the next level.
Morgan Stanley analysts Adam Jonas and Katy Huberty, meanwhile, said in their own note that the company’s auto and tech hardware teams have long been under the working assumption that Apple was going to eventually design and build its own car.
Apple has the opportunity to enter a large, fast-growing industry where it can put its knowledge of marrying hardware, software, and services to work to dramatically improve the consumer experience, according to the Morgan Stanley analysts.
“Apple possesses the key ingredients that we believe are critical to be successful in the future auto industry: Access to capital, an ability to attract and retain top talent, proven hardware design (from HMI to battery), and a rich ecosystem to leverage recurring subscription/service revenue,” the two write.
It’s the subscription services that Goldman Sachs analyst Rod Hall says could be the main reason for Apple to jump into the auto market. According to Hall, the increased amount of time consumers spend in their self-driving cars would provide ample opportunity for Apple, and other tech companies, to benefit from a captive audience in need of some kind of distraction.
Apple has been working on its car for years
Of course there’s been plenty of speculation as to the state of Apple’s Project Titan, and whether it will result in a car. The original concept, according to a 2015 report by The Wall Street Journal, called for Apple to build its own minivan-like autonomous vehicle.
But those plans changed significantly, with Bloomberg reporting in 2016 that Apple was instead switching its focus to the software that powers autonomous vehicles, which could then be licensed to other automakers.
Then in 2018, according to The New York Times, Apple, after striking out with BMW and Mercedes Benz, reached a deal with Volkswagen for the automaker to provide Apple with some of its vans, which the tech giant would turn into autonomous shuttles for its Cupertino, California, campus.
Leadership on the project has also been in flux. Earlier this month, Apple’s head of AI, John Giannandrea, took the reins of Project Titan, after Apple’s senior VP of hardware engineering, Bob Mansfield, retired. Former Tesla senior VP of engineering, Doug Fields, who prior to that worked at Apple, continues to run Titan’s day-to-day operations.
There’s little doubt that Apple will face significant headwinds in building out its own automotive capabilities. Tesla, for example, was “single-digit weeks” away from running out of cash to finance operations as it struggled to ramp up production of its Model 3 in 2018, according to its CEO.
And some analysts disagree on whether the tech giant can really pull it off. Wedbush’s Dan Ives says the company has a 35% to 40% chance of putting a car on the road by 2024 given the difficulty of designing and building a car that can stand up to regulatory scrutiny.
But if Apple does have an electric, self-driving iCar ready in the coming years, it may once again become the company that determines the direction of a nascent industry, just as it did with consumer technology.
By Daniel Howley, tech editor. Follow him at @DanielHowley
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