Apple’s stock hit a new high on Friday, the corporation had set an internal goal of 2025 for the delivery of an autonomous car. Apple’s foray into electric and driverless vehicles has been rumoured for some time, and the corporation is reported to be working on them through an internal project called “Titan.”
This year has seen a number of challenges for Apple (AAPL), including a global processor shortage that cost the company $6 billion in missed sales in the fiscal fourth quarter. The stock, on the other hand, has renewed traction and just achieved a new all-time high, recovering its status as the world’s largest firm by market capitalization.
A Tesla killer?
Meanwhile, some of the analysts are bullish on Apple’s entry into EVs and see it as a clear risk for Tesla, whose market cap recently crossed above $1 trillion. Loup Ventures’ co-founder Gene Munster sees Apple’s entry into electric vehicles as the biggest risk for Tesla. If the company bets big on electric vehicles, it can be a tough competitor to not only legacy automakers but pure-play electric vehicle makers like Tesla, Rivian, Lucid Motors, and NIO. The iPhone maker has the financial strength and technical expertise to become a major competitor in the electric vehicle industry.
EV market opportunity
Foray into electric vehicles could be a long-term driver for Apple stock. Morgan Stanley analyst Katie Huberty sees it as a big opportunity for the company. “Smartphones are a $500bn annual TAM. Apple has about one-third of this market. The mobility market is $10 trillion. So Apple would only need a 2% stock of this market to be the size of their iPhone business,” she wrote in a client note.
After the recent reports of Apple’s entry into autonomous cars, she has reiterated her bullish views. She said, “We can provide a number of examples from the last 20 years that show while Apple may not always be first to market, its innovation engine, differentiation via vertical integration, and manufacturing/operational excellence have allowed it to leapfrog first movers.”
Apple’s entry is a risk for incumbents
Meanwhile, AAPL’s entry into electric cars is a risk not only for Tesla but other EV names also. Morgan Stanley analyst Adam Jonas who is a noted Tesla bull termed Apple’s entry into EVs as an “ultimate EV bear case” and a “clear negative for much of our automobile coverage.” Notably, while Jonas is bullish on Tesla, he holds a bearish view of Lucid Motors which is run by a former Tesla employee Peter Rawlinson. Tesla’s CEO Elon Musk has also mocked the soaring valuations of Lucid Motors and Rivian. The latter is backed by Amazon, whose chairman Jeff Bezos does not share a friendly relationship with Musk. What do we know about Apple’s electric car?
We don’t know much about Apple’s electric and autonomous cars but the company might opt for a third-party tie-up for production, as it does with the iPhone and the Macs. Last year, citing sources, a Reuters report said that Apple is working to “radically” lower the battery costs and increase the range. The source called Apple’s battery technology the “next level” and compared it with “the first time you saw the iPhone.” Batteries are a key component of electric cars. It not only impacts a car price but also determines its range that is very important while choosing an electric car. Production plans
Here it is worth noting that companies like Tesla, Rivian, and Lucid Motors have built their own plants for producing cars. However, many others like Fisker and NIO have opted for a third-party tie-up. Now, there are pros and cons of both the strategy. While a self-owned plant gives control over the production process, it also exposes the company to higher execution risk.
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