Apple Car would take the tech giant to the next level — even if it’s a long shot
Wednesday December 24, 2020
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You could be driving an Apple car for the next few years
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Like Aliens, Bigfoot and the Loch Ness Monster, the long-fabled Apple (AAPL) car is said to be on the way. According to Reuters, the tech giant now plans to build its own self-driving, electrically powered passenger vehicle in 2024, which could pose a threat to Tesla (TSLA).
Although there are obvious reasons why there is no such thing as a "Tesla-crushing" Apple car, as Brian Sozzi of Yahoo Finance wrote, Apple still has plenty of incentives to pursue it. For one thing, with iPhone sales slowing in recent years, Apple could benefit from the estimated $ 9 trillion the auto industry is projected to be worth by 2030.
And, as some analysts point out, a self-driving car would leave consumers more time behind the wheel and do little other than sign up for Apple's subscription-based services, which range from infotainment to vehicle upgrades. This could bolster Apple's service segment, which the tech giant is increasingly relying on revenue growth.
Apple CEO Tim Cook welcomes fans in front of the Apple Store on Fifth Ave in the borough of Manhattan in New York, New York, USA, 20 September 2019. REUTERS / Carlo Allegri
Of course, Apple has 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 effort known as Project Titan.
Apple could change the auto industry
Apple has reportedly been playing with entering the auto industry for years. In 2019, Craig Irwin of Roth Capital Partners told CNBC that Apple attempted to acquire Tesla in 2013 for $ 240 per share. However, the deal never materialized. On Tuesday, Tesla CEO Elon Musk claimed through a tweet that he wanted to sell Tesla to Apple for $ 60 billion, but Apple CEO Tim Cook refused to meet with him.
However, Project Titan and Apple's previous interest in Tesla is sufficient evidence that some analysts see an Apple car as near-possible.
"We continue to see this as a likely scenario as Apple has invested in mobility for the past seven years and the auto market is massive and on the verge of transformation," Loup Ventures' Gene Munster wrote in an analyst report following the Reuters report.
It would fit Apple's approach to enter an emerging industry such as electric vehicles and completely revolutionize it, stressed Münster. Look no further than smartphones, wearables, or even headphones to prove that Apple is capable of taking 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 believed that Apple would eventually design and build its own car.
According to analysts at Morgan Stanley, Apple has the opportunity to enter a large, fast-growing industry where it can use its knowledge of connecting hardware, software and services to dramatically improve the customer experience.
Elon Musk, Tesla CEO, said he wanted to sell the company to Apple, but Tim Cook refused to attend the meeting. REUTERS / Hannibal Hanschke
“Apple has the key ingredients that we believe will be critical to success in the future auto industry: access to capital, the ability to attract and retain top talent, proven hardware design (from HMI to battery) and a rich ecosystem to take advantage of recurring subscription / service revenue, ”the two write.
According to Rod Hall, an analyst at Goldman Sachs, subscription services could be the number one reason Apple enters the automotive market. Hall said the increased time consumers spend in their self-driving cars would provide ample opportunity for Apple and other tech companies to capitalize on a trapped audience in need of a distraction.
Apple has been working on its car for years
Of course, there has been a lot of speculation about the condition of Apple's Project Titan and whether it will lead to a car. According to a 2015 Wall Street Journal report, the original concept was for Apple to build its own minivan-like autonomous vehicle.
However, these plans changed significantly. Bloomberg reported in 2016 that Apple instead shifted its focus to software for autonomous vehicles, which could then be licensed to other automakers.
According to the New York Times, after a strike with BMW and Mercedes Benz, Apple signed a deal with Volkswagen in 2018 to allow automaker Apple to provide some of its vans that the tech giant would turn into autonomous shuttles on Cupertino, California, campus.
The leadership of the project was also in flux. Earlier this month, Apple's AI chief John Giannandrea took over the helm of Project Titan after Apple's senior vice president of hardware engineering, Bob Mansfield, retired. Doug Fields, former Tesla Senior Vice President of Engineering who previously worked at Apple, continues to lead Titan day-to-day operations.
There is little doubt that Apple will face significant headwinds as it builds its own automotive capabilities. Tesla, for example, was "single-digit weeks" away from running out of money for financial deals as it struggled in 2018 to ramp up production of its Model 3, according to the CEO.
And some analysts disagree on whether the tech giant can really do it. Wedbush's Dan Ives says the company has a 35% to 40% chance of getting a car on the road by 2024 due to the difficulty of designing and building a car that will stand up to government scrutiny.
However, if Apple has an electric, self-driving iCar ready in the years to come, it may once again be the company that determines the direction of an emerging industry, just as it did with consumer technology.
Posted by Daniel Howley, technical writer. Follow him at @DanielHowley
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