Apple targets car production, eyes batteries: Reuters
Kristin Myers of Yahoo Finance and Robert Muller, RBC Capital Markets Enterprise Hardware Analyst, discuss Apple's move into the electric vehicle space.
KRISTIN MYERS: And I want to take a look at Apple because we're going to have a chat with them next, up over 3.5% right now. This is in the news that Apple wants to move forward with self-driving cars and aims to do so by 2024. Therefore I would like to have Robert Mueller, RBC Capital Enterprise Hardware Analyst, join this discussion.
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So Robert, that's under the umbrella project Project Titan, as it was called. And it has been running for years and only released around 200 employees from this project last year. When I heard this news, I thought that we've seen a lot of companies really trying to break into autonomous vehicle space. And it was full of setbacks, I'll name them.
In your opinion, how excited is Apple to be not only successful in this area, but to be successful by 2024 despite all of these setbacks battling the pandemic?
ROBERT MULLER: You know, when you think of Apple from top to bottom, they really stand as good a chance as anyone when you think of a great brand, a very loyal following. They make products that make your life easier. You have a great balance sheet, a great balance sheet capacity. You can take on debt, you have plenty of cash on hand.
And then they have a lot of talented engineers, very bright people, who can work there and write code that can make products. So if I had to hinder them, I don't see too much of a reason why they couldn't work with a manufacturer or make this work compared to others.
2024 could be a little tricky for full autonomy just if you think about regulatory pressures and get the technology ready in the next three years. That could be a little difficult. But you could get the software working, you could prove it in certain use cases, and really build the momentum behind your car. So that's absolutely a possibility. Again I think they have as good a chance as anyone else.
KRISTIN MYERS: Well, you've picked up a couple of things that I definitely want to know a little more about. Because when I think of Apple, I don't think so much about the technical challenges they may face in the future, but rather logistical challenges. They just aren't ... they're not an automaker. They don't make cars, they don't have to - they never have to make cars. Cars are not cell phones.
What do you see as some of the biggest hurdles for the future? And do you have any idea who they could possibly work with or who would be the best partner for Apple to manufacture the vehicles themselves in the future?
ROBERT MULLER: So you have some manufacturing knowledge if you think about how you work with some of your suppliers. They make many iPhones every year, hundreds of millions. So you have the capacity, you are used to making it. And so this is just one more area they would switch to.
You could partner with a premium brand. I'm not trying to make a call that is strictly BMW, for example, but you know, someone with some sort of this prestigious brand, this luxury offering that they could work with, or just another OEM trying to increase their self-driving behavior autonomous skills.
But really, you know, a lot of their manufacturing partners, some of whom we cover, whether Jabil or Flex, these companies make parts that are used in consumer electronics, but they are also more involved in the automotive industry. So you have manufacturing partners with automotive experience who don't necessarily build the entire type of tires on the roof. But they have the ability to manufacture and practice and the ability to ramp up.
KRISTIN MYERS: Do you think this is something that you may fully own rather than outsource that manufacturing? Obviously, I think if you are an Apple investor there are a ton of benefits to having really started owning the full value chain.
ROBERT MULLER: Whether they actually own the machines that assemble the cars and bring them off the assembly line, maybe, maybe not, I don't know if there is a significant difference between whether it's a brand in one or not partnership with one other companies or when they actually put the finishing touches on. Like even the iPhone, you know, they outsource production and final assembly there. So I would imagine that they would do something similar.
They are also successful from a software point of view. If you can show the technology works, show us some use cases. I think that would be beneficial, and software itself would just be a higher margin product than what you would just get out of the metal in the car. However, when you have more control over the design, manufacture, and final production, Apple is very strong at making its products look their best. They are slim, they are useful. And so they just have more control over the end product.
KRISTIN MYERS: I wonder if you could talk to us about the battery. I think the lidar technology that is downright "li-dar" isn't even something I've heard too much about. I am not the expert in this area. I know you know a lot more about this, as well as about these sensors. Just talk a little about this technology, how important it will be to the success of this vehicle.
ROBERT MULLER: Yeah, you know, and we think lidar is really just radar with lasers, that's the easy way I think about it. So the technology is there if you have to - you don't necessarily have to see it with your eyes, but you do have to see it with the laser capabilities like you said. So you can see an object in front of you, measure the distance and measure the closing speed.
So this is going to be an important technology. They tested it on their new iPhone model, the 12 Pro. With lidar you can scan the room and try to get some kind of example of all objects that are on the run. So it is a technology that is only used with a view to safety or logistics to put the self-driving capability into operation.
From a battery point of view, one of the big complaints is the fear of range if your car can't go very far. So some improvement in the batteries, the sources in the [? Oracle?] Claims are a radical improvement in battery technology. So if you can increase the range it would help make people a little hesitant about having an electric vehicle that you can't just pop into a pump and refuel when you run out of gas.
KRISTIN MYERS: Well, in your note, you were talking about long-term benefits here. I especially wonder about the path to profitability of this company. How long is a runway do you think Apple is looking at?
ROBERT MULLER: Apple is fortunate to have a very long-term view of their product. You just have a cash cow with all of your consumer goods. So, in the meantime, they will make money no matter what happens to their automotive technology. And one of the reasons we've been positive about Apple for a while is because we're really looking at the business.
It's kind of a call option for all future innovations. When you think of a company that created the iPhone, they created the iPad category, the tablet category, smartwatches, and some wearables that I wear right now. They somehow mastered and dominated these categories. So it's unreasonable for me to believe that they won't have a new product in the next two, three, four, five years.
So it really is all upside if you own the stakes in future innovations. And then a product like the car, if you just think of a massive, overall addressable market for it, it's huge. It's bigger than any of the categories they currently have if they can master it. So this is really just a future call option. And I think you can see that is reflected in the share price today.
KRISTIN MYERS: All right, we'll leave that there. Robert Muller, hardware analyst at RBC Capital Enterprise, thank you for breaking it all down. It's something very cool to me, but still a little bit "The Jetsons" in some aspects. Appreciate you broken all of that down. Thank you for joining us today.
ROBERT MULLER: Absolutely. Thanks for the invitation.
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