'Apple Car' profits will quickly dwarf initial $3.6B Kia investment, analyst claims

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Apple's entry in the car market could generate profits that "dwarf the initial investment" of $3.6 billion, an analyst claims.

Credit: Kia
Credit: Kia


In a note to investors seen by AppleInsider, JP Morgan analyst Samik Chatterjee offered some quick thoughts and analysis on recent rumors that Apple plans to invest in Kia to produce the "Apple Car."

Chatterjee notes that the build plan of 100,000 vehicles a year ramping up to 400,000 over time would be less than 1% to 3% of the global luxury vehicle market. It would also clock in at between 1% and 4% of the battery electric vehicle (BEV) market.

However, the analyst adds that a successful "Apple Car" launch could accelerate growth in the BEV segment.

On the $3.6 billion number, Chatterjee says it would represent one of Apple's most significant investments. The investment eclipses even the $3 billion to acquire Beats and the $1 billion to buy Intel's modem business.

However, the profit total addressable market (TAM) opportunity could far outweigh that investment. The analyst forecasts a $70 billion to $100 billion profit TAM on hardware alone, before adding in estimates of services monetization opportunity.

The fact that Apple would probably adopt a contract manufacturing supply chain similar to the iPhone may also bode well for the endeavor. Chatterjee says it could keep return on investment high despite the lower margins on vehicles.

However, Chatterjee says that the immaturity of current autonomous vehicle technologies could be a "limiting factor" on the launch timeline. Press reports indicate that Apple and Kia are aiming for a 2024 production run.

Although the analyst casts doubt on that timeline, he adds that an easier path to production and market entry could be had by adopting only certain autonomous functions. That would result in a semi-autonomous vehicle, rather than a fully self-driving car.

Previously, Chatterjee said that Apple was more likely to adopt a "go big or go home" strategy with a fully autonomous vehicle slated to launch in the latter half of the 2020s.

The analyst is maintaining his 12-month AAPL price target of $150, based on JP Morgan's 2022 earnings-per-share estimate of $4.90 and a blended price-to-earnings multiple of about 31x.

Comments

  • Reply 1 of 11
    22july201322july2013 Posts: 2,102member
    Considering how many years I've been waiting for the APPLE CARD to come to Canada, I think the APPLE CAR will also take years to arrive here.
    viclauyycGraeme000DAalsethlolliverwatto_cobra
  • Reply 2 of 11
    Given reports that first generation vehicles will have zero provisions for a driver, I think the presumption of luxury vehicle profit margins is debatable, at best. I’m very curious how a luxurious robotaxi & every possible service can pile on top is going to provide margins akin to the rest of Apple’s product line.
    JWSCCloudTalkinwatto_cobra
  • Reply 3 of 11
    BebeBebe Posts: 142member
    Wow, that's a very optimistic prediction.
    watto_cobra
  • Reply 4 of 11
    A $3.6B investment doesn't seem like it would be a big deal for Apple.  Apple just collected $14B for selling bonds, so the $3.6B amount should already be covered.  Apple sure seems a bit frugal for such a wealthy company, but then again most of these numbers are beyond my comprehension to be judging Apple.  I hope the car turns out well.  I won't be able to afford one but I hope those that do enjoy it.
    ackpfftwatto_cobra
  • Reply 5 of 11
    Given next to zero solid information about the apple car, the analyst really pull out a lot from his ass. 

    Pretty much all we know there is a apple car project.
    zeus423GG1JWSClolliveranantksundaramMplsPlongpathwatto_cobra
  • Reply 6 of 11
    dk49dk49 Posts: 86member
    I don't know understand how these Analyst give such numbers without giving any explanation regarding the business model? Yesterday's report said Apple was targetting the enterprise space. Which most likely means Apple will not be selling these vehicles, but rather use them to provide a taxi type service. That means it will take quite some time to recover the high cost of these vehicles, let alone generate a profit!
    edited February 4 longpathwatto_cobra
  • Reply 7 of 11
    Whenever the Apple Car finally debuts, I'm sure it'll be nice but way out of my price range. I don't see car makers subsidizing it like cell carriers do with phones.
    watto_cobra
  • Reply 8 of 11
    tundraboytundraboy Posts: 1,744member
    In truth, nobody knows how this foray will turn out.  Analysts coming up with solid-sounding numbers are just pulling stuff out of their nether orifices.
    watto_cobra
  • Reply 9 of 11
    Considering how many years I've been waiting for the APPLE CARD to come to Canada, I think the APPLE CAR will also take years to arrive here.

    It's Apple.  The car is unlikely to function at all outside of the bay area for many years, will take many more years to function in most US cities, won't work in rural areas in the US for at least a few decades, and might make it to big Canadian cities by 2050.
    rotateleftbyte
  • Reply 10 of 11
    MplsPMplsP Posts: 2,939member
    Bebe said:
    Wow, that's a very optimistic prediction.
    That was my thought, too. Let’s take a bunch of rumors with little reliable information, an industry where new startups have taken years to take hold and come up with massive profit predictions!
    watto_cobra
  • Reply 11 of 11
    melgrossmelgross Posts: 32,958member
    darkvader said:
    Considering how many years I've been waiting for the APPLE CARD to come to Canada, I think the APPLE CAR will also take years to arrive here.

    It's Apple.  The car is unlikely to function at all outside of the bay area for many years, will take many more years to function in most US cities, won't work in rural areas in the US for at least a few decades, and might make it to big Canadian cities by 2050.
    That’s silly.
    watto_cobra
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