Apple to adopt a 'go big or go home' strategy for 'Apple Car,' analyst says
Investment bank JP Morgan expects the "Apple Car" to be a fully autonomous vehicle that Apple manufactures itself toward the end of the 2020s.
Credit: AppleInsider
In a note to investors seen by AppleInsider, lead analyst Samik Chatterjee outlines some of JP Morgan's predictions about the "Apple Car." That includes what its debut could imply for Apple, the automotive market, and the technology industry.
Chatterjee expects the Cupertino tech giant to adopt a "go big or go home" approach. He expects Apple to look to control the pace of innovation to differentiate the "Apple Car" and position it in the growth market of battery electric vehicles (BEV) that are fully autonomous.
The primary reason why Apple is interested in the car industry, Chatterjee says, is that its total addressable market (TAM) is nearly $2.55 trillion -- far higher than the smartphone market's $420 billion. Apple also has an opportunity on an installed base of 1 billion vehicles, and the autonomous "Apple Car" could also integrate deeply with and expand Services.
Although speculation about an Apple electric vehicle aren't new, the analyst notes that recent press reports "indicate expansion and building momentum of intent to participate in the industry." Rumors of changes in leadership, similarly, are likely an indication of past delayed commercial launches in shifts in direction.
Chatterjee also notes that a lack of feedback from other parties in the automotive and technology industries likely hints that Apple has been focused on developing its own intellectual property in the car space.
There may be a few obstacles to Apple's entrance into the car space. The industry is inherently challenging and risky. Since it's a mature market, any growth has to come at the expense of existing automakers.
Despite that, Chatterjee still forecasts Apple will "go big or go home" and position itself as a full-fledged manufacturer. The analyst points out that Apple is likely eyeing an expected shift toward autonomous vehicles as an opportunity to differentiate its offering.
The relative immaturity of fully autonomous vehicles (AVs) will likely push the "Apple Car's" launch toward the end of the decade, Chatterjee says. However, the sole focus on an electric vehicle could accelerate the timeline.
On the financials, the "Apple Car" will be a premium vehicle and the company will likely prefer outsourced manufacturing to vertical integration at first. Gross margins will likely be much lower than Apple's other hardware products, but revenue could reach $700 billion with a $70 billion to $100 billion TAM in the premium auto category.
The key revenue component, Chatterjee adds, is likely to be Services. Services could improve the vehicle's low margins, particularly if it's a closed ecosystem. Fully autonomous vehicles could also allow for greater monetization of Services.
Other JP Morgan analysts, in Chatterjee's note, expect the "Apple Car" to have a negative impact on other automakers and a positive impact for any OEM chosen as a contract manufacturer.
Chatterjee 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.
Shares of AAPL are trading at $129.86 on the NASDAQ in intra-day trading Monday morning.
Credit: AppleInsider
In a note to investors seen by AppleInsider, lead analyst Samik Chatterjee outlines some of JP Morgan's predictions about the "Apple Car." That includes what its debut could imply for Apple, the automotive market, and the technology industry.
Chatterjee expects the Cupertino tech giant to adopt a "go big or go home" approach. He expects Apple to look to control the pace of innovation to differentiate the "Apple Car" and position it in the growth market of battery electric vehicles (BEV) that are fully autonomous.
The primary reason why Apple is interested in the car industry, Chatterjee says, is that its total addressable market (TAM) is nearly $2.55 trillion -- far higher than the smartphone market's $420 billion. Apple also has an opportunity on an installed base of 1 billion vehicles, and the autonomous "Apple Car" could also integrate deeply with and expand Services.
Although speculation about an Apple electric vehicle aren't new, the analyst notes that recent press reports "indicate expansion and building momentum of intent to participate in the industry." Rumors of changes in leadership, similarly, are likely an indication of past delayed commercial launches in shifts in direction.
Chatterjee also notes that a lack of feedback from other parties in the automotive and technology industries likely hints that Apple has been focused on developing its own intellectual property in the car space.
There may be a few obstacles to Apple's entrance into the car space. The industry is inherently challenging and risky. Since it's a mature market, any growth has to come at the expense of existing automakers.
Despite that, Chatterjee still forecasts Apple will "go big or go home" and position itself as a full-fledged manufacturer. The analyst points out that Apple is likely eyeing an expected shift toward autonomous vehicles as an opportunity to differentiate its offering.
The relative immaturity of fully autonomous vehicles (AVs) will likely push the "Apple Car's" launch toward the end of the decade, Chatterjee says. However, the sole focus on an electric vehicle could accelerate the timeline.
On the financials, the "Apple Car" will be a premium vehicle and the company will likely prefer outsourced manufacturing to vertical integration at first. Gross margins will likely be much lower than Apple's other hardware products, but revenue could reach $700 billion with a $70 billion to $100 billion TAM in the premium auto category.
The key revenue component, Chatterjee adds, is likely to be Services. Services could improve the vehicle's low margins, particularly if it's a closed ecosystem. Fully autonomous vehicles could also allow for greater monetization of Services.
Other JP Morgan analysts, in Chatterjee's note, expect the "Apple Car" to have a negative impact on other automakers and a positive impact for any OEM chosen as a contract manufacturer.
Chatterjee 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.
Shares of AAPL are trading at $129.86 on the NASDAQ in intra-day trading Monday morning.
Comments
In April 2020, TSLA was about $70. Today it's $850. Richest investors have been infected with the pandemic virus Tesla Speculatis. There is no recovery.
Equivalently this about a 75% interest rate, and the price earning ratio is about 1700.
Music players.
In-car entertainment
Maps
Healthcare
Fitness and well-being
Green energy (yes, Apple sells that too)
Processor design
Automated manufacturing
Never understood this weird belief some folk have that it’s somehow impossible to learn something new …
I believe that the BEV industry will follow a trend similar to the dawning age of ICE vehicles where lots of manufacturers at first then will consolidate to the larger players that can react faster to the changes and demands of the market.
looking forward to how Apple will sell these cars, also the charging stations / infrastructure.
A music player is just a small computer with weird power considerations.
A mobile phone is a small computer with weird power considerations and a cell radio.
Smartwatches are smaller mobile phones with some extra sensors.
And so on.
Of the things you listed, bringing processor design in-house is the biggest, most complicated project by far. Like multiple orders of magnitude more effort than any of the others.
Now consider that none of these things except automated manufacturing carry a significant risk of actively hurting or killing the owner or operator when they go wrong. Compare the number of people injured or killed by iPhone batteries, cables, chargers and so on—both first-party and third-party—to the number of people injured or killed by Takata airbag inflators. A car, self-driving or not, has major safety concerns which Apple has never had to deal with before.
Then you have the safety risk to people who are entirely unrelated to the operation of the car. I've never heard of any Apple product which even could injure a bystander, let alone one which has. If they really are making a self-driving car, it could potentially injure or kill somebody without a human even being inside.
Building a safety engineering organization in a company which has never needed one is extraordinarily complicated for a lot of reasons. Definitely not impossible, but not comparable to anything Apple has ever done. At least another order of magnitude more effort than bringing processor design in-house. If this is a thing which Apple is actually doing, I expect it will fundamentally change how the company operates in the same way the iPhone did.
On the other hand, it's Apple. The company that brought Apple ]['s and Macintosh to the computing world when machines with similar technologies cost thousands of dollars more.
There have already been rumors about Apple pioneering cheaper battery technologies. Would an Apple car necessarily have to be priced as if it were a Tesla Model S?
Next, apply the autonomous driving AI to delivery vans, and short and long haul trucking, busses, shuttles, etc and you gain similar benefits in those segments.
I believe history will prove you wrong.
As I've said before, I think Apple should offer transportation as a service, but far better than what Uber has done.
When I call an Apple Car from my iPhone, I want a comfortable, safe, personalized ride. My music and video, ready to play on the in-car entertainment system. I want flexibility to pick up friends, drop people off, make multiple stops, have the car wait while I run in to pick something up. No hassle, no constraints. Just a radically better experience.