Recently, Reuters published a report which brought forth new details regarding Apple’s plans to build an Apple Car. According to 9to5Mac, analysts at Morgan Stanley are saying that tech giants like Apple can provide ‘far more formidable competition than the established OEMs’ to Tesla.
The Cupertino tech giant could pose a threat to legacy automobile makers like Ford Motor Co., and General Motors, with its next-gen battery technology.
Apple Car could give formidable competition to Tesla – Morgan Stanley
In a new investment note seen by 9to5Mac, analysts at Morgan Stanley explained that Apple could join a “large, fast-growing industry” where it can “dramatically improve the user experience” with the desire to “enhance the driving experience with vertical integration of hardware.”
Analysts led by Adam Jones wrote that Apple has the potential to make a bear case for Tesla’s stock with an Apple Car. Jones gave Tesla a buy-equivalent rating with a $540 price target, 15% below where it is currently trading.
Apple’s potential entry into autos represents perhaps the most credible/formidable bear case for Tesla’s stock that investors have had to consider for some time
The analysts are also anticipating that the opportunity for additional services revenue offered by the car industry could outweigh the auto business for Apple:
Apple possesses the key ingredients that we believe are critical to be successful in the future auto industry: Access to capital, an ability to attract and retain top talent, proven hardware design (from HMI to battery), and a rich ecosystem to leverage recurring subscription/service revenue. We believe the value of the services opportunity (MAU x ARPU) embedded in Internet-of-Cars (IoC) could potentially dwarf the auto business itself (units x price).
Tesla’s stock dropped drastically after hearing that Apple might be resurrecting its automobile plans. According to Morgan Stanley, Apple represents a significant amount of competition for the current leading EV maker. The analyst further explains by saying Apple “represents far more formidable competition” to Tesla than traditional automakers.
The Cupertino tech giant is currently in a unique position to bring forward new innovations in vehicular and renewable tech. Stanley says that Apple is heavily invested in core technologies that could help in the development of the Apple Car:
Importantly, Apple has recently invested to bring five core technologies in-house, which can aid their car development — processors, battery, camera, sensors, and display. They believe there are other growth drivers like AR, payments, and health that are likely to roll out sooner, making a 4+ year time horizon appear realistic.
Reuters is anticipating that production for Apple Car could start in 2024, however, the on-going pandemic “could push the start of production into 2025 or beyond”.