Apple stock has thrived for decades as the company thrilled consumers with well-timed innovations in computing, music and phones. Now investors, hungry for a new breakthrough from the Silicon Valley icon, are cheering for what could be the company’s biggest quantum leap ever: an electric Apple car.
Rumors that Apple (AAPL) plans to branch out into automaking have circulated for years and gained momentum recently. The speculation is sparking the imagination of both investors and consumers, who wonder if the Apple car will be something revolutionary or just a me-too electric vehicle to compete with the likes of Tesla (TSLA).
Will Apple break new ground like it did with the first iPhone, which paved the way for touch-screen mobile devices? And will it rock the auto industry the way its iPod and iTunes almost single-handedly saved record companies from extinction? An intriguing question is whether the company can perfect autonomous driving, still a distant vision for many carmakers.
“From a design perspective, it needs to be pretty out of the box,” Apple stock analyst Daniel Ives of Wedbush Securities told Investor’s Business Daily. “Consumers don’t just want a car with an Apple logo.”
The stakes could be enormous for Apple stock. An Apple car would allow the company to target a market exponentially larger than phones. Global auto sales totaled $2.55 trillion in 2020, vs. $420 billion for the smartphone market. An electric car also would fit with the company’s environmentally friendly image.
But it could be a while before consumers see an Apple car, even if the secretive company goes in that direction. The history of Apple’s electric-car venture, known as Project Titan, has been one of fits and starts since its beginning in 2014, based on media leaks.
Apple Stock: Clock Is Ticking For Car
Apple doesn’t discuss future products, and the company did not respond to a request for comment for this story. But rumors regarding Apple’s strategy with its car project have ranged from plans to build its own branded vehicle to being content with supplying existing automakers with technology.
Speculation that Apple would build a car shifted into high gear in December when Reuters reported that the company was planning to roll out a passenger vehicle in 2024. The report said Apple has developed “breakthrough battery technology” with designs that could “radically” reduce the cost of batteries and increase the vehicle’s range.
In January, Apple reportedly held talks with Hyundai and its Kia affiliate about a manufacturing partnership. Since then, Apple has been in discussions with several other makers of electric vehicles, or EVs, including Nissan.
“Right now, they are going through the EV dating game,” Wedbush’s Ives said. “Time is ticking for them in terms of making their entry into this market. We believe they need to cement a partnership in the next three to five months if they want to get an Apple car on the road by 2024.”
The electric-vehicle market is starting to take off and Apple doesn’t want to be left behind, Ives says.
“They don’t want to miss out on the EV and autonomous party that’s on the horizon,” Ives said. “We think it’s a $5 trillion market over the next decade.”
Apple Car Needs More Than Apple Logo
An Apple car would compete with electric vehicles from Tesla and other established players like Volkswagen (VWAGY) and BMW (BMWYY). It also would face upstarts such as Nio (NIO), Li Auto (LI) and Xpeng (XPEV).
Apple is targeting 5% to 7% market share in the EV market in its first few years, Ives says. If Apple launches an electric car by 2024, the product could generate $10 billion in revenue by year three, he adds. Apple’s 2020 overall sales were $274.5 billion.
“If they did that, it would be a home run,” he said. Some estimates call for as much as $1 trillion in worldwide electric vehicle sales by 2027, which could prove to be an even bigger boon for Apple.
But the Cupertino, Calif.-based company will need to offer something special to stand out, says longtime Apple stock analyst Gene Munster, a managing partner at Loup Ventures.
That might come in the form of a fully autonomous self-driving car. Such a move would allow Apple to focus on passenger experiences, such as creating a space for mobile work, entertainment and relaxation, he told IBD.
“When you think about all this free time you are going to have in the car, that’s a juicy opportunity for Apple to wow people,” Munster said.
Look Ma, No Hands
Analysts have a range of visions when it comes to autonomous driving and the Apple car.
Don’t expect the Apple car to have a steering wheel, Morgan Stanley automotive analyst Adam Jonas said in a recent report to clients.
“We have a hard time imagining Apple entering the automotive market with a vehicle design that involves human intervention in the driving process,” Jonas said. “An Apple car with a steering wheel is like an iPhone with physical buttons and a coiled rubber cord connected to a wall.”
Others aren’t so sure Apple will be able to make such huge strides at the outset. In fact, Morgan Stanley’s Apple stock analyst Katy Huberty isn’t sure that the Apple car will be an autonomous vehicle, or AV, at first.
“When the iPhone Gen 1 first came out, it didn’t really even have an app store,” she said in a note to clients. “So, when contemplating if Apple would start with a full AV or not, we wouldn’t be surprised if Apple’s first leg into the market looked different a few years later.”
Apple Car: iPhone Or Motorola Rokr
Making a car is a risky endeavor for Apple’s brand. After all, for every Cadillac and Mustang, there’s an Edsel or PT Cruiser. It’s no different in the technology world.
If Apple ends up outsourcing too much of its car design to an existing automaker, it could end up with the “Motorola Rokr 2.0,” Munster said. Nearly two years before the release of the first iPhone, Apple partnered with Motorola on the Rokr, known as the “iTunes phone,” which met with disappointing reviews and sales.
Apple likely won’t make that mistake again and will want to control the design of the Apple car, Munster says.
That poses a different problem, says Apple stock analyst Harsh Kumar with Piper Sandler. Finding a car manufacturing partner willing to cede control will be a challenge, he says.
“Apple appears to be having a hard time finding a partner for its auto endeavors,” Kumar said in a note to clients. “Carmakers do not want to be ‘the Foxconn of the auto industry.’ ” Foxconn is Apple’s primary contract manufacturer for the iPhone.
Which is why conventional carmakers may be left out of the loop. On April 13, the Korea Times reported that a joint venture of LG Electronics and Canada-based automotive supplier Magna International (MGA) was “very near” to signing contracts with Apple to build its early electric vehicle models.
Apple Stock Not Swayed By Apple Car News
When Apple will come out with an electric vehicle is a moving target. Noted Apple stock analyst Ming-Chi Kuo of TF International Securities believes the earliest that Apple could launch a car would be 2025. And it would be on a “tight schedule” to meet that launch time frame, he says.
Other reports say Apple is targeting 2024, but many analysts say it could be anywhere from five to 10 years away.
“If investors really believed that this was going to happen in the next few years, the stock would be meaningfully higher right now,” Munster said. “So, there’s some healthy skepticism about what actually will come out of it.”
Apple stock fell 20% during the tech sell-off in February and early March. It recently climbed above its 50-day moving average in a positive sign. Apple stock hit an all-time high of 145.09 on Jan. 25.
Shares closed Friday trading at 134.16, down 0.3%. It has formed a cup base with a buy point of 145.19, according to IBD MarketSmith charts.
UBS analyst David Vogt recently turned bullish on Apple stock because of the company’s prospects in the electric-vehicle market. The value of Apple’s likely entry into the auto market is not reflected in Apple stock today, he says.
Apple CEO Discusses Interest In Autonomy
Apple is keeping its cards close to its vest on the subject of cars. Yet during a recent interview with the New York Times, Apple Chief Executive Tim Cook dropped some hints about the company’s interest in autonomous vehicles.
“Autonomy itself is a core technology, in my view,” Cook said. “If you sort of step back, the car, in a lot of ways, is a robot. An autonomous car is a robot. And so there’s lots of things you can do with autonomy. And we’ll see what Apple does.”
Despite Cook’s vague remarks, analysts aren’t shying away from speculating on what the company will do, going so far as to speculate how much it will cost.
Wedbush’s Ives thinks the Apple car will be priced in the $45,000 to $50,000 range. Loup Ventures’ Munster estimates it will start around $75,000. Eventually Apple will offer lower-priced models, he says.
What Munster isn’t clear on is when.
“Apple will eventually have a branded car, but it’s next to impossible to guess the timing of it,” he said.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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