Autos
Why an Apple iCar Is a Very Bad Idea
December 23, 2020 10:19 am
Last Updated: December 24, 2020 8:39 am
Given the issue with margins, the other way to boost valuation is growth, and there’s little question that the market for EVs is growing. EVs currently account for only 3% of all new vehicles sold. By 2025, one estimate has EV’s accounting for 30% of all new vehicle sales. Analysts at Loup Ventures expect Tesla to hold about one-third of the global market for EVs at the end of that five-year period.
The biggest thing that Apple has going for it, should it decide to get into the transportation business, is its brand. However, can the company use that as a lever to separate consumers from $30,000 instead of $1,000 for a new iPhone?
As Morgan Stanley auto industry analyst Adam Jonas told Barron’s: “Apple may have an interest in enhancing the driving experience with vertical integration of hardware, software and services.” If Apple chooses to go that way, the company avoids the low-margin, capital-intensive auto manufacturing business.
Even then, is the effort worth the reward? If Apple doesn’t build the cars (or have the final voice in what the hardware needs to provide), it doesn’t control the vertical integration that Jonas sees as the company’s opportunity.
Tesla stock traded down about 1.5% on Tuesday and was up about 0.8% Wednesday morning to $645.37. The 52-week trading range is $70.10 to $695.00, and the consensus price target is $411.53.