Apple Inc (NASDAQ: AAPL) may have a car by 2024. Or, it might not. It depends on which rumors people believe. The latest media report is that a deal is pending with either South Korea’s Kia or the same nation’s Hyundai brand. The company that should be most worried about Apple’s move is Tesla.
Tesla Inc. (NASDAQ: TSLA) leads the global market in electric vehicle (EV) sales. It shipped 500,000 cars last year. Every major manufacturer has pledged it will catch Tesla. Volkswagen, General Motors Corporation, and The Ford Motor Company each plan to invest over $20 billion in EV models and autonomous cars. Their legacy reputations as fossil fuel-driven car manufacturers have triggered a good deal of skepticism about whether their brands can make the jump to EV. Even with good electric cars, consumers may be more likely to stay with Tesla. That, in turn, could lead to some odd alliances. A 24/7 Wall St. article pointed out, some car companies need Apple more than Apple needs them:
As with Ford, there would be nothing like an Apple partnership to jumpstart efforts. Along with the Apple brand, there is its balance sheet that has over $100 billion in cash, which it has not used much for M&A and which grows by the quarter.
The Apple brand has a number of advantages. Its hardware, particularly the iPhone, has been bought by hundreds of millions, if not over a billion people. The brand is known and highly regarded worldwide. It is often listed as the world’s most valuable brands. Tesla also does well on these brand valuation lists. Legacy car companies do horribly.
Apple’s jump to EV will not be easy, which should give Tesla supporters some comfort. It will have to put its electronics into vehicles which, for the most part, need to be made by another manufacturer. And the marriage will need to be perfect. Apple cannot risk its brand value with a product launch disaster.
If Apple does come to market with an EV, Tesla may have the first challenger with a brand more visible and more valuable than it is.