One of the most interesting developments in recent months has been the suggestion that Apple will develop an Apple Car. From something that originally looked to be an unlikely rumor, this now seems to be a cast-iron certainty, as news has already leaked indicating that the company is making plans to test this vehicle.
Apple Car gamble
The idea of an electric car from Apple is certainly a gamble, but it is one that the corporation clearly feels is worthwhile. Part of the motivation for this could be the collaborative potential that an Apple Car possesses, with Apple able to move into electric battery manufacturing, and also showcase its range of in-car entertainment systems.
Although Apple remains an incredibly successful company, and indeed the most valuable on the planet in terms of market capitalization, its share price has suffered significantly in recent months. This has reflected the mediocre performance of the iPhone in terms of sales, with city investors believing that Apple will struggle to achieve continual growth with its existing product range.
This could be another possible motivating factor for the release of an electric car. But what influence could the Apple Car have over the Apple stock?
The first thing to note about this concept is that the Apple Car would naturally need to be a success in order to significantly raise the Apples share price. The Apple Car is not going to have a massive influence over the future of Apple unless the corporation can convince a significant number of consumers to sign up for the technology. This could be a challenge considering that numerous established automakers are apparently considering the production of electric vehicles, whiel Tesla has already established itself as a major market player.
However, if the Apple Car does turn out to be an overwhelming success, it is predicted that the electric vehicle could earn $88 per share of incremental value based on present-value terms. Already some market observers are upgrading Apple to Buy from Hold, with targets for the share price increasing by as much as 15 per cent.
Apple certainly has many advantages in the production of an electric vehicle. Firstly, although producing an electric car is a massive challenge for any corporation, Apple already has one of the largest supply chains of any company on the planet. The consumer electronics giant would certainly need to upgrade some aspects of its operation in order to produce something on the scale of an Apple Car, but this is certainly plausible for a company with so much cash in the bank.
Secondly, Apple is already an integrator, manufacturer, and, in some cases, designer of high-technology components, and in many ways the company already resembles existing automotive original equipment manufacturers. It seems certain that Apple itself is aware of this fact, and thus believes that it will be plausible for the company to manufacture an Apple Car effectively.
Thirdly, the recent indication from Apple’s recruitment policy is that the company is taking the manufacturing of an Apple Car extremely seriously. It has been widely reported in the media that Apple has hired over 600 automotive engineers from competitors such as Tesla. This highlights the fact that Apple is working to extend its engineering expertise in this challenging field, ensuring that it is a top-notch mechanical engineering company.
Apple Car brand value
Another interesting fact to note is that of the 88.6 million light vehicles expected to be sold in 2015, approximately 63 million are to be sold in North America, Western Europe and China. This is extremely promising for the prospects of the Apple Car, as Apple is already extremely dominant in these marketplaces. It would be difficult to name a corporation with a higher brand value in these regions, and indeed Apple was recently named as the global leader of the authoritative Interbrand survey.
Analysis indicates that Apple has a good chance of generating an operating margin in the region of 20 per cent on an Apple Car. This would be an excellent return for the company, and suggests that the electric vehicle could send the Apple share price in an upward direction. Already a price target of $167 for the Apple Car has been set by one analyst, and it certainly looks to be a positive string in the bow of the leading consumer electronics corporation.