Will there ever be a full-fledged Apple electric car? We don’t know for sure. You don’t know either unless you are Tim Cook reading this article. The rumor mill is fairly certain that Apple has been working on an electric car with self-driving capabilities for years under the Project Titan. The project has suffered many setbacks in the last couple of years, and Apple has dramatically scaled back the scope of the project.
The autonomous car fits Apple’s product-focused business model
Despite all the challenges, the Cupertino company shouldn’t give up on the so-called Apple electric car project, says Guggenheim Securities analyst Robert Cihra (via Barrons). Making cars is well outside Apple’s core competency of smartphones, tablets, and Macs. But Cihra says in his latest report that automobile is a market worth pursuing for many reasons. Back in March, Cihra had told investors that Apple would either go “all-in” or abandon the automobile market by 2020.
The Guggenheim Securities analyst points out the Apple electric car will fit the company’s product-based business model. At its core, Apple is a “product company” with extensive expertise in the integration of software and hardware. It also has a strong brand image, akin to luxury car brands. The company has years of experience in managing complex supply chain, and the Apple electric car will be in line with the company’s focus on the environment.
Since scaling back the Project Titan, Apple has shifted its focus from building a full-fledged car to developing the autonomous driving systems first. Apple CEO Tim Cook has described the self-driving technology as “the mother of all AI projects.” The company is already testing its autonomous driving systems using Lexus SUVs on public roads in California. It has a fleet of at least 55 such vehicles.
According to The New York Times, Apple has partnered with Volkswagen to build a self-driving van to shuttle its employees. There are speculations that Apple will license its autonomous driving technology to third-party automakers instead of building its own car. But Cihra argues that it’s not in Apple’s DNA to license its core technology to other vendors. The company has a habit of controlling the end-to-end user experience.
Apple electric car could be the future growth driver
The biggest reason Tim Cook & Co should build an Apple electric car is the size of the total addressable market (TAM). Apple’s revenue is expected to surpass $260 billion in 2018. From there on, the company will have to add the equivalent of a Fortune 200 company every year to grow at just 5%. Apple’s primary focus right now is its Services business, which is growing at a healthy rate but is unlikely to move the needle.
Robert Cihra predicts Apple’s Services business will generate $36 billion revenue in 2018. The tech giant is acquiring content at a rapid pace. It has also recently signed a deal with Oprah Winfrey. According to a recent report from The Information, Apple will soon launch a new bundle that will combine the video, music, news, and iCloud into a single service.
But the Services business relies heavily on the installed base of the iPhones, iPads, and Macs. In short, it exploits the devices instead of helping sell more of them. Also, it doesn’t leverage Apple’s software or hardware expertise, which are its “two primary strengths.”
The Guggenheim Securities analyst argues Apple needs to find a new product segment that is large enough to move the needle. And mobility could be that segment, where the total addressable market (TAM) is greater than $2 trillion. Even the luxury car market is worth more than $400 billion a year.
Cihra added that Tim Cook will want to “leave his mark” by re-establishing Apple as a “manufacturing company,” especially considering his expertise in the supply chain.
Signs Apple isn’t giving up on the project
Back in 2016, Apple invested $1 billion in Chinese ride-hailing service Didi Chuxing. The deal is an indication that Apple was seriously exploring opportunities in the mobility market. It’s no secret that Apple is testing autonomous vehicles on California roads. The company has also filed numerous autonomous driving-related patents such as autonomous vehicle control, machine vision systems, vehicle climate control, guidance and navigation systems, LiDAR detection, and neural networking.
Guggenheim Securities is fully convinced that the tech giant will “inevitably be drawn” into launching an Apple electric car. Maybe it will start designing the car after having developed the autonomous driving technology. The Apple car is coming – it’s only a matter of time.