The Apple Car -- Demand is Here
Date Published: 2017-02-28Written by Ophir Gottlieb
Preface
While the tech world and tech reviews have vacillating opinions, consumers want a car from Apple (NASDAQ:AAPL), and they want it more than anything else.
STORY
Patrick Seitz of IBD who broke the latest news: Consumers want an Apple Inc Car more than anything else when it comes to the "next thing."
Baird's Poll
IBD reported that investment bank Baird did an online poll that garnered 3,000 U.S. respondents asking what people would like to see Apple develop over the next five years.
The responses came in as follows:
* Apple Car (21.6%)
* Netflix like video streaming service (19.5%)
* Virtual reality headset (16%.1)
* Advanced healthcare wearable (16%)
* Netflix like video streaming service (19.5%)
* Virtual reality headset (16%.1)
* Advanced healthcare wearable (16%)
THE STARTING LINE
Apple (NASDAQ:AAPL) is positioning itself to enter into one of the world's largest and most competitive industries. The road to success is fraught with hazards and the potential reward is huge. Apple has built one of the strongest brands in history, turning electronic devices into status symbols through their brilliant marketing, design aesthetic, and reputation for dependability.
Now they will put their brand and technology prowess to the test as they plunge into the market of the world's most recognized status symbol: The Luxury Automobile.
Their brand and a substantial portion of their $750 billion market cap hangs in the balance.
THE TITAN IN THE ROOM
We start by capturing what is publicly known or widely believed about the Apple Car project, code-named "Titan":
- Elon Musk calls the Apple Car project a "open secret" and the San Francisco Chronicle reports that Musk met with Apple's acquisition chief, Adrian Perica, in 2013, and likely CEO Tim Cook as well.
-
Apple is poaching talent from across the automotive and battery industries. So much so,
that, according to CNN:
A123, an electric car battery maker, sued Apple for poaching its staff earlier this year. The Massachusetts company claimed that Apple has hired away five high-tech PhD and engineering employees, causing "irreparable harm."Another report states that enough engineers have been drawn away from Tesla as to impact Tesla's product roadmap, according to Apple Insider
- Over a thousand engineers are now said to work within Project Titan, according to CNBC and many other sources.
- An Apple-leased van filled with sensors has been driving around a San Francisco suburb, also reported by CNN.
- CEO Tim Cook has held discussions with BMW at BMW headquarters and toured the BMW i3 electric car manufacturing facility, according to Forbes and others.
- Apple already has products dedicated for the car, such as CarPlay, which its website touts as "a smarter, safer way to use your iPhone in the car".
- CML broke news that Apple registered apple.car and apple.auto website domain names.
THE POTENTIAL
The automotive industry is one of the world's largest markets, with luxury cars alone accounting for $360 billion per year in sales and growing fast:
The electric vehicle market weighed in at over $80 billion in 2012 and is projected to hit greater than $270 billion by 2019:
The world's largest vehicle producer is, surprisingly to American car owners, Volkswagen, with global sales of over 200 billion euros per year, followed closely by Toyota (source: Statista). Put in perspective, Volkswagen has roughly the same total revenue as Apple's $240 billion USD. A successful launch for Apple could realistically double revenues, and with time, operating margins and substantial new profits would be sure to follow.
THE RISK
The risk to Apple's brand if the car launch is unsuccessful is enormous. In 2010 an antenna problem with the iPhone 4 was a recoverable embarrassment. In the automotive realm, any mishap could have dire consequences. When Tesla was a little known startup with grand ideas, they were able to survive several batteries catching fire. Serious, potentially dangerous problems with the Apple Car would likely have far broader implications with down-stream effects across the Apple ecosystem.
COMPETITION
The most obvious competition comes from Tesla Inc (NASDAQ:TSLA), which is a company that created an unbelievably strong brand. Apple (NASDAQ:AAPL) will have to grapple with the reality that in the automotive space, there is a brand that is tied to technology that is going to be a burden to overcome, even for the mighty mac maker.
The competition also sprawls into the makers of the brain of a self-driving car -- and that means Alphabet Inc's (NASDAQ:GOOGL) Waymo.
For the longest time this project felt like one of the many moonshots that would never really see the light of day - that's what Wall Street would have had us think, at least. But it isn't a moonshot, it's a business - and a rather large one.
FINISH LINE
No company is better positioned to make a huge technological investment, backed by a brilliant marketing campaign, and championed by a beloved brand, than Apple (NASDAQ:AAPL). If Apple succeeds in releasing its car, they are likely to not only reap enormous financial rewards, but also to massively swell the size of the electric vehicle market and, in so doing, create a permanent shift to a new era of automotive history.
And, now we know -- people want an Apple Car -- and they want it more than anything else the company can deliver.
The author is long shares of Apple (NASDAQ:AAPL) at the time of this writing.
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