A new report from Reuters claimed that Apple would be ready to put a car into mass production as soon as 2024, and Morgan Stanley has responded by saying that the move could be a “far more formidable competition than the established OEMs” to Tesla.
Morgan Stanley notes that Apple has the key ingredients required to make a good stab at competing in the car industry, not least the ability to make the most of a large subscription service revenue.
Apple possesses the key ingredients that we believe are critical to be successful in the future auto industry: Access to capital, an ability to attract and retain top talent, proven hardware design (from HMI to battery), and a rich ecosystem to leverage recurring subscription/service revenue. We believe the value of the services opportunity (MAU x ARPU) embedded in Internet-of-Cars (IoC) could potentially dwarf the auto business itself (units x price).
What a subscription service in relation to a car could be like, isn’t clear however. Morgan Stanley also reportedly believes that Apple has spent heavily on core technologies that could be useful for the development of a car.
Importantly, Apple has recently invested to bring five core technologies in-house, which can aid their car development — processors, battery, camera, sensors, and display. They believe there are other growth drivers like AR, payments, and health that are likely to roll out sooner, making a 4+ year time horizon appear realistic.
Rumors of the Apple Car have circulated for years but yesterday’s Reuters report again brought it to the fore thanks to the 2024 date. There’s still plenty of time for Apple to change course here, however. As it has done multiple times before.
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