Yes, Apple Is Building A Car

Tim Cook © Provided by Business Insider Tim Cook Brendan McDermid/Reuters

  • Apple needs to break into another big market to keep growing, Guggenheim analysts believe.

  • They think that market should be cars, which has a total addressable market of more than $2 trillion. 

  • Apple has a lot of strengths that could be beneficial to building an electric car, including hardware and software expertise. 

Apple's leadership has signaled its next big source of revenue is its online services business, with a goal to sell over $50 billion in iCloud, Apple Music, and other subscriptions by 2021.

In fact, Apple is preparing to launch a new bundle with news, music, and video, as soon as next year, according to  CNN.

One bank, however, sees Apple's future more closely associated with another massive market: the $2 trillion car market.

Although Apple's car program, Project Titan, has reportedly had some setbacks, Apple CEO Tim Cook has said it's "the mother of AI projects" and the iPhone maker has poached two serious Google execs. It's still testing self-driving software on California roads, according to public records, and it's building a self-driving Volkswagen van to shuttle employees, the New York Times reported

But Guggenheim analysts Robert Cihra and Amil Patel point to another reason why Apple may still be investigating making its own car: because it fits in well with Apple's product-focused business model.

They write that there's no history of Apple ever licensing its core technology to other companies. So, if Apple's developing self-driving software, it's likely to end up in its own car, where they control the entire experience, they conclude. 

As the analysts write in a note distributed on Thursday: 

Not only do we see cars representing a market that is big enough to move Apple’s needle and that is undergoing technology disruption, but also one that fits well with its traditional M.O. that we characterize as:

a) target the high end of an already large but otherwise commoditized market by

b) designing a better product that creams off the industry’s highest-price/margin tops

and

c) drives a self-reinforcing high-end demographic and closed-loop ecosystem.

There are other reasons why actually building a car, instead of operating a taxi service, would make sense for Apple.

Apple is a product company, the Guggenheim analysts observe, and it already has a strong brand and image association, similar to luxury car brands.

Apple also has expertise at manufacturing complicated items through its scores of contract manufacturers, and making an electric car fits in with Apple's emphasis on the environment. 

There's also the chance that Apple could be interested in developing a Uber-like service, the analysts note. It invested $1 billion in Didi Chuxing, a ride-hail app based in China, and at the time, Cook said that it could inform "some strategic things that the companies can do together over time." 

Regardless of the way Apple decides to attack the car market, the Guggenheim analysts see the space being "too hard to resist" as Apple looks for growth.

"We forecast Apple’s revenue surpassing $260B in 2018, meaning that to keep growing even 5% from there it would need to keep adding the equivalent of a Fortune 200 company each year," the analysts write. 

Guggenheim rates Apple a "buy" with a price target of $215. 

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Source : https://www.msn.com/en-us/news/technology/building-a-car-is-still-the-best-way-for-apple-to-move-its-big-needle-say-analysts-aapl/ar-AAziJrh

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