On the 23rd (US local time), the New York Stock Market was quiet. The Dow index fell 0.67% from the previous day and the S&P 500 fell 0.21%, while the Nasdaq rose 0.51%.
The fiscal stimulus was finally passed through the US Congress, but news was already reflected, and fears about the UK virus strain were lowered, but alertness continued.
In addition, economic indicators have mixed directions. In the third quarter, the US gross domestic product (GDP) growth rate was increased by 0.3 percentage points to 33.4%. In addition, last month’s sales of existing homes also decreased by 2.5% from the previous month. However, this was analyzed because the housing stock fell to the lowest level since 1982.
One thing that was noisy was the boss, Apple, and Tesla, the 6th place in the market cap, which was included in the S&P 500 the previous day. Apple rose 2.85%, while Tesla fell 1.46%, falling for the second day. It’s not just a matter of Apple or Tesla. On this day, some auto parts and battery stocks such as Lida-related stocks and Magna also surged.
This is the aftermath of the Reuters report the day before. “Apple has plans to launch an electric vehicle in 2024,” Reuters said. “The car will be based on innovative battery technology.”
Wall Street argued all day about whether Apple’s entry into the electric car market would happen, and if so, how it would proceed.
While some analyzes say that Apple will enter the market with electric vehicles as a new growth engine, there are mixed views that there is no reason to enter the capital-intensive and low-margin automobile industry. The side that expects to enter, the side that it will vertically integrate into production, and the side that expects to run a software license business based on autonomous driving technology, confronted.
Let’s summarize this.
▶Apple to enter the electric vehicle market
① New growth engines are needed
-Apple’s growth is stagnating. Sales of $233.8 billion in 2015 only increased to $274.5 billion last year. The Wall Street Journal (WSJ) pointed out that “the biggest innovation Apple has made in the last 10 years since the iPhone was released is in the field of headphones,” and “through the acquisition of Beat, we made it possible to sell a single earset for $550.”
-You can dominate the world by combining smartphones and electric vehicles. The automobile market is a huge market worth 2 trillion dollars. In addition, if various services such as music content, etc., connected to electric vehicles and smartphones are provided through Internet of Things (IoT) technology, the automobile industry itself can look like a dwarf.
-Apple sticks to’no comment’ on Reuters’ news, which is evidence that something is going on.
-If the stock price rises like this, it means that investors want it, but there is no reason not to do it. RBC’s Robert Muller said, “It’s a positive development in terms of expanding Apple’s TAM and increasing shareholder profits.”
② I have been preparing for more than 10 years
-Although reported several times, Apple has been researching electric vehicles by creating the Titan Project since 2014, and in 2018 it recruited Doug Field, who was in charge of development at Tesla. In 2019, a white paper related to autonomous driving technology was released. Apple’s senior vice president of marketing, Phil Schiller, said in 2012, “Apple has been discussing automotive development long before the iPhone introduced in 2007.”
③ Have the elements to succeed
-Excellent funding and technical skills. The battery, display, and semiconductor elements of electric vehicles are all Apple’s specialties. The engine can be outsourced.
-Morgan Stanley analyst Adam Jonas said, “Apple has all the essential elements for success in the automotive industry of the future. Capital raising, the ability to recruit and retain the best talent, hardware design capabilities and ecosystems, while threatening automakers. It has the competitiveness to do it,” he said.
④ If you partner with an automobile company, it is not difficult to advance.
-Existing automakers’ production capacity is full. It can be easily made by acquiring a factory at a low price and changing it, or by partnering with a company that is having difficulty in developing electric vehicles. Although it is difficult to enter the electric car market, Tesla has also done it, and there are also places like Nikola, a startup.
-RBC’s Robert Muller observed that it would make sense to partner with the traditional automotive industry rather than have the entire value chain.
⑤ If you develop new battery technology, you can become a game changer.
-Evercore ISI said, “Battery is a key factor that has been blocking the spread of electric vehicles by taking up a lot of cost in electric vehicles. If Apple finds a breakthrough in battery technology, it will be possible to produce electric vehicles.”
▶Apple will not enter the electric vehicle market. Even if it does, it will only make and sell software.
① Since 2014, I have been hitting it several times, but I am not satisfied.
-In 2015, Apple started the Titan Project in 2014, and there was a report that it plans to launch an electric vehicle in 2019. However, not only did Apple not launch an electric vehicle, there are no known plans. In addition, it fired 190 employees related to the Titan Project in 2019. There is no production preparation at all, but the launch of an electric car after 4 years is impossible due to schedule.
② Automotive is a low-margin industry. Doesn’t suit Apple
-Automotive is a capital-intensive and low-margin industry. The gross margin of the world’s top 10 automakers is 15%, far lower than Apple’s 38%. This is not a market for high-margin companies like Apple to jump into.
-Amit Darjanani, analyst at Evercore ISI, observed that “Apple is more likely to continue to develop autonomous vehicle technology and sell it to traditional automakers.”
-Citigroup said, “I am very skeptical that Apple makes cars because automobiles are low-margin products. I believe that Apple will sell the operating system (OS) to automakers and consumers.”
③ Even if it advances, it will only be software such as autonomous driving.
-Jin Munster of Loop Ventures said, “Apple is developing self-driving technology and has not yet decided whether to use it to create an Apple-branded car or to do a licensing business.”
Apple was known about the development of Apple TV in 2015, which made a wave in the electronics industry. There was an analysis that if Apple released a TV, it would be a big threat to Samsung Electronics. However, last year, Apple released Apple TV as a streaming service and had no effect on the existing TV market.
Some analysts say that even if Apple releases an electric car in 2024, it will not be easy to compete with Tesla. By that time, Tesla could be a company selling millions of electric vehicles with a global production network from California and China, to Berlin and Texas, USA.
In fact, Elon Musk tweeted “The Apple Car is a Known Secret” when a related article came out in 2016, and in 2019, “the engine and headphones will be sold separately.”
In a tweet on the day, Musk said, “Tesla is already using lithium iron phosphate batteries in a medium-distance model manufactured at the Shanghai plant. The monocell method is electrochemically impossible. The maximum voltage is too low. Perhaps this means tying the cells together as Tesla made the battery pack structurally.”
In doing so, he revealed that he had tried to acquire Apple. “When I was struggling with the Model 3,” Musk said, “I contacted Tim Cook to discuss the possibility of a Tesla acquisition for a tenth of its current price, but he declined the meeting.” Is Apple really willing to enter electric vehicles?
Reporter Kim Hyun-seok [email protected]