Morgan Stanley: Six thoughts about the new Apple car rumors

From a note to clients by Adam Jones that landed on my desktop late Monday:

According to a Reuters article citing undisclosed sources, Apple is targeting production of a passenger vehicle as soon as 2024, featuring a ‘radically’ new “mono-cell” battery design with reportedly lower cost and higher range. The story also discusses Apple’s potential lidar strategy, mentioning the company’s in-house experience with the technology used in the iPhone 12. (Apple did not comment on the article.) We share a few thoughts:

    1. It has long been the auto and tech hardware teams' collective working assumption that Apple will, one day, design and engineer a car...
    2. Apple possesses the key ingredients that we believe are critical to be successful in the future auto industry...
    3. From a Tesla perspective, we have long felt that tech players likeA pple (working with manufacturing partners such as FoxConn) represent far more formidable competition than the established/legacy OEMs...
    4. Large tech firms want access to the auto industry due to its large TAM [total addressable market] size, as well as the enormous amount of time spent in cars...
    5. From our Apple team... they see Project Titan (AppleCar) as a long term project where, similar to other markets like mobile and wearables, Apple can disrupt through vertical integration...
    6. The EV arms race is still in the early stages and the battery technology is not mature...

Maintains Overweight rating and $144 price target.

My take: Adam Jones is head of Morgan Stanley's auto and space research. The fact that Katy Huberty's name is below his on the note -- and that the note did not endorse Reuters' 2024 production target date -- may be significant.

20 Comments

  1. Chris Ferebee said:
    Apple is slated to mass-produce an electric car in 2024 using a new battery technology that’s never occurred to anyone else?

    It goes downhill from there. 24 actually means 25, radical new battery technology is one weird trick for packing the same materials more efficiently, except that Apple has also heard of Lithium Iron Phosphate and is “investigating” it. Who wouldn’t?

    But the new battery technology will be as momentous as the original iPhone?

    The defining technology of the Apple Car will be a battery giving it somewhat greater range?

    What have these guys been smoking, can I have some, and what odds do they offer on bets against an Apple Car in 2024.

    1
    December 21, 2020
    • John Konopka said:
      There is a huge amount of work being done on Li batteries, as you would expect. You have to imagine that Apple is on top of all of this effort, ready to choose a technology that checks all the boxes for them. Here is just one possible candidate.

      https://newatlas.com/energy/quantumscape-solid-state-battery/

      In addition to the battery an Apple designed car would presumably look nice, perform well, have great quality and fit and finish, great electronics, great sound system, and have a slot for your iPhone.

      1
      December 22, 2020
  2. Chris Ferebee said:
    BTW in the previous millennium I sold Macs to the marketing department of a German battery manufacturer whose founder was on the hot forefront of prismatic cells back when NiMH was cutting-edge.
    The form-factor was superior but, in the end, not sufficiently relevant, and they went bust.
    This is not how you shift a paradigm.

    1
    December 21, 2020
  3. Jerry Doyle said:
    It could be Gregg & Kathy playing the options side putting this rumor out. If so, shame on them deviating from long term Apple investors. 🙂

    I still want to know where to place my deposit now.

    1
    December 21, 2020
  4. Gregg Thurman said:
    If, and I say again, IFF Apple introduces an EV Apple will have 2 major advantages the competition (excepting Tesla) doesn’t have:

    #1. Brand recognition
    #2. Consumer trust in the brand

    Would I pay a premium for an Apple EV? You tell me, I own Macs, iPhones, iPads, Apple Watch, Ear Pods and subscribe to Apple One. First Mac (Plus) bought in 1987.

    3
    December 21, 2020
  5. Fred Stein said:
    I love the concept of an Apple Car, especially with sustainable competitive advantages in battery and Lidar.

    Still…

    Tim Cook has said that ‘health’ will be Apple’s “greatest contribution to mankind”.

    3
    December 21, 2020
    • Bart Yee said:
      If by reducing carbon emissions and advancing renewable energy in the long run, I’d say that is contributing to the health of the planet.

      0
      December 22, 2020
  6. Michel Contant said:
    Had a hard time thinking Apple will make the whole car. I see them more working with oem ( old and new). Futur of car is integrating hardware and software for autonomous car and ride sharing and battery, not on the physical car. Actual oem are lost on two front : battery (including bms ) and autonomy. Apple can pull a wintel but be both win and tel. It can sell battery tech as intel did and sell oem the brain software and sensor for autonomy as Microsoft did Oem get what they need. Then apple sell as SaaS the right to use autonomy or do ride share (integrating apple Ecosystem in it). Apple Like to be integrated but the profit is not in the physical car but in battery and software. Actual hardware ( except the brain and battery) are negligible in term of profit.

    Remember that Elon Musk ( love him or hate him) suggested that one day the value of the autonomous drive plus ride sharing would be greater then the actual cost of the “actual physical car”.

    1
    December 21, 2020
  7. Larry Fritzlan said:
    What fun!

    Got my first Tesla Model S in 2013, on my third one now and could not imagine ever driving a carbon powered car again.

    Been watching Project Titan since Philip started talking about it.

    Exciting times!

    (Gregg, put a deposit down on the first Mac… and waited… in 1984)

    🙂

    5
    December 21, 2020
    • Lalit Jagtap said:
      Same for our family Larry. Model S on a day before 2013 Thanks Giving. I am ready with a deposit for Apple EV.

      3
      December 21, 2020
  8. Martin Beutling said:
    Launching a car would be only the next consequent step for Apple.
    -a huge market
    -disruptive position
    -and from what I heard, an EV is all about the software and in this space, Apple is king

    Coming back to my question to Gene on saturday: IF Apple will launch car in the 2-5 years timeframe I predict that they will start selling green and carbon neutral gained electricity….something like “content” for the car….as we learned years ago: content is king

    3
    December 22, 2020
  9. bas flik said:
    for the moment a nice driver for the stock.

    1
    December 22, 2020
  10. Patrick Beyrouti said:
    Foolish to expect a car …

    Expect however,

    The best OS for a driverless car which includes:

    The best engine management system, the best battery management system, the best sensor management and communication system, and the best car play .

    All the hi tech needed for a driverless car !

    Forget hardware, this is where we need to keep an eye on a cool venture with a factory deal style TMSC …

    All high tech

    2
    December 22, 2020
  11. bas flik said:
    in holland we have one car factory looking for a car to produce. they are fabricating the BMW mini. but bmw will pull back the order in 2023. i think there will be enough factories out there willing to produce for apple.

    1
    December 22, 2020
    • Bart Yee said:
      @bas Valmet in Finland produced many years of the Porsche Boxster and Cayman models until VW took them back to Karmann facilities. Also many smaller Japanese automakers have excess capacity but plenty of experience. If Apple pilots production and proves feasibility, it just might expand to regional specific production to avoid tariffs, transport and logistics costs, while perhaps getting big breaks on factory costs. Streamlining manufacture with new styles of assembly manufacure may also be in the works.

      Possibilities are huge.

      0
      December 22, 2020
  12. Chris Ferebee said:
    A dramatic, fundamental and possibly insurmountable advantage Tesla has over the ICE incumbents is its fully integrated software stack. The incumbents have no integrated software platform and instead struggle to patch together software from dozens of uncooperative subsystem vendors.

    Like Tesla, Apple keeps increasing its lead through integration. Attempting to retrofit integration into incumbents who have ignored it for 17 years would be a fool’s errand.

    1
    December 22, 2020
  13. Tommo_UK said:
    The rumours of a real car emerging seem to getting stronger, but the dates are all over the place. Just a few days ago there was a note out pinning a surprise early launch in the next year or two.

    Now we have 2024.

    I’m not sure it really matters if it’s 2022 or 2024. If this is actually part of the product roadmap AAPL will ramp, TSLA will dive given its nose bleed valuation. I still question the veracity of reports of a real car, this close, rather than a technology and integration testing platform but if they’ve got substance then the crossover of brand proponents in Tesla and Apple will be high, and churn quite likely.

    I suspect Apple’s EV would go after a niche in the beginning though, in much the same way the iPhone did, before expanding the product matrix. Or like the Volkswagen Beetle, it may be a truly fantastic car for the masses.

    2
    December 22, 2020
  14. bas flik said:
    difference between a car and a phone is that a car should work 100%. the more software the more errors. a crashing phone is no problem. a crashing car is. the future of cars is without windows. thats for sure.

    0
    December 22, 2020
  15. Peter Kropf said:
    It would be advantageous if Apple’s car assembly line was the 1st AI controlled line. (I’m not betting on this, but it would be a pleasant surprise.)

    I guess while we’re at it, the real-time battery controls might be AI too.

    0
    December 22, 2020

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