Morgan Stanley: Could Apple do to electric cars what it did to mobile phones?

In other words, grow the market for all cars while shrinking the market for gas guzzlers.

From a note to clients by auto analyst Adam Jonas that landed on my desktop earlier just before the holidays:

  • Prior to the iPhone, the global mobile phone market was 1.0 billion units in 2006. Apple announced the iPhone in January 2007 and launched it on July 29th 2007. By 2010, the global mobile phone market was 1.6 billion units. By 2014 it was 2.0 billion units. [See featured image.]
  • We currently forecast global BEV [battery electric vehicle] sales to grow at a 28% CAGR [compound annual growth rate] through 2030 driving our 31% BEV penetration forecast by 2030. This is BEFORE considering a potential Apple product. What would it be when including it?

My take: Let’s hope Apple doesn’t double the market for cars. Who needs more parking lots and traffic jams, no matter what the filling stations serve up?

BONUS: From Jonas’ Q&A with a “longtime dealer principal”…

Jonas: “I’ve been speaking with some dealers recently who say that the repair work on EVs is similar to ICEs and that it’s neutral impact..”

Dealer Principal: “Yeah, whatever. The car has 1/3 of the moving parts. I mean, come on.”

Jonas: “When do you think dealers will actually start feeling the EV impact in their business in a major way?”

Dealer Principal: “I think by 2030 we’ll be feeling it big time. From the dealer’s perspective it’s gonna be like boiling a frog. Guys can deny it all day long and stick their head in the sand but this isn’t going to change. And the OEMs are behind a lot of these startups and they want to carve out the electric vehicles from the franchise laws so they can go direct.”

Jonas: “Are you starting to smell this sentiment from the OEMs?”

Dealer Principal: “Yeah I’m smelling it. Maybe not from the likes of Toyota, but from the other manufacturers absolutely. Anybody who doesn’t think that is in La-La Land.”

Jonas: “Am I wrong in thinking that when startups go direct to consumer that the flood gates could open?”

Dealer Principal: “Once it breaks, it’s done. I think it’s in the next couple of years if not imminent under a Biden administration. The lobby is not strong enough anymore and regulators will look at the current system as anti- consumer.”

26 Comments

  1. Horace Dediu said:
    As always, we measure and concentrate on the visible while ignoring the unmeasured invisible. The invisible dawned on me in 2016. Don’t count cars, count trips. Once you realize it’s a market for miles you’ll also see it’s a market for smiles. The rest is implementation.

    11
    December 26, 2020
  2. Romeo A Esparrago Jr said:
    Yes, I think Apple will do to electric cars what it did to mobile phones.
    Because now more people are thinking about the concept of electric vehicles since there’s a strong rumor of Apple thinking about them, if not producing them. Sort of like, “it ain’t ‘legit’ until Apple starts eyeballing it, too”. Like 5G. There’s more street cred for AT&T & other Telcos to push 5G now that iPhones have it.
    Like the concept of large companies & countries committing to carbon neutral.

    7
    December 26, 2020
    • Romeo A Esparrago Jr said:
      Like what Apple did to the concept of Supplier Responsibility.

      Made it effectively real in volume.

      6
      December 26, 2020
  3. Miguel Ancira said:
    I think, to Horace’s point, we should look at trips. Most cars are idle for most of the day. The trick is maximizing usage for the cars that are active. I predict that in 5 years we will not be owning cars, but a piece of a time-share. It makes sense because there is a lot of waste that can be cut by not owning a car.

    5
    December 26, 2020
    • Rodney Avilla said:
      “I predict that in 5 years we will not be owning cars”

      I believe you and Jobs have something in common- you both see change coming in the future. Jobs thought the ‘regular’ computer is like the pickup, on it’s way out of usefulness. As pickups are replace by smaller, more efficient cars, most people would do their ‘computing’ on an iMac, iPad, iPhone, (and Cook added a watch). He also predicted the dvd player would not be around in a few years, and felt no need for Blu-ray. They were not the future. Now, almost 15 yrs later, pickups are the #1 auto sold, dvd & blu-rays are still very popular, and Apple sells lots of macs, iMac Pros, and MacBook Pros.

      0
      December 27, 2020
    • Rodney Avilla said:
      continued….
      Same for car ownership. It will not go away any more than bike ownership went away with bike sharing. Not everything that happens in inner city happens in the rest of America. As long as businesses and Educational Systems best operate between 8-5, then cars are most needed between 6-9 and 4-6. Unless government controls when you work and drive (does anyone want that?), there always will be a lot of cars sitting idly at times.
      Eventually you (and Jobs) will be right. But not in 5 yrs. Not in 10 yrs, IMHO. But we ARE heading in that direction. Even in 20 yrs we’ll still see car ownership and watching blu-rays. Just not as much as before.

      0
      December 27, 2020
  4. John Blackburn said:
    People need transportation, not cars. As it did for shipping (standardized containers) and communications (Internet), packetizing would revolutionize transportation, allowing someone to step into a container at home and be transported to wherever they like.

    2
    December 26, 2020
    • Gregg Thurman said:
      Now you’re talking form over function.

      If people no longer own the vehicle, will there be much need for design? I’m not sure, for sure garages will be used differently, as well as shopping centers and employer parking lots (more green space?).

      Driverless Uber may very well be the future. You just won’t own. Transportation as a Service.

      1
      December 26, 2020
  5. Fred Stein said:
    @Horace, Miguel, I concur. Apple can have the best true self driving cars because of their lead in AI and sensor technology plus their most favored customer relationship with TSMC.

    Self driving is the big game change. Self driving can radically alter transportation, especially in cities. Urban populations are the fastest growing segment of the population.

    5
    December 26, 2020
  6. David Emery said:
    The interesting thing about “trips, not cars” is that you have to consider both the average and the exceptional. That includes both significant surges when everyone wants to go somewhere (Christmas Eve? 🙂 ) and the opposite when no one is taking trips. From there, you can look at the utilization of each vehicle, to determine the number of vehicles needed to satisfy some amount of peak demand without having a bunch of assets sitting unused most of the time.

    Right now vehicle owners each individually make those decisions. Our vehicles (wife’s car, my pickup) sit most of the time, and that was true even before Covid. So we carry the costs of an unused asset. But since there are 2 people and 2 vehicles, (unless one is in the shop) we can always meet peak demand.

    It would be really interesting to know what the utilization rate is for pickup trucks from both rental car companies and Home Depot. I use the ‘pickup’ part of my truck maybe once every 15 or 20 trips, but when I buy lumber for a project in particular, no other vehicle would work.

    4
    December 26, 2020
  7. Jonny T said:
    Darn. This forum takes away all the fun and expectation of a surprise…

    But, I so agree. Apple cars will only be owned by organisations providing a service, including Apple itself. And if you abuse the car in any way it will drive itself back to base!

    PS We will of course all have an electrified classic in our garage too!

    3
    December 26, 2020
  8. John Konopka said:
    The analyst has it wrong. Apple didn’t just change the “mobile phone” market. Apple completely changed it. Today’s iPhone can act as a phone, if you like, but lots of people never make or accept calls. It’s more like Apple replaced mobile phones with pocketable computers that have a ton of features (cameras, GPS, WiFi, BT, … ).

    If Apple gets into the car business I suspect they will do the same. As with the Watch, the tablet, the phone, Apple will find a new way to address transportation. We will call them cars but they won’t be like my dad’s cars.

    The chart surprised me. People still make and buy feature phones?

    4
    December 26, 2020
    • Bart Yee said:
      Yes, feature phones still exist, produced by regional ODM (original device manufacturers) to serve the ultra low cost cell market. Still a vast 3 billion population making <$2.50/day, primarily India and Middle East Africa and Latin America, with 2G and 3G cell systems that otherwise cannot / don’t want to use or afford major data plans. Counterpoint estimates a cumulative 1 billion unit sales in 2019-2021 generating $16B wholesale revenue over that time.

      Counterpoint Research believes 4G VOLTE capable feature phones will eventually help regional telecoms retire old infrastructure and expand efficient telecommunications as well as long term smartphone expansion as well.

      0
      December 26, 2020
      • Gregg Thurman said:
        The demand that electrified transpiration is going to put on the grid cannot be satisfied by current electric generation technology. As unpopular as it may be today, we have to remove the blinders on nuclear power. Today’s nuclear technology bears little resemblance to the technology used since the 1950s. Today’s designs don’t generate nuclear waste, they consume, and the by-products they give off are more valuable than the raw fuel they begin with, without the “meltdown” potential of current nuclear generators. There’s a fantastic documentary on Amazon’s Prime entitled Thorium. It’s a must watch.

        0
        December 26, 2020
  9. Bart Yee said:
    Perhaps the biggest issue for an autonomous rideshare service that does not depend on driver/owners is where do you “garage” or “store” all the vehicles when not in use.

    During down demand they should not be circulating but rather be charging if needed – cheaper night electricity rates (a plus for utility excess capacity, ironically natural gas powered unless Apple uses its own battery sources) or swap quick charge/change modular batteries.

    Then I realized huge suburban and city parking areas/structures exist at every major shopping mall, baseball, football, theme park, Apple Park-corporate parking, etc. essentially unused outside of the workday. Which facility owners above wouldn’t love to have a bigger ROI than partner with AppleCar ™ for car service and staging?

    2
    December 26, 2020
  10. Bart Yee said:
    I think Apple is looking at the long term disruption of many industries (rental cars, rideshare and delivery services, even to some extent fixed route public transportation, etc.) If Apple not only creates autonomous vehicles but also augmented / semi-autonomous riding micro-mobility vehicles with 2-3 wheels, then Apple may begin to disrupt our (human) ideas of mobility entirely (and maybe add a health benefit to it).

    The difficulty is getting towns, cities, and other people to allow or create safe paths and roadways for unencumbered and unopposed mobility from the cars and trucks already existent. Horace can speak more to these issues.

    1
    December 26, 2020
  11. Jerry Doyle said:
    I enjoyed the comments above and find them informative and insightful. The comments, though, avoid acknowledgement that a wide swath of Americans have a love affair with their cars.

    While AVs may be welcomed in the megalopolises where the need for them is enhanced by an aging population and by individuals who desire more affordable transportation, many Americans crave the freedom of owning their own vehicles. They crave the freedom, the adventure of driving through open country and desert lands and the intimacy with their vehicles little different then they experience the oneness of melding with their mates. It’s little different from the exuberance motorcycle riders have with their bikes, that freedom!

    One purchases his vehicle and admires her sex appeal, her curves, the flushness of color, the perfect proportionate rear, top, back and frontal along with the oblique lines that sweep inward and outward for fit and finish.

    In summary, I don’t see the love affair of the car (or truck) going very far, as AVs beyond those who need it the most for the reasons I stated earlier.

    2
    December 26, 2020
    • Gregg Thurman said:
      In summary, I don’t see the love affair of the car (or truck) going very far, as AVs beyond those who need it the most for the reasons I stated earlier.

      The primary “drive” will be economic, convenience and sense of ecological responsibility.

      If the average car is only used 10% of the time, a service can cut transportation costs by 50% and make huge profits.

      Being picked up at your front door, and delivered at the front door of your destination, without spending time looking for parking is a huge benefit. Ordering online and having it delivered via driverless “vehicular drones” is another huge benefit.

      Knowing that your mode of transpiration isn’t emitting airborne pollutants satisfies our moral conscience.

      The combination of the 3 “motives” is more powerful than the limited pleasure of a drive through the country (who and how many of us really do that anymore?).

      0
      December 26, 2020
  12. Jerry Doyle said:
    I discern many commenters know little to nothing of oil and gas. EVs are definitely coming, but oil and gas is embedded deeply in this nation’s commerce. It drives the economies of many states along with millions of jobs that support families, suppliers, community businesses and keep politicians elected to office. Pontificate as one desires on the energies from heaven, but the energies from hell is here to stay for decades.

    It’s too early to know if there will be an Apple car. If anyone can pull it off besides Elon Musk, it is the entity and cultural spirit of Apple that will compete with Tesla. Apple can do it. They have the funding, the technical prowess, the brand name, and recognition for quality and excellence. Just tell me where I can put down my deposit. 🙂

    1
    December 26, 2020
    • Gregg Thurman said:
      but oil and gas is embedded deeply in this nation’s commerce.

      Not for long. California has passed legislation that bans the sale of ICEs by 2035. Detroit Japan, Korea and Germany are rapidly developing EVs for the single largest automotive market in the world. They won’t be limiting sales of “California” cars to California, they will be sold everywhere and achieve 50% road share very quickly after 2035.

      Car dealership owners have already accepted that their business model is history. That ownership of transportation and travel patterns are going to change dramatically in the next 20 years.

      2
      December 26, 2020
  13. Mike Dsida said:
    “Pontificate as one desires on the energies from heaven, but the energies from hell is here to stay for decades.”

    If the energies from hell remain prevalent for decades, the consequences will be catastrophic for billions of people. I agree that Americans are in love with their internal combustion engine cars; but it’s a love affair that can’t end fast enough. Whatever Apple and others can do to hasten the end will save untold lives.

    2
    December 27, 2020
    • Jerry Doyle said:
      “… If the energies from hell remain prevalent for decades, the consequences will be catastrophic for billions of people.”

      The key words in your comment above are: “…. remain prevalent for decades, …”.

      Little doubt during the decades going forward we will see more and more EVs on the road and ever increasing energies from heaven driving the power we need to exists, usurping our world’s dependency on energies from hell. So, that transitioning will ameliorate matters for us but that transitioning will take decades.

      Interestingly, I drive through Houston, Beaumont, Lake Charles and Baton Rouge and see more refineries operating at full capacities and hear of rigs off-shore in the Gulf than I saw and heard about in the 1960s. That’s just in my immediate geographic area. Before I retired a couple years past, on every overseas flight, I would meet oil workers from cooks, rig workers and security details heading to Africa, the Middle East, Russia, Southeast Asia, and Alaska. They ain’t going away overnight.

      1
      December 27, 2020

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