But the key component is not likely to reach maturity until “towards the end of the decade,” says analyst Samik Chatterjee
From a note to clients that landed on my desktop Monday:
Key highlights relative to our expectations are: 1) Apple will aim to be a full-fledged manufacturer of BEVs [battery electric vehicles] with AV [autonomous vehicle] capability; 2) Apple will extensively rely on contract manufacturers to preserve returns despite lower hardware margins; 3) The launch will be delayed till AV technology reaches maturity, likely towards end of the decade; 4) All-in margins for Apple in the auto industry should be higher given high-margin Services monetization – amplified in a fully autonomous vehicle.
Go Big or Go Home approach. Despite well understood challenges in being a new OEM, and an easier alternative of being a technology supplier in the automotive industry, we expect Apple will look for control on the pace of innovation as it pursues differentiation and positioning in the growth market of BEVs with AV functionality. Primary reasons for interest in this end-market include: 1) TAM [total addressable market] of $2.55 trillion vs. $420 bn for smartphone; 2) Opportunity on installed base of 1 bn vehicles long-term, with expected transition towards BEV/AVs near-term; and 3) Synergies with existing Services and expansion of TAM in a fully autonomous vehicle.
Maintains Overweight rating and $150 price target.
My take: Go big or go home sounds like Apple. I hope they go big. I’ll be disappointed if they don’t.