Apple car: ‘Where there’s smoke, there’s fire?’ asks Evercore analyst

From a note to clients by analyst Amit Daryanani that landed on my desktop Wednesday:

ALL YOU NEED TO KNOW: Over the last few weeks we have seen the news flow on AAPL car inflect materially higher. Key points we would flag here:

    1. AAPL is reportedly looking to invest $3.6B in Kia to gain access to ramp up production in their Georgia facility. The goal will be to product 100K cars annually by 2024 (aggressive target in our opinion). The report also notes that capacity can be scaled up to 400k, but does not provide a timeline for how quickly it will ramp beyond the initial 100k. Expectation is Hyundai will provide manufacturing and component design/know how, while AAPL will do the heavy lifting around – self driving hardware, software, battery technology, user interface, etc,
    2. AAPL hired a notable Porsche executive with expertise in chassis design(Manfred Harrer). and
    3. Appointing Dan Riccio (head of hardware) to a new role focusing on a new project and reporting to CEO Tim Cook. Though to be clear, AAPL didn’t specify what the “special project” entails.

Net/Net: Near-term bullish bias is driven by trifecta of iPhone supercycle, monetization of install base and GM expansion. The Automotive market will be a driver for multiple expansion as we get closer to realization that AAPL will disrupt the Automotive market much as it did the phone industry.

Maintains Outperform rating and $160 target (40x P/E). 

My take: Analysis by news flow.

15 Comments

  1. Michael Goldfeder said:
    @PED: Great photo! Lol!

    4
    February 3, 2021
  2. Robert Paul Leitao said:
    Yes. Analysis by news flow. $3.6 billion? Not to diminish its value, but Apple invested about that much, on average, every two weeks last quarter on share repurchases. I’m not saying Apple isn’t making an investment in future car production. But before we let our collective imaginations run wild, it would be good to know what the company has planned as a transportation solution. In the meantime, I trust Apple’s management to make very good decisions on the development of future products and solutions. Now back to our regularly scheduled programming…

    4
    February 3, 2021
  3. bas flik said:
    to much rumours.
    the car is coming.
    maybe i will buy one with the ever rising dividends.

    0
    February 3, 2021
  4. bas flik said:
    if they really introduce a car it will be spectacular event.
    only the attention this will draw worldwide is worth billions of free publicity
    all media will promote apple freely for month”s
    people underestimates all this free publicity
    editors and journalists, most of them captured in the apple ecosystem, will promote the car for free. airtime radiotime newspaper all for free worth billions.
    how one can compete against this?
    impossible.

    2
    February 3, 2021
  5. bas flik said:
    Angela Merkel is crying
    Apple already battered her car industry by buying all the chips available from TSM
    and now they introduce a car which will bring the final blow
    future of germany is cloudy, car manufacturing is the spiritual heart of germany.
    unless they are smart and buy aapl stock in time like i did
    apple keeps every penny for herself. she shares nothing. really closed distribution.
    so it was really hard for us to make any profit on apple products
    in the beginning we were only fighting with them and cursing.
    then i thougt why fighting its better to join them.
    go with the flow
    i bought the shares and made more money than ever before.
    because of my experience as a dealer in apple products i understand their market power. what they are doing is not possible. they defy law of economics.
    in the most price elastic market they crushed all compatition with excessive pricing.
    i have never witnessed a company doing this.
    its not like facebook amazon or google
    they are monopolists
    but apple is in a full compatition every day
    people can choose their phones out of hundreds of different models and brands.
    Apple pursuades them to pay the highest price.
    this power is priceless.
    the street often does not realize this enough.
    to much short term spreadsheet analyzing but missing the big picture.

    5
    February 3, 2021
    • Peter Kropf said:
      Thanks Bas.

      That’s a very strong view you bring of Apple’s ability to get huge sales at premium pricing.

      (It’s only going to get better as iPhone and M1 Mac lap the wannabees several times over.)

      2
      February 3, 2021
  6. Jerry Doyle said:
    Over analysis and getting too far down in-the-weeds has obscure Apple’s goal relative to producing a car. Apple has no plan for a transportation solution to solve traffic congestion. Apple knows that ten years from now automobile manufacturers will be producing BEVs. If Apple sees a societal contribution it can provide (as a transportation solution), then it is one of “cleaner air.”

    Apple sees the car being the extension of our homes, the extension of our work places, the extension of our family activities. Apple wants to produce a car as an integral part of all these extensions by giving us an Apple car that integrates seamlessly with Apple’s hardware, software and services.

    We spend hours in our cars. If Apple has a transportation solution it is to get us from point A to point B in the most relaxed and enjoyable manner possible, all while using Apple hardware, software and services. Don’t make this all complex. Apple is going to go head-to-head competitively with the likes of other BEV car manufacturers believing that it can give us a more serene driving experience. It is not to solve the transportation problems of the world, other than giving us cleaner air.

    0
    February 3, 2021
    • Bart Yee said:
      @Jerry I agree in part with your comment – Apple will produce high quality EV automobiles for individuals and families who will still own and drive (perhaps with assistance) on their own. Having an AppleCar Pro (TM) 4 seat performance sedan will be one option to prove the concept and validate early production. Then an iteration to an AppleCar Pro S ™ small SUV and AppleCar Pro S Max full size SUV.

      Note well – once these models become available by 2024-2025, 5G rollout and operation will be mostly complete for developed countries and at least urban areas, enhancing AI, VR, data/streaming, local wifi experience within the vehicle and for its operation. At some point, autonomous operation also become clearly feasible.

      0
      February 3, 2021
      • Bart Yee said:
        Here is where I differ from you. IMO, it is not mutually exclusive that Apple cannot tackle clean air and helping solve inefficient automotive use and space utilization. After 2025, it is entirely possible Apple could introduce a competitively priced fleet model specifically designed for autonomous on demand people moving in dense urban areas which relieves riders of ownership, charging, insurance, garage and parking issues. With full 5G, these vehicles can run autonomously and have high daily utilization by operating in coordinated network fashion. Down time is only for charging and cleaning, plus staging for next days use.

        Would they sell these fleet vehicles to others to do the same? Maybe. Would Apple own and operate their network and fleet? Entirely possible. Consider you could ride like Uber/Lyft by Apple providing “a la carte” or on demand rides on AppleGo (TM). OR Apple could provide ridership at a favorable subscription price or bundle based on miles, trips or even an unlimited plan via AppleGo+ (TM). They could potentially lease fleets to corporate entities as well, reducing parking issues. Wonder if this could work for colleges and schools? The opportunities are very wide.

        0
        February 3, 2021
        • Bart Yee said:
          Finally, while I share Jerry’s love and affection for driving and owning cars, our generation and the next may be the last to grow up with that ownership/operation paradigm en masse. While I agree with my wife there will still be substantial personal ownership of vehicles, this may taper off in denser urban areas where pooled travel with flexible routing may have advantages. This is where Apple can again disrupt existing structures / industries / paradigms. Not in 1-5-10 years and not all at once but gradually as the technology, capability, deployment, and yes, finally market and people can eventually embrace it as “normal”. It has taken us 13 years to get to the iPhone 12, where will we be in 10-13 years with AppleCar and AppleGo?

          0
          February 3, 2021
          • Jerry Doyle said:
            @Bart Yee: Thanks for your thoughtful & insightful comments. I do not take exception with any of the possibilities you denoted & described. What you described is years away. Apple usually takes one step at a time.

            I believe Apple initially will focus on offering a full, premium BEV that will be an extension of our homes, offices and family activities giving us full access to Apple hardware, software and services for a seamless integration of them in getting from point A to point B. This compilation gives the occupants (especially the driver) the option of driving or sitting back and letting the car do most of the driving for us while we enjoy our traveling in Apple’s Wall Garden Zen experience. Apple will target the higher end clientele initially for solid margins.

            The only question I have about your Apple fleet proposal is Apple seeks high margins. Car companies involved in fleet sales have low margins. If there are others involved in this approach, history has shown us that Apple will step back and let them fill the void as Apple never desires to be in a competitive race toward the bottom when it comes to margins.

            0
            February 4, 2021
  7. Steven Philips said:
    Don’t forget Apple’s investment in that Chinese ride share company. Could Apple be working on some kind of car “networking” software that would help with all the “fleet” type solutions you allude to? Tied to their cars.

    1
    February 3, 2021

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