Apple (AAPL) Car Venture hits the road

Apple Inc. (AAPL) no longer appears to be heading toward a deal with South Korea’s Hyundai Motor Company (HYMTF) and Kia Motors Corporation (KIMTF) to develop and manufacture electric vehicles (EVs) with autonomous driving capabilities, a story that broke. early January 2021.As recently as last week, news reports indicated that a deal was imminent, possibly pointing to an announcement on February 17, 2021.

However, Hyundai has now released this statement: “We are not in discussions with Apple on the development of self-driving cars.” Kia, in which Hyundai has a 34% stake, did not comment, instead referring news agencies to Hyundai’s statement.Meanwhile, sources familiar with the matter said Apple had suspended talks with Hyundai and Kia weeks ago.

Importance for investors

For Apple to have a realistic chance of entering the vehicle market, the widely held consensus is that it must partner with an established automaker. Setting up a vehicle manufacturing plant can cost billions of dollars and take many years, and Apple is a company with no relevant prior experience in this industry.

While analysts and investors generally seem to see opportunities for Apple in the EV market, especially if it strikes the right partnership deal with the right existing automaker, some are not convinced. One skeptic noted that Apple had a history of higher profit margins than most automakers.

One of the bulls is analyst Daniel Ives of Wedbush Securities. In a research note released after Hyundai’s statement, he wrote that “the electric vehicle industry is entering a golden age.” Based on his projection that electric vehicles could be a $ 5 trillion industry, Ives estimates that grabbing a market share of just 5% to 10% could be another major source of growth for Apple. .

Ives still sees Hyundai as a likely partner for Apple, with Volkswagen AG (VWAGY) as his other best possibility. He also thinks Apple could pose a significant challenge to Tesla, Inc. (TSLA), General Motors Company (GM) and Ford Motor Company (F). “In a nutshell, Apple with the right partner (choice of Hyundai and VW Top 2) would be a major force in the electric vehicle industry and could disrupt the market share of Tesla, GM, [and] Ford if the company is able to put the Apple Car on the road by 2024, ”concludes Ives.

Look ahead

One possibility is that Apple could seek to forge multiple partnerships, and analysts have suggested other major automakers as potential candidates, such as Honda Motor Company, Ltd. (HMC), Tata Motors Ltd. (TTM) of India, which owns Jaguar and Land. Rover or Geely Automobile Holdings Ltd. (GELYF) from China, owner of Volvo.Indeed, a report indicates that Apple has had discussions with at least six automakers.

Like Daniel Ives, widely followed Apple analyst Ming-chi Kuo also believes Apple could potentially strike a deal with Hyundai and Kia. Kuo sees Hyundai’s E-GMP as an ideal platform for Apple’s first electric vehicle and Kia as a logical choice for manufacturing in the United States. Nonetheless, Kuo does not expect the car to be available until 2025.

Ives predicts that Apple will announce a partnership to build electric vehicles before the end of the first half of 2021. Like Kuo, he finds Hyundai’s E-GMP platform a good fit for Apple. Ives cites Volkswagen’s modular electric drive matrix as another logical choice.