While Apple (NASDAQ:AAPL) is highly secretive, its executives are fairly honest in public. At the D Conference in 2013, Tim Cook commented on Google Glass and was very dismissive of it but added “For something to work here,” gesturing at his wrist, “you first have to convince people it’s so incredible that they want to wear it.” That is how Apple watch was born a year later – Apple takes time to produce superb products. The car may not however be forthcoming, after all. This is a plain marketing gimmick for investor and customer confidence.
It is expected that Apple will tread carefully moving into the automotive industry. You are likely to replace your computer every two to five years but a car can last for 10. The car business is simply not as lucrative from a margin standpoint. Apple cannot just ignore the $108 million net loss that Tesla suffered in 2014. The Luxury electric car business remains tiny. The market is not likely to grow much bigger, not unless users throw out their gas-powered autos en masse (something that is not happening yet) and prices were lowered to accommodate the majority. Not to mention that these Electric cars may not be as environmentally friendly as once thought, it is simply too early to know what will happen to dead electric car batteries that are deemed toxic to the environment.
EVs constitute such a tiny auto market segment that there is no other way you would expect the figures to go but up. In this luxury market, Tesla is actually all there is at this moment. The company managed to deliver 50,580 vehicles in 2015 and plans to double that this year. This is a figure that Toyota, GM or Ford delivers in just a month. But why are consumers not buying these vehicles?
1. They are more expensive than their gas-powered counterparts (even when you factor credits and other incentives).
2. Poor performance in extreme weather conditions.
3. The charge cannot go very far.
4. Takes too long to re-charge.
But these are not the only road blocks and bumps awaiting Apple. The company must beat or equal Tesla in design and engineering. The launch must not be delayed (which is happening of course) for Apple to cut an early market segment. Tesla is due to launch the much hyped affordable Model 3, while Apple will release an expensive model alternative much later.
While other automakers are merging, Apple is building a high-profile team for its Electric Vehicle. In the same breath, while competitors like Tesla are merging with others in the renewable sector, Apple is planning some late competition. And for the team that is shaping up for this imminent breakthrough, why would they come up with just driving software rather than hardware that constituted the original Project Titan? In the meantime, AAPL stock’s confidence continues to grow. Investors are provided hope for better rewards in the future, should iPhones continue to face stiff competition.
The AAPL stock price experienced a dramatic increase when car rumors started surfacing. Now it is time for a much anticipated announcement before hype dies down and prices go to where they belong.
With AAPL posting quarterly revenue of $42.4 billion and quarterly net income of $7.8 billion in Q3, Tim Cook was impressed by “stronger customer demand and business performance” that the company experienced with iPhone SE.
But the auto industry is very different from the company’s core business. Venturing into the auto industry for AAPL is like jumping from a wobbling airplane and learning how to fly on the way down. And this is a step that the company knows must be delayed, if investor confidence remains. As if this is not enough, “the all-new 72-MPGe performance-driven BMW 330e is here, now, reinventing what a plug-in hybrid is as only BMW can,” shouts an ad in Germany that claims this is the car that does not require waiting for.