Apple (AAPL) is reportedly not moving forward with its multibillion-dollar, nearly 10-year plan to build a car. But in the end, some analysts say this is probably a good thing for the tech giant.
“A successful and profitable company like Apple has little to gain from making its own cars,” said Sam Fiorani of Autoforecast Solutions, a research firm specializing in the auto manufacturing sector. said. “We should have let Apple executives know how difficult this is, given the minefield that companies like Rivian and Lucid are currently walking through.”
In recent months, Apple executives appear to have actually come to this conclusion. According to Bloomberg, Recently, after pushing back the deadlines and features set for the car, it has become more apparent that building a car from scratch is expensive. At the same time, the car will enter a market already saturated with EV competition from luxury cars like Tesla, Rivian, and Lucid, and where demand is slowing significantly. Even the Big Three automakers, including Ford and GM, warned of a decline in EV demand in their fourth-quarter earnings reports.
“Apple outsources much of its product manufacturing to other companies, so it’s unlikely that the vehicles they developed were assembled in-house, but selling such a vehicle would require the genius of a mall Apple Store. We needed something more than that,” Fiorani said. He emphasized the challenges Apple faces in the market.
Also, unlike other EV makers, Apple won’t be able to leverage its own data. That’s because the company already captures a lot of data through the ubiquitous iPhone.
“The new car startups of the past 20 years have focused their long-term energy on data, which is Apple’s core business today,” Fiorani said, referring to Rivian and Lucid. “The iPhone already collects so much information about its owners that the cost of starting an automotive division would be impossible to recoup with enough additional data to offset the financial risk.”
Apple has previously dabbled in non-core product areas and canceled plans if they proved unprofitable. Apple has been rumored for years to be producing its own high-end flat screen TVs for consumers. However, as the LCD and LED TV markets became less profitable, Apple withdrew those efforts and stuck to making external monitors.
As many analysts have pointed out, Apple’s better strategy for moving into the automotive space is to stick to software and help traditional automakers create a better user experience for their customers. By using his Apple CarPlay software for vehicles, Apple has the potential to focus on Apple’s core competencies such as design and user interaction to increase added value and enjoy higher and more stable profit margins. there is.
“Today’s software-driven vehicles require engineers like Apple to build systems that collect, process, leverage, and leverage data from drivers, passengers, and the vehicles themselves,” Fiorani added. “This could potentially be a bigger benefit than actually developing the vehicle.”
Wall Street reaction from analysts at companies including Morgan Stanley, CFRA and Wedbush Securities was largely positive about Apple’s cancellation of the car project, although they acknowledged that the costs incurred were not ideal. Ta. Nevertheless, Apple’s pivot away from cars to other endeavors, such as generative AI, is welcome.
“With the Apple Car underperforming, this report, if true, will help us 1) focus on what’s important and 2. “We believe this represents a positive step forward in demonstrating cost discipline.” “We believe that the engineering talent, capital investment, and time spent on Project Titan could be better repurposed into related technologies, such as Generative AI, that have a much better chance of being brought to market and strengthening Apple’s competitive position. In our view, Apple’s AI advances are a net positive.”
Pras Subramanian is a reporter for Yahoo Finance.you can follow him twitter And even more Instagram.
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