Apple’s massive cash reserves, talent pipeline, and history of innovative tech will be key in its quest to build an electric car, experts say

Tim Cook
Apple’s nearly $200 billion in cash on hand could be a massive help in getting its EV project off the ground, Wall Street analysts said.

  • Apple plans to build an electric, self-driving vehicle for consumers by 2024, Reuters reported Monday.
  • Wall Street analysts from Morgan Stanley and RBC Capital Markets think Apple has several key attributes that could set it up for a successful vehicle launch. 
  • The company’s strong brand, deep pockets, and ability to vertically integrate, among other factors, set it apart from other EV startups. 
  • However, Reuters reported — and the analysts agree — Apple won’t be able to go it alone, and will need a manufacturing partner. 
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After years of ups and downs, Apple’s self-driving electric vehicle project is steaming ahead, Reuters reported Monday.

Wall Street analysts say the tech giant has several key advantages  – from a critical talent pipeline, to massive cash reserves, and a history of disruptive hardware – that could make its reported plans to bring a consumer car to market by 2024 a reality. 

Building an electric car from scratch is an ambitious task – as evidenced by the many startups that have tried and failed to replicate Tesla’s successs – but analysts from Morgan Stanley and RBC Capital Markets say Apple, with its vast resources and decades of manufacturing expertise, may have what it takes. 

For starters, Apple’s strong brand name tees it up for a successful vehicle launch if its long-rumored plans become reality, RBC Capital Markets’ Joseph Spak said in a note to clients. That’s something that EV upstarts like Rivian, Fisker, and Lucid can’t fall back on as they launch vehicles in the near future. 

Both Spak and Morgan Stanley’s Adam Jonas agree that Apple’s easy access to capital, as well as its ability to attract and retain top talent, set it up for success. Apple has one of the largest cash piles among US companies, counting more than $191 billion in cash on hand at the end of its fiscal fourth quarter in September. For reference, Amazon-backed Rivian, one of the EV startups closest to delivering its first vehicles, has raised $6 billion in funding to date, according to PitchBook data. 

Morgan Stanley’s Jonas said that Apple benefits from a “rich ecosystem to leverage recurring subscription/service revenue,” adding that “the value of the services opportunity … embedded in Internet-of-Cars (IoC) could potentially dwarf the auto business itself.”

Apple’s services business – including Apple TV, Apple Music, App Store, and iCloud – is rapidly growing as a share of the company’s overall sales. And industry watchers have noted a similarly growing importance of software in the auto sector, as over-the-air software updates provide firms the opportunity to bring in recurring revenue from a single vehicle sale.

Tesla, for its part, plans to launch a subscription service for its “full self-driving” driver-assistance system in early 2021. 

Read more: Jeff Bezos bought robotaxi startup Zoox for $1.2 billion – after agreeing to this one key term, says co-founder

Jonas also sees the electric car project as another area, like mobile phones and wearables, where Apple can “disrupt through vertical integration.”

“Importantly, Apple has recently invested to bring five core technologies in-house, which can aid their car development – processors, battery, camera, sensors, and display,” he said in the note. 

However, despite Apple’s ability to bring development in-house, its success in the EV space will also depend on which manufacturer it decides to partner with to build the vehicle, the analysts said. Sources cited in Monday’s Reuters report said they expect Apple to contract out the manufacturing to a partner. 

Morgan Stanley said that a tech company that decides to team up with a manufacturing partner would be better positioned to compete with Tesla than a traditional automaker. However, legacy carmakers have already brought battery-powered cars to market, while no tech company has done so. 

“From a Tesla perspective, we have long felt that tech players like Apple (working with manufacturing partners such as FoxConn) represent far more formidable competition than the established/legacy OEMs,” Morgan Stanley analysts said. “Such firms may also be better positioned to bring forward new innovation in autonomy and renewable tech (ie. storage) than most of today’s auto companies.”

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