The Apple and Tesla blogs (and shares of electric vehicle related stocks, naturally) are going bananas this week on reports the iPhone maker will enter the electric vehicle space.
But some Wall Street analysts are casting doubt on the arrival of the “iCar,” for more reasons other than it would badly screw up their finely tuned discounted free cash flow models.
“We would assign the chances of Apple unveiling its own standalone car by 2024 as 35%-40%,” says Wedbush tech analyst Dan Ives.
Apple (AAPL) could start production on its own electric vehicle as early as 2024, according to a report out of Reuters this week. The car will be powered by a “breakthrough” monocell battery design that offers up greater range than traditional electric vehicle batteries. Apple, which did not respond to Yahoo Finance’s request for comment, is also reportedly exploring the use of a lithium iron phosphate battery, which would not include hard to mine metal cobalt.
Analysts like Ives contend making an electric car is an operational headache that Apple CEO Tim Cook probably won’t want to take on directly.
“There are the Herculean-like auto production capabilities, battery technology ramp, financial model implications, and regulatory hurdles involved in such a game changing initiative,” Ives explains. “In addition, on the autonomous front and given safety/regulatory issues we would see a longer timeframe if Apple ultimately heads down this path especially given the cautious DNA of Cook & Co. in launching new products.”
Instead, Ives believes Apple will go the partnership route to enter the surging electric vehicle space. It would likely lead with the Lidar (Light Detection and Ranging) technology it has reportedly been developing since 2014. Doing so would reduce capital outlays and regulatory hurdles, among other elements to the complicated story that is making a car in the modern day.
“We believe based on our investor conversations over the last few days that many on the Street would rather see Apple partner on the EV path, than start building its own vehicles/factories given the margin and financial model implications down the road, coupled with the strategic product risk around such a gargantuan endeavor. This speaks to our view that the chances of a strategic partnerships with the likes of a Tesla, VW, or other auto manufacturers in China (e.g., Nio, Xpeng) are in the 70%+ range over the next few years and could lay the groundwork for a dual path (start building its own line of EV autos post 2025) over the next decade if this EV/autonomous venture is successful with consumers,” adds Ives
Speculation on Apple’s potential EV entry has put a spotlight on shares of many suppliers in the space. Battery startup shares of QuantumScape (QS) spiked 29% on Monday and rose nearly 40% on Tuesday. A source tells Yahoo Finance QuantumScape is currently not in talks with Apple.
Meanwhile, shares of Lidar sensor maker Luminar (LAZR) are up a cool 31% this week. The company debuted on the Nasdaq Composite earlier this month.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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