The "Apple Car" may not disrupt the market when it first debuts, but Piper Sandler says it could become a solid hardware revenue source for Apple, possibly generating $50 billion by 2030.

In a note to investors, lead analyst Harsh Kumar laid out Piper Sandler's framework for a potential "Apple Car" release.

"Overall, we think Apple entering the automotive market makes perfect sense. Similar to its other hardware offerings, the company can enter the market at a time of peak technology disruption while avoiding the risk of forming the market," Kumar wrote.

It's possible that Apple could opt to make its automotive debut smaller in scale with an upgraded CarPlay system or an Apple-branded vehicle user interface for use in other manufacturer cars. However, Kumar says he expects Apple will run with a "full-blown Apple-branded electric vehicle."

That's because Apple could control every aspect of the design, including the electric vehicle hardware and the baked-in software platform.

Citing recent reports, Kumar points out that Apple may be targeting a run of 100,000 vehicles in 2024. Based on that, he says Apple could generate about $5 billion in revenue with just less than 0.1% of the market. If it reached 1% market penetration by 2030, that could grow to $50 billion.

The analyst believes now is the right time for Apple to enter the car market. That's large because it's "primed for technological innovation," and the fact that Apple could use the additional revenue to drive growth as products like the iPhone and Mac reach maturity.

Even if it does opt for an Apple-branded car, Kumar believes the company will tap a third-party manufacturer to actually produce it. Apple, he notes, doesn't assemble its own hardware products. However, Kumar says that Apple's development in-vehicle tech has been in the works for years. As such, he believes the car could feature strong technology compared to rivals.

The biggest hurdle is Apple finding a manufacturing partner since Kumar notes that carmakers don't want to be "the Foxconn of the auto industry."

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Apple, the world pioneer in information technology, is highly likely to get into the automotive market. The American company is currently planning to use a business model similar to its iPhone output to build self-driving electric vehicles produced by an automaker under a tie-up agreement. 

A potential Apple Car is believed to have an impact on the automotive industry's competitive environment.

 

Following stories by Reuters and Taiwanese news media on Apple's potential entrance into the auto industry, U.S. and Chinese high-technology companies' share prices shifted uphill.

In the US, strong investor interest has been attracted by companies such as Velodyne LiDar, a manufacturer of light detection and ranging (lidar) sensors that serve as the "eyes" of self-driving cars. In China, investors rushed to the world's largest electric vehicle battery maker, Contemporary Amperex Manufacturing, and other suppliers of EV-related components.

An Apple Car will be a "collection" of high technology, said analysts at American and European auto market research firms, indicating that it is possible to shift suppliers of key automotive components.

Through the use of smartphone creation and manufacturing know-how to build automobiles and through the horizontal division of production, the Apple EV project is expected to have a more serious impact on the car industry. Though outsourcing manufacturing to businesses such as Hon Hai Precision Industry, a top Taiwanese electronics contract manufacturer, Apple will likely concentrate entirely on designing vehicles.

Apple is expected to commit itself, as in the case of iPhones, to overall design work, including self-driving technology, while outsourcing manufacturing. The strategy is likely to shake the current vertical integration business model of the auto industry, in which carmakers participate in the entire process from concept to production.

In China's auto market, the horizontal division of labor is already progressing. Baidu, a top Chinese internet company leading the development of self-driving technology, revealed on Monday that it would manufacture EVs on an original-equipment-manufacturing basis with Zhejiang Geely Holding Group, a major automaker in China.

Magna International, a leading Canadian supplier of automobile parts that has progressed on behalf of car manufacturers to produce vehicles, is seen as a leading contender for producing the Apple Car. Allegedly, Taiwan's Foxconn, which has collaborated with Apple in the development of smartphones, also wants to win the contract.

The Apple initiative has gained attention from automakers as well. South Korea's Hyundai Motor said Friday that it is in early talks with Apple over a tie-up to create an EV. If obtained, a large order for the manufacture of the vehicle would likely allow Hyundai to increase its capacity utilization rate and stabilize earnings.

But the project may threaten the dominance of carmakers at the top of the sector. An executive at a major Japanese carmaker cautioned that automakers can "become Apple's subcontractors and lose their originality."

On behalf of Didi, BYD agreed to manufacture EVs because it can expect to benefit by growing performance, an analyst from the auto industry said. 

Although Asian businesses are beginning to move in an effort to capitalize on the Apple Car project, the question is whether Japanese companies are ready for it. 

As in the case of smartphones and consumer electronics, there remains fear that Japanese companies will lose the initiative to Chinese and South Korean rivals.
 

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At the end of 2014, when Shinzo Abe, then Prime Minister, announced in a speech that Apple was building its first technology center in Japan, high-profile foreign investment was praised as a success of its economic policy.

It also fueled immediate speculation that the iPhone manufacturer might be looking for a Japanese partner for its secretive project to build autonomous electric vehicles.

So it was only natural that market scrutiny would once again fall on Japan’s eight carmakers after the US tech giant halted talks on an automotive tie-up with South Korea’s Hyundai Motor and its affiliate Kia.

In the past two weeks of financial results, almost every Japanese carmaker has been asked whether it has been approached by Apple to take part in its car efforts. The responses from Mazda, Subaru, Nissan, and Honda have varied from a “no comment” to indicating vague readiness to work with tech companies. 

Apple’s search in Japan seems genuine, with Nissan being briefly approached by the group in recent months. But, with clashing visions of branding strategy, the chances of a car-building partnership between the two appear low. 

For Japanese carmakers, Apple’s courtship is double-edged. If the US group picks a Japanese partner and its foray into cars is successful, the alliance could be a powerful force in the global shift towards zero-emission vehicles. On the other hand, a tie-up to build Apple-branded cars could downgrade Japanese carmakers to what some outraged executives say is a supplier of “moving boxes”. 

Japan’s storied electronics industry has faced a period of soul-searching after companies such as Sharp and Panasonic shifted focus from being the face of consumer products to a supplier of components to Apple and Tesla.

But shifting from a parts supplier to an assembler like Foxconn would take Japanese manufacturing to a whole new level. The psychological blow will be even bigger for the automotive industry, which accounts for 20 per cent of the country’s exports — a contribution to the economy that is even larger than that of German carmakers, according to research firm Euromonitor.

In some ways, Apple’s interest is a testimony of the quality of the country’s just-in-time manufacturing, which is well-known to Apple through its existing relationship with more than 900 suppliers in Japan.

From the US company’s perspective, the fragmentation of Japan’s auto industry is appealing since smaller players will not be able to make the enormous investments required for the shift to electric vehicles. Even before the race for battery-powered cars has seriously kicked off, the country’s eight carmakers combined are worth less than half of Tesla’s $750bn market value. 

For now, companies from Subaru, Suzuki Motor to Mazda have formed capital tie-ups with industry leader Toyota, but such loose alliances will not be a permanent solution for survival. Faced with an uncertain future, some may be attracted to Apple’s capital and branding strength that has the potential to take electric vehicles mainstream. 

In recent weeks, talk of Apple interest has lifted the shares of Nissan, its partner Mitsubishi Motors and Mazda. Investors have tended to focus on struggling companies that have strong technology and presence in the US but weaker balance sheets and extra plant capacity due to sluggish sales. However, the gains have been short-term.

Not surprisingly, Toyota, the world’s largest carmaker by the number of vehicles sold, did not face any questions on Apple during its financial presentation. 

Worldwide, carmakers are already working closely with tech companies, with Google sibling Waymo working with Jaguar, Volvo, Renault, and Nissan. Toyota has also partnered with Aurora, the Amazon-backed start-up, which recently acquired Uber’s autonomous driving unit.

Apple has remained consistently silent about its car ambitions and it is unclear what exact conditions it is seeking from potential partners. As Ashwani Gupta, Nissan’s chief operating officer, recently said, the existing tie-ups with tech companies have involved adapting their services to products of carmakers, but Apple may be looking to flip that relationship to adapting the vehicles to its technology and services.

However, delivering large volumes of high-quality vehicles is not easy for tech companies to replicate immediately. To turn a tie-up with Apple into an opportunity, Japanese carmakers would need to negotiate ruthlessly while they still have a strong hand.

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