Apple Car would only need 2% of mobility market to equal iPhone revenue

While that’s certainly easier said than done, it’s an interesting observation when considering Apple’s chances of turning its automotive plans into a potential financial windfall for the company.

“Most cite Apple’s strong brand and an impressive balance sheet [as a reason to build an Apple Car],” the analysts — which consisted of Apple analyst Katy Huberty and Chinese and European battery experts — said during an investor conference call. “But we see several other reasons why it is quite likely that Apple does a car. One is the size of the market. Smartphones are a $500 billion annual [total addressable market]. Apple has about one-third of this market. The mobility market is $10 trillion. So Apple would only need a 2% share of this market to be the size of their iPhone business.”

The analysts went on to note that, while Apple is new to this market, a “noticeable percentage” of Apple revenue each year comes from products and services that didn’t exist 3-5 years before. This is important to consider when think about the market opportunity of a new area of Apple interest like cars, health or AR.

What about Apple Car margins?

Another interesting point in the conversation was a response to the (frequently voiced) concern that the automotive industry has smaller margins than smartphones, and that this would make it unappealing. The Morgan Stanley analysts noted that:

“When Apple entered the PC, handset and wearables market, the margins of competitors were [also] razor thin. And through vertical integration, as well as driving significant scale on a small number of SKUs, Apple has been able to enter industries with low profitability and earn very strong margins. I don’t see why autos would be any different … The auto market looks very similar to the industry structure and profitability of many other markets Apple has entered in the past.”

The analysts concluded by saying that a “timeline of 4 to 5 years out makes sense” for an Apple Car — but a couple of extra years are possible as well.

Reliable Apple analyst Ming-Chi Kuo recently suggested that a possible self-driving vehicle from Apple could land in 2025. However, he said he would not be surprised if it didn’t happen before 2028. Apple has been working on a possible Apple Car since at least 2014.

What do you think are Apple’s chances of being successful with an Apple Car? Let us know your thoughts in the comments below.