Apple would only need to capture 2% of the mobility market with a possible Apple Car to equal the revenue that it currently gets from the iPhone, Morgan Stanley researchers note.
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.