4 Reasons the Car is Crucial to Apple

Apple Inc. AAPL has been mum on its plans to get into the auto business amid accusations that the company is poaching employees from Tesla Motors Inc TSLA, A123, Mercedes Benz and other electric car manufacturers. Morgan Stanley Research released a note today that outlines four reasons the car is crucial to Apple’s future. In short, this is a move out of necessity, rather than a passion the company is indulging.

Reason 1: The total addressable market is huge. Whether measured as the total value of all the miles driven or the value of all the cars on the road, Morgan Stanley pegged the TAM at $10 trillion. For new car sales only, $1.6 trillion are sold annually. Smartphones and PCs TAM is less than half of new car sales, combined.

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Reason 2: Captive customers, particularly in autonomous cars. The average driver spends an hour in the car each day, driving between 30 and 50 miles. When cars go autonomous, that hour will become free for drivers to use in other ways. Morgan Stanley expects that “Apple will want unfettered access to this vast and captive audience.”

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Reason 3: Apple can earn more share of customers’ time pie. Today, Apple “reaches a quarter of its users’ time.” Becoming a larger player in the car means that Apple can break into a larger portion of customers’ time.

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Reason 4: The car will be the “4th screen.” Users have four screens now to consume content – PCs, phones, TVs and the car. Apple’s Carplay is already transitioning the smartphone ecosystem into the car, which can be a foothold to the Apple Car adoption.