The Rumored Apple Car Initiative: 6 Things Investors Must Know
From Google Inc (NASDAQ: GOOG) to Tesla Motors Inc (NASDAQ: TSLA) and every automaker in between, Apple's car -- or lack thereof -- could send shockwaves through the industry. Before getting carried away, though, there are six things every investor should know.
1. This Could Be Another Television Set
Remember Apple's television set: The illusive, over-hyped piece of hardware that (up to this point) did not actually exist? While it is wholly possible that Apple researched the idea behind the scenes, the lack of any concrete evidence proves that the media took this one too far.
The same may be true for Apple's car.
"I think Apple is smart enough to know that even if they look into it and decide not to go because they realize it's not a smart move for them, investors are going to be a lot happier with that decision than to go and make a mistake and invest a lot of money unwisely," Karl Brauer, senior analyst at Kelley Blue Book, told Benzinga.
"So they're going to spend a little money doing some exploration [first]. That's wiser than not doing the exploration and jumping in with both feet and committing without having full knowledge and awareness of what they're committing to."
2. There Will Be A Learning Curve
Apple won't be able to enter the auto industry without doing its homework.
"There'll be a learning curve, like there is anytime you go in a new industry," said Brauer. "There's been a lot of people who have tried the car game and failed. If it was a company that didn't have a lot of money and a lot of past success in doing new things -- like Apple -- I would write it off as another unwise move and a likely failure."
Brauer said the thing that sets Apple apart is "that they're doing everything that they should be doing.
"They're pulling existing engineers and designers from companies like Tesla," he said. "They're getting a lot of intelligence before they ever dump major money into it. They're kind of ramping up slowly."
Brauer also noted that Apple has a history of entering new markets (music players, phones and watches) and generally succeeds. "They've broken enough past rules -- where breaking the rules meant success instead of failure -- that I could see that happening again if they try to go after the car market," he added.
3. The Industry Is About More Than Selling Cars
Apple could invest billions in R&D and enter the auto industry without manufacturing a single automobile.
"Don't forget: they might just be wanting to make sure they have a full grasp of how the car is going to evolve over the next 10 years," said Brauer. "There's some very basic things we know are going to happen undeniably. The ramp up of the connected car technology, the ramp up of autonomous driving."
Those are technologically-oriented evolutions, so Apple (a technology company) "could very well simply be hiring enough people to give them full confidence as to exactly how this is going to all go down.
"And then know how they're going to position themselves and their technology services to take the most advantage of it, but not necessarily build cars of their own," Brauer explained.
4. Those Vans Don't Prove Anything
No one knows exactly why Apple is thought to be driving around in modified mini-vans. Are those cameras on top or some other technology? Whatever it is, Brauer doesn't think it necessarily proves Apple is building a car.
"I think it could be more [about] testing and internal validation of things that they think are going to evolve in the industry, that they want to be positioned for, or maybe services they want to personally offer," said Brauer.
"They could be utilizing those vans to explore their own technological capabilities, and then they're going to come out in two weeks or two months or two years and say, 'Okay, Apple is now ready to provide this service to all the existing car makers' versus building their own cars."
5. Don't Expect A Self-Driving iCar Right Away
If Apple decides to produce, manufacture and sell an automobile, the company will likely require drivers to actually drive the vehicle.
"They would never, at this point, create a car from scratch without the autonomous driving long-term thinking," said Brauer. "But they might start out with one that can be driven by humans because that's the near-term reality."
If Apple produced an autonomous vehicle today, the company would still have the legal and liability issues that Google and other companies face. Apple would also have to set up an infrastructure to facilitate an autonomous environment, which is not yet in place.
"The car could be ready, but the world may not be ready for it if they want autonomous right off the bat," said Brauer.
He added that Apple could release an upgradeable car that becomes more autonomous over time.
6. Where To Buy? No One Knows
Finally, Apple's automobile plans could be quashed by the same issues that plague Tesla. "If they try to do anything that's not following franchise laws, they'll face all the same obstacles that Tesla has been mired in for the past several years," Brauer theorized.
>"That's something else they will have to address. Even Apple can't ignore the existing network of franchise laws that keeps the National Auto Dealers Association pretty much in control of how cars are retailed in this country."
Thus, if Apple wants to bring cars to retail, Brauer said the company will "have to put all their political and financial weight behind changing the system, which would take a lot of money [and] might not work.
"The dealers have a lot of money to fight back with," Brauer added. Alternatively, Apple could "adopt the official franchise system that dealers already use."
Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.
Image credit: Cryptic C62, Wikimedia
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