Bernstein analysts led by A.M. Sacconaghi recently suggested that Apple Inc. (NASDAQ: AAPL) should make a car.
Sacconaghi noted that the “auto sector offers a uniquely large, addressable market for Apple, with over $1 Trillion in annual sales.”
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Apple’s ability to enter the market could be measured against Tesla Motors Inc (NASDAQ: TSLA).
With limited resources, Tesla “has been able to successfully compete against high end luxury offerings, suggesting that innovation and design are arguably as important as mature distribution channels, manufacturing competence and financial might,” according to Sacconaghi.
Innovation and design capabilities are major strengths for Apple and with its vast financial and engineering resources, it could successfully disrupt the auto market.
“Tesla's story mimics the initial challenges of Apple's iPhone in that Apple spent far less on R&D than industry incumbents yet was also able to develop a product that disrupted the industry and threatened the traditional players,” Sacconaghi concluded.
To illustrate the financial power Apple possesses, a “purported 400 people are said to be working on a car at Apple – if true, this number is more than the number of engineers at Tesla. At $250K in annual salary for each, the total cost to Apple would be ~$100M annually, or 0.05% of revenue and 0.15% of operating income,” according to the analysts.
Apple reports Q2 financial results on Monday following the market close.
Ahead of its earnings release, Apple Inc. closed at $130.29 Friday, up 0.48 percent.
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