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Apple (NASDAQ:AAPL) famously disrupted the entire mobile phone industry back in the 2000s, ushering in the age of smartphones. Now, it seems that the iconic iPhone manufacturer has set its sights on cornering the next big gold rush – the quest for fully ADAS-capable consumer and commercial electric vehicles – by launching an autonomous EV by 2024.
As per the reporting by Reuters yesterday, Apple has revived its dormant Project Titan, which entails the launch of a consumer electric vehicle equipped with self-driving technology. While details are scarce, Apple plans to disrupt this increasingly crowded sphere – populated by the likes of Tesla (NASDAQ:TSLA), Google-backed Waymo (NASDAQ:GOOGL), and Amazon-backed Rivian and Zoox (NASDAQ:AMZN) – by focusing on cheaper batteries and longer range. As far as the battery is concerned, Apple is purportedly focusing on a monocell design that efficiently utilizes the space within a battery pack by eliminating individual pouches and modules. As is the case with its iPhones, Apple is likely to outsource the manufacturing of key components as well as the assembly of the vehicle to an OEM.
This brings us to the crux of the matter. Apple is entering the autonomous driving sphere very late in the development cycle. However, the richest company on the planet has plenty of resources to achieve what may prove impossible for any other company. Of course, given the size of this gambit and the ensuing disruption, winners and losers will abound. Let’s take a look at who would benefit the most and who has a lot to lose from this move.
Lidar Manufacturers May Emerge as Beneficiaries While Tesla May End up Being the Most High-Profile Loser From This Move by Apple
Tesla has famously eschewed lidar sensors in favor of data harvesting and machine learning to refine its Autopilot algorithms. With millions of connected cars on the road, the approach has proved effective for Tesla. Nonetheless, a similar strategy would not work for Apple. Instead, the iPhone manufacturer may have to utilize an integrated approach akin to the one currently being utilized by Intel’s (NASDAQ:INTC) Mobileye. As a refresher, Mobileye’s TRUE REDUNDANCY™ solution is an integrated system that leverages data streams from 360-surround view cameras, lidar, and radar in order to deliver enhanced safety for autonomous driving. As is Apple’s customary approach, the company is likely to source these crucial lidar – and possibly radar – sensors from an OEM. While a lot may change between now and 2024, Velodyne (NASDAQ:VLDR) or Luminar (NASDAQ:LAZR) may well emerge as the ultimate beneficiary from Apple’s autonomous EV gambit. Readers should note though that the lidar sphere continues to become increasingly crowded, with new companies tapping the equity markets in droves to raise fresh capital. As an illustration, Innoviz just became the latest lidar manufacturer to announce its intentions to go public by merging with the SPAC Collective Growth (NASDAQ:CGRO). Additionally, Aeva is also slated to go public in Q1 2021 by merging with the SPAC InterPrivate Acquisition (NYSE:IPV).
Of course, the biggest beneficiary of Apple’s move would be the OEM that ends up assembling the iCar (dubbed as such due to the lack of a proper naming convention available from Apple at this time). Bear in mind that the company has held talks with Magna International on this subject, but nothing ever came out of those negotiations. Magna is already slated to assemble Fisker’s Ocean electric SUV, which may lend it an added sheen of attractiveness. Nonetheless, as the situation is in flux, no definitive conclusion regarding the identity of the OEM can be drawn at this time.
The biggest loser from this gambit would, of course, be Tesla. Elon Musk’s EV company has made no attempt at hiding its ambitions to corner the self-driving sphere. Should Apple decide to direct its considerable resources at achieving supremacy in the autonomous mobility sector, historical precedence suggests that it would be successful. Bear in mind that Apple had over $38 billion in cash and cash equivalents as of the 26th of September 2020. Against this backdrop, as the current leader in the EV market, Tesla has much more to lose.
Of course, Tesla’s stratospheric valuation is now also at risk, given Apple’s newfound resolve to gun for the EV giant’s crown. After all, with year-to-date gains of over 600 percent, the stock has been one of the best-performing assets in 2020. However, in the backdrop of the evolving mobility landscape, investors should re-calibrate their outlook and critically examine whether Tesla’s current valuation makes sense.
Battery Tech – the Most Significant Uncertainty in This Mix
It is no secret that battery tech is rapidly evolving. In the lithium-ion sphere, we now have Microvast, offering battery systems that can be fully charged at the 6C rate, corresponding to a 100 percent charge in 10 minutes. Moreover, the solid-state battery manufacturer, QuantumScape (NYSE:QS), recently made waves when it revealed that its batteries could charge to 80 percent capacity in 15 minutes. Similarly, Toyota announced earlier in December that its solid-state batteries could charge to full capacity in 10 minutes. While QuantumScape’s commercial product is still some distance away from a formal launch, Toyota expects to bring its product to the market in 2021. While it appears that Apple is currently opting for lithium-ion or lithium-iron-phosphate (LFP) batteries, should solid-state ones start to outperform by 2024, it stands to reason that the iPhone manufacturer would look to incorporate this tech in its EVs.