For the last few years, Apple has been investigating making autonomous cars, even though this is well outside its core competency of computers and their accessories.
The move leaves many observers scratching their heads, but a pair of analysts put together reasons why self-driving automobiles should be Apple’s next product category.
“We believe Apple needs big new TAMs (total addressable markets) to keep growing and we reiterate our expectation that it ultimately launches a self-driving car, irrespective of contrary news flow and even its own hesitations to date,” wrote Guggenheim analysts Robert Cihra and Amil Patel in a research note to investors.
They are basing this on more than just rumors. Details of the Apple car are kept under wraps, but CEO Tim Cook admitted years ago that autonomous vehicle technology is in development. This is allegedly under the code name Project Titan.
But the company reportedly limited the scope of the project after realizing how difficult it is. “Consensus is that Apple has pulled back on ambitions to launch a car and is now just focusing on autonomous tech to sell to others,” Cihra and Patel wrote this morning. However, they also pointed out that’s not what Apple does. It doesn’t develop then license technology to other companies. It makes consumer products.
Prepare for the iCar
The Guggenheim analysts spelled out three reasons why they see the iPhone maker getting into the auto business:
Not only do we see cars representing a market that is big enough to move Apple’s needle and that is undergoing technology disruption, but also one that fits well with its traditional M.O. that we characterize as:
a) target the high end of an already large but otherwise commoditized market by
b) designing a better product that creams off the industry’s highest-price/margin tops
c) drives a self-reinforcing high-end demographic and closed-loop ecosystem.
Cihra and Patel argue that the company has vast experience bringing together the components for very complicated systems. What works for a MacBook could extend to an electric Apple car.
“Given the market’s sheer size and parallels to Apple’s historical MO, we remain convinced that it will inevitably be drawn into launching its own car,” is how they summarize their position.
Apple car progress so far
The two analysts aren’t working in a vacuum. There’s solid evidence that Apple is actively pursuing Project Titan.
At last count, Apple has permits for 55 self-driving vehicles to be on the roads in California. A year ago, that number was just 3.
In addition, Apple recently lured Jaime Waydo away from Google’s autonomous car subsidiary, Waymo. She’s a systems engineer with long experience in this area.