Analysts say that the Apple Car will be 'formidable competition' to Tesla

Tesla Model X
Tesla Model X (Image credit: Tesla)

What you need to know

  • Morgan Stanley analysts believe Apple may be Tesla's biggest competition.
  • They point to potential services revenue as one of the reasons for Apple wanting to build a car.

Reported by 9to5Mac, a new investor note from analysts at Morgan Stanley says that an Apple Car would be "far more formidable competition than the established OEMs" to Tesla. Like any industry that Apple wades into, the analysts believe that Apple may be building its own self-driving car because it has identified an opportunity to "dramatically improve the user experience."

Morgan Stanley explains that Apple's interest in entering the electric car industry is likely its desire to "enhance the driving experience with vertical integration of hardware, software, and services." At the same time, the company also gets to enter a "large, fast-growing industry" where it can "dramatically improve the user experience."

The note goes on to suggest that the future of services in the car may end up outweighing the business opportunity of selling the physical car itself.

Apple possesses the key ingredients that we believe are critical to be successful in the future auto industry: Access to capital, an ability to attract and retain top talent, proven hardware design (from HMI to battery), and a rich ecosystem to leverage recurring subscription/service revenue. We believe the value of the services opportunity (MAU x ARPU) embedded in Internet-of-Cars (IoC) could potentially dwarf the auto business itself (units x price).

Apple Car

Apple Car (Image credit: The Verge)

The analysts also point to core technology investments that Apple has made that could be applicable to a potential car business.

Importantly, Apple has recently invested to bring five core technologies in-house, which can aid their car development — processors, battery, camera, sensors, and display. They believe there are other growth drivers like AR, payments, and health that are likely to roll out sooner, making a 4+ year time horizon appear realistic.

This new investor note happens to come on the same that Tesla CEO Elon Musk said he once attempted to discuss selling the company to Apple, but Tim Cook refused the meeting. A Reuters report from yesterday suggested that Apple, if they do move forward, may plan to begin producing a passenger vehicle as soon as 2024.

Joe Wituschek

Joe Wituschek is a Contributor at iMore. With over ten years in the technology industry, one of them being at Apple, Joe now covers the company for the website. In addition to covering breaking news, Joe also writes editorials and reviews for a range of products. He fell in love with Apple products when he got an iPod nano for Christmas almost twenty years ago. Despite being considered a "heavy" user, he has always preferred the consumer-focused products like the MacBook Air, iPad mini, and iPhone 13 mini. He will fight to the death to keep a mini iPhone in the lineup. In his free time, Joe enjoys video games, movies, photography, running, and basically everything outdoors.