Investors are underestimating the impact of Apple Car, say analysts

JP Morgan is jumping on the Apple Car...train.

What you need to know

• Three JP Morgan analysts weighed in on Apple Car today in an investor note.
• The analysts predict that Apple's electric vehicle will have a greater impact than investors realize.

As reported by AppleInsider, a number of analysts from investment bank JP Morgan are warning investors not to underestimate the effect that an Apple Car will have on the wider EV market. Lead analyst Katy Huberty, Asia Pacific Auto analyst Young Suk Shin, and Adam Jones of the firm's automotive team all spoke on the subject in a new investor note released on Thursday.

Lead analyst Katy Huberty points to other markets that Apple entered into like portable music players with the iPod and the cell phone market with the iPhone. Each product entered the market in a perfect position to drive growth until the industry hit a peak. The analyst also stresses the unique experience Apple could bring to the automotive market because of its tight control on hardware, software, and services.

"In other words, applying a market share figure to the current EV market forecast is likely to vastly underestimate the size of Apple's car business in the future," Huberty writes. She also maintains her position that Apple is entering the car market because of its combination of hardware, software, and services and the fact that it could create a better experience. "We believe Apple would approach the market with the same vertical integration it leverages in other markets," she says.

Asia Pacific Auto analyst Young Suk Shin said that if Apple's $3.6 billion investment in Kia for production of the Apple Car is true, the company is "effectively putting its own capital for capital expenditures, while Kia gets to manufacture."

"From that perspective, it can be seen as a better option, but we don't believe this changes the thesis that Kia ends up being an outsourcing firm. The Apple halo-effect/sentiment is overtaking outsourcing concerns for now," the analyst said.

Adam Jones, who currently predicts 31% EV penetration in the auto industry by 2030, believes that an Apple Car could have a major impact and accelerate that adoption.

"We believe contemplation of an Apple entry into the car market will expand investor thinking around the role of the network including the business model of recurring, software enabled platform revenue (installed base, attach rate, ARPU valued at SaaS multiples)," Jones writes. Like Huberty, Jones believes that an "Apple Car" could materially expand the broader electric vehicle market. Jones' current 31% EV penetration forecast for 2030 doesn't not consider the Apple self-driving car.

Yesterday, news broke that Apple and Kia were nearing a potential production deal to manufacture Apple's electric car at Kia's factory in the state of Georgia in the United States.

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