JP Morgan says Apple Car profits could 'dwarf the initial investment'

Apple's biggest bet could result in one of its biggest payoffs.

What you need to know

• Apple's investment of $3.6 billion for Apple Car could create returns of at least $70 billion.
• JP Morgan analyst Samik Chatterjee also wavers on if the car will be fully autonomous at launch.

As reported by AppleInsider, a new investor note from JP Morgan analyst Samik Chatterjee dives into the topic of Apple and Kia partnering to build Apple's electric car. The analyst says that profits from Apple getting into the auto industry could "dwarf the initial investment" that Apple is potentially making into the market. The company is rumored to be investing $3.6 billion in Kia to support the production of Apple Car.

Chatterjee notes that a $3.6 billion investment in Kia would one of the largest investments the company has ever made, comparing the event to the company's acquisition of Beats and Intel's modem business.

Chatterjee notes that the build plan of 100,000 vehicles a year ramping up to 400,000 over time would be less than 1% to 3% of the global luxury vehicle market. It would also clock in at between 1% and 4% of the battery electric vehicle (BEV) market. On the $3.6 billion number, Chatterjee says it would represent one of Apple's most significant investments. The investment eclipses even the $3 billion to acquire Beats and the $1 billion to buy Intel's modem business.

While a $3.6 billion investment would be one of Apple's largest, the payoff could be exponential. Chatterjee believes that Apple could make up to $100 billion in profit on hardware alone - not accounting for potential services. While the potential is there, the analyst is unsure where things will land and if Apple will choose to go semi or fully autonomous at launch.

However, Chatterjee says that the immaturity of current autonomous vehicle technologies could be a "limiting factor" on the launch timeline. Press reports indicate that Apple and Kia are aiming for a 2024 production run. Although the analyst casts doubt on that timeline, he adds that an easier path to production and market entry could be had by adopting only certain autonomous functions. That would result in a semi-autonomous vehicle, rather than a fully self-driving car.

Chatterjee's note from today goes a little against what the analyst talked about in January. In that investor note, the analyst seemed confident that Apple would "go big or go home" with Apple Car and release a fully autonomous vehicle in the second half of 2020. Now, Chatterjee is seemingly keeping the window open for Apple to roll out a semi-autonomous vehicle if full self-driving is not ready in time for its initial launch.

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