Analyst Throws Cold Water on Idea of Apple (AAPL) Producing Electric Vehicles (TSLA)
February 20, 2015 1:08 PM EST
Stifel is out with commentary on Tesla Motors (Nasdaq: TSLA) following recent speculation that Apple
(Nasdaq: AAPL) might be entering the electric vehicle (EV) market.
Analyst James Albertine doesn't think Apple is looking to manufacture entire vehicles, but is instead
looking to leverage its global brand presence and cash pile to improve its negotiating position with major
automakers. He further noted that Apple making headlines about entering the EV market is good for the
EV market, thus good for Tesla.
On Apple's plan, Albertine continues, The center console/infotainment head-unit of a vehicle is valuable
real estate, as we believe it can serve as a conduit for additional monetization strategies (much like iTunes
is to the iPhone/Pad). As OEMs are interested in
(a) providing a device agnostic unit (avoids alienating certain consumers, streamlines production), and
(b) controlling the flow of funds potentially related to seamless interaction to the online payment portal,
we believe this may complicate AAPL's strategy, for argument's sake, to control the center stack. AAPL's
global brand awareness and nearly $200 bn cash stockpile are two very powerful levers management
can utilize in swinging the negotiating leverage back in their direction.
On battery supply, Albertine observed, Critical to TSLA's ability to produce a mass-market vehicle is its
investment in the Gigafactory, which once constructed, will nearly double global battery cell production
capacity. AAPL clearly has strong production ties to Li-ion battery suppliers. According to our colleague,
Sven Eenmaa, Stifel's Industrial and Clean Technology Analyst, one could argue AAPL's strong ties to
battery producer LG Chem as AAPL intervened in a patent litigation between LG and Celgard (Polypore
(NYSE: PPO)). LG Chem is also reported to be building out Li-ion battery capacity, though they are also
expected to be supplying GM with respect to the Chevrolet Bolt expected in 2017 ($30k price point,
200-mile expected EV range), among other potential OEMs. Could AAPL leverage its relationship with
LG Chem and other battery suppliers (e.g. Panasonic, Samsung etc...) to further drive lower production
costs on a $/kWh basis, and perhaps do so faster than TSLA? We think clarity on this matter will be critical
near term before hypothesizing on a 2020 model year production vehicle, and will be one element of the
discussion worth watching closely.
Albertine has Tesla at Buy with a price target of $400.
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