Can Apple take a big bite out of the auto industry?

Apple has the cash flow to swamp the auto industry if it dives into electric car business

Here’s how Apple could blow away the auto industry — by going electric and outspending everyone else.

That’s the assessment of Adam Jonas, auto industry analyst at Morgan Stanley research.

“If the world’s most valuable company were to design and engineer a car, we are convinced it would be 100% a battery electric propulsion system,” Jonas wrote in a report to investors Tuesday.

The tech giant has reportedly created a team of employees to explore an Apple-branded electric car. While Apple has yet to comment, hints of its work surfaced in a lawsuit filed against Apple earlier this year by electric car battery maker A123 Systems.

The company, which makes batteries for BMW, Daimler and Tata, accused Apple of poaching its employees.

Jonas noted that Apple generates billions of dollars in profits — $13 billion and $18 billion in its last two quarters, respectively — and has scads of cash available for investment in a capital-intensive project such as car design.

Just one quarter’s worth of free cash flow at Apple, approximately $15 billion, is equal to nearly four months of the combined research and development spending of all of the world’s automakers, he said.

Any vehicle Apple designed would be electric because, Jonas said, that’s the long-term future of the industry as autonomous vehicles hit the roads, speeding a transition from individual car ownership to shared transportation, he said.

“A fully autonomous car is meant to be shared, not owned,” Jonas said. “A fully autonomous car — as in no steering wheel, no pedals — can work 24 hours a day."

The problem with electric vehicles now, Jonas wrote, is that they are too expensive to sit all day in one owner's garage. But the economics change once you start running an electric car 10 to 12 hours a day though vehicle-sharing. A company could run a fleet of electric cars and charge users a subscription, for instance.

Centralized charging bays could reduce the disadvantage of long charging times, a major obstacle to electric car adoption today.

This all means that California electric car maker Tesla Motors may have to change its business model, he said. “For Tesla, the end-game is to offer mobility services as an Uber-like ride-sharing app,” Jonas said.

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