March 3, 2021

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Apple is back trying electric cars

3 min read

The code name is Project Titan. But it take-two of a plan that was wrecked in 2014 and this time to succeed we would have to imagine scenarios that are hard to imagine.

Clearly reporters have skin in the game on this one and they really want it to be true: Apple is largest company by market capitalization in the world and if it decides to dust off the dream of building an electric self-driving car within four years, it is worth thinking about the possible feasibility.

The rumor first came from Reuters. The Cupertino company, which refused to comment, would be trying again by taking advantage of the sophisticated knowledge of the world of batteries needed for its iPhones to potentially start making electric cars. It is worth noting that the iPhone batteries are made by Foxconn in China, vs. directly by Apple, but that’s really going into the weeds.

But analysts are fairly surprised and puzzled and, to tell the truth, even some car manufacturers – for the last time the president of Toyota Akio Toyoda – start to say what many think but nobody dares to say: the electric car is expensive, much more than a car with an endothermic engine (one imagines cost parity in 2025 when the gigafactories in the production of batteries will be many more than the current ones) and above all it is not true – now – that the carbon footprint in the production of electric cars is zero. Quite the contrary.

And let’s compare electric car capabilities versus the benchmark of the auto industry: Germany’s Volkswagen, the world leader with its 11 million cars delivered worldwide. It is building a colossal switch to electric: 75 models by 2029. In the last ten years it has invested 180 billion for a profit margin of 7%. Apple in the same period has invested one hundred with margins four times higher: 28%. Volkswagen shares traded at an average of 6.3 times estimated profits over the past 10 years. Apple traded at a multiple of 16.

The automotive industry is “capital intensive” and mergers are inevitable, most recently that between FCA and PSA. The electronic devices sector much less so. Why should Apple shareholders applaud a strategy that would bring Cupertino into a low-margin sector? Certainly Tesla’s stock market exploit is striking, because Wall Street incorporates lifestyle (and regulatory) changes in advance by discounting them in market valuations. Declining battery costs and zero-emission government policy – primarily the EU – are forcing analysts to rethink trends.

But there is a geopolitical issue that cannot be ignored, and it is also clear to Cupertino: China has long been positioned upstream of the supply chain of raw materials needed to produce batteries: cobalt, nickel, lithium. It has the concession of almost 90% of the world’s deposits and also controls the know-how of the industrial process. Beijing has colonized the Congo, which is the largest producer of cobalt and won ten-year contracts for its exploitation in South America. So the all electric car roads lead to China…

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