Ray Tiernan, at Baron’s Tech Trader Daily, summarizes a new research note by Tony Sacconaghi at Bernstein. Sacconaghi gives five reasons for why Apple might build a car:
- It’s a trillion-dollar market;
- The company’s never shied from entering new markets;
- Tesla (TSLA) has already done a lot with very little capital;
- Apple’s always gotten a large share of profit even where others have low margins;
- Apple may be able to leverage rising auto production capability in China.
Sacconaghi goes on to say, however, that:
We are more optimistic about the possibility of a car than we were initially, but underscore that a lot can change and the timeframe is certainly not imminent.
All five reasons are somewhat valid, but also somewhat “business-y”, in the sort of way that Ballmer-era Microsoft pursued profit without a fundamental understanding of the products that would delight consumers. What’s lost is the notion that Apple doesn’t pursue “a market”. It builds a product if it thinks it can make it meaningfully better and satisfy a lot of people. The way Saconnaghi expresses it, it might as well be a numbers-based targeting exercise. (Many companies can “target”, few can execute.)
So on points like the “trillion-dollar market” aspect: I’d think of it as “A car is a high-value item for many, many people. It performs several important jobs for them, often daily. It also has has an affinity for a wide range of devices and services”, rather than expressing it in dollar terms… Internet routers might be a “trillion dollar business”, but that’s not (quite) as relevant here. On the “jobs” aspect I mentioned, I’m very grateful to Horace Dediu for his terrific thinking on this, and his in-depth, car-specific podcast on the topic (here).
On the “never shied away… new markets” aspect: Again, only if Apple believes they can move the product forward, meaningfully.
I’ll provide my perspective on this soon. If you didn’t catch one of my posts yesterday, I’m heads-down with research on basic market and competitor data (not car-specific).
Finally, if you didn’t expect that cars would be a relevant topic for this site (Mobile Forward)… I’m happy to exceed your expectations! “Mobile” covers a lot.
