Analysts and investors are quick to bash Apple (AAPL) when their iPhone sales slip, forgetting that the company has hundreds of billions in cash at its disposal. Morgan Stanley recently released an evaluation that indicated Apple boosted its R&D spending by $4.7 billion in the last three years, with the majority of the cash going into the company’s automotive endeavors.
Apple does not provide a complete breakdown of their R&D expenditures, but Morgan Stanley’s analyst, Katy Huberty, points to the company’s $1 billion investment in Didi Chuxing, a ride-hailing company out of China, as an indicator of the company’s ambitions.
The top 14 automakers in the world increased their R&D expenditures by $192 million in the same time period. This figure is comprised of additional R&D expenditures, not total expenditures in R&D.
If the analyst is correct, Apple has made a strong commitment to the automotive market, which could be a key revenue driver for the company.
The shared mobility market is valued at $2.6 trillion. Apple will not sell cars directly to consumers, according to current findings. The company is interested in using cars-as-a-service. The company’s expenditures in the shared mobility market, according to Huberty, would give the company a 16% share of the market.
The market has the potential to provide Apple with an additional $400 billion in revenue by 2030, according to Huberty’s findings. By comparison, the company earned $155 billion from iPhone sales in fiscal 2015.
Apple may be looking at the automotive market as a whole, but penetrating the market, even for a strong brand like Apple, would be difficult. iPhone sales account for 64% of Apple’s total revenue, and the car-as-a-service venture makes sense for the company as iPhone sales begin to wane.
Forecasts indicate that by 2035, 10% of all vehicles on the road will be driverless vehicles.
Anthony Young
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