Apple’s iCar: How to Profit

by Jason Simpkins, Outsider Club Elon Musk made a lot of headlines when he said Tesla Motors (NASDAQ: TSLA) would be as big as Apple (NASDAQ: AAPL) in 10 years. But really, Apple is the company that’s chasing Tesla. That is, Apple hopes to have its own electric car on the market by 2020. There’s even speculation that Apple tried to buy Tesla last year. And a future tie-up between the two companies can’t be ruled out. The whole thing is a massive profit opportunity for investors, if they know where to look. And we’ve got a few ideas for you. But first, let’s take a closer look at the iCar. Project Titan According to Bloomberg, Apple has been secretly working on a car for years. J. Crew CEO and Apple board member Mickey Drexler suggested Steve Jobs got the ball rolling before he passed. “Steve’s dream before he died was to design an iCar,” he said. “It would have been probably 50% of the market. He never did design it.” Well, Apple has carried on, with Tim Cook green-lighting the iCar project last year. Code-named “Project Titan,” the goal is to release an electric car in five years. That puts Apple on a collision course with other automakers — General Motors and Tesla — as well as its Silicon Valley rival, Google (NASDAQ: GOOG). Indeed, Google has been working on an autonomous, self-driving car since 2010. Meanwhile, Tesla and GM each aim to release an electric car that costs less than $40,000 and is capable of travelling more than 200 miles on a single charge. Apple is right behind them. In fact, it allegedly tried to pull even by kicking the tires on a Tesla buyout. The San Francisco Chronicle broke the story last year, when it reported that Apple’s head of M&A met with Elon Musk — something Musk himself confirmed to Bloomberg. “We had conversations with Apple,” Musk said. “I can’t comment whether those revolved around an acquisition.” Sounds like it did. Apple is one of the few, and maybe the only company that could pull that off. Now the largest U.S. company ever, valued at $750 billion, Apple posted a record $18 billion profit last quarter. It generates $200 billion annual revenue and has $178 billion in cash just sitting around. Of course, with no sale imminent, the company has been content to simply poach Tesla’s employees. Musk says Apple has been offering his workers $250,000 signing bonuses and 60% salary increases to jump ship. Yet he made Apple’s task even easier, when he gave away patents on Tesla technology last summer. “Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology,” he said in a blog post. iCar Inside Charging Ahead In addition to snagging Tesla employees, Apple has also been poaching workers from Massachusetts-based battery maker A123 Systems LLC. Apple hired five people from A123, as well as other battery experts from LG Chem Ltd., Samsung Electronics, Panasonic Corp., Toshiba Corp., and Johnson Controls. Indeed, the cornerstone of Apple’s car will be the battery. You see, the problem with electric cars is that long-running batteries are incredibly expensive. Hence, the high cost of Tesla’s current crop of automobiles. A Tesla Model S starts at about $61,000. To combat that cost, Tesla is building a huge new mega-factory, a “Gigafactory” out in Nevada. Continue Reading>>>

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