How Apple making cars possibly effect Tesla

It could well be the clash of two mega giants as Apple reportedly plans to roll out its first-ever passenger vehicle to take on the might of Tesla.App
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People in the know say while Apple is working overtime on its car, pandemic-related factors may push production to 2025 or beyond. (REUTERS)
People in the know say while Apple is working overtime on its car, pandemic-related factors may push production to 2025 or beyond.

Apple Inc.’s reported foray into making its own self-driving, electric cars creates “a new Tesla bear case," according to analysts at Morgan Stanley.

Tesla Inc. shares fell as much as 5.5% Tuesday, adding to their 6.5% drop on Monday, after Reuters reported that Apple is moving forward with autonomous technology and aims to produce a passenger vehicle by 2024 that could include its own battery design. Tesla’s two-day slump also follows its admission into the benchmark S&P 500 Index before the open on Monday.

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“Apple’s potential entry into autos represents perhaps the most credible/formidable bear case for Tesla’s stock that investors have had to consider for some time," analysts led by Adam Jonas wrote in a note Tuesday. Jonas gives Tesla a buy-equivalent rating with a $540 price target, about 15% below where it’s trading currently.

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The iPhone maker getting into the vehicle market could also pose a threat to legacy automakers like General Motors Co. and Ford Motor Co., which will have a hard time competing if “Apple were to really throw its weight around," Jonas said.

For suppliers of electric, autonomous and connected-car systems, meanwhile, Apple’s plans “could very likely mean a significant inflection in the speed and magnitude of a wide range of investments," he added. Lidar suppliers include Luminar Technologies Inc. and Velodyne Lidar Inc. rallied Monday after the report and continued to rise Tuesday.

First Published Date: 23 Dec 2020, 09:04 AM IST
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