The Apple Car is a transformational idea for the auto industry. Who are potential partners for the undertaking? A Japanese carmaker could be the biggest.
Shares of Japanese automakers have popped higher after reports from the Nikkei newspaper that Apple is looking for a partner to produce the Apple car.
Two central questions are- why wouldn’t Apple make its own cars like Tesla (TSLA)? And why wouldn’t Apple partner with a US car company like Ford or GM?
The answers probably lie with how Apple goes about building its iPhones. All the production is in Asia because of the cost-savings and increasingly it is where the greatest demand for new cars comes from. Given the geopolitical risk of partnering with a Chinese company, it would make sense for apple to look at the other Asian industrial powerhouses - Japan and Korea.
Apple would likely also want to target a relatively smaller carmaker, which would be more open to sharing its brand with Apple than the big carmakers like VW, GM and Toyota.
Apple reportedly stopped plans for a car years ago and has restarted them now that the demand for electric vehicles is clear and rising. Apple are not normally first to market but once they do enter, they enter with often game-changing quality and use the power of brand loyalty to take a sizeable market share.
The point being, seeing an Apple Car on the road could be 5 years away and too soon for any carmakers to gain any advantage from a partnership. This of course depends on the terms and in what manner Apple would compensate the Carmaker for its cooperation, technical expertise.
Even if Apple doesn’t pick a carmaker from Japan or Korea for its partner, the companies are coming out of a prolonged slump after Dieselgate and potentially on the cusp of a new era of rising electric vehicle demand. Expectations for industry growth recovery can limit the potential downside to the stocks.
The chart above demonstrates that story on EVs and the Apple Car has already started to run - but even in the case of Suzuki (6785) that has had the biggest run up - it is still down 1% in a 3-year period. The other carmakers are down 40-60% from their highs of 3-years ago.
Japan looks like a strong contender for where Apple will find its Apple Car partner. Japanese auto stocks are down over 3-years - while the Nikkei has reached multi-year highs this year. Apple’s car project is still a long way off, it may not pick a carmaker in Japan as partner.