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.
- There are growing rumours of Apple (AAPL) looking for partners to build the Apple Car
- Japanese and Korean carmakers have seen their stock pop in the last 24 hours on reports that Apple is in talks with some according to Nikkei / WSJ
- Focus stocks: Suzuki (6785.TSE) Mitsubishi (ticker 7211.TSE) and Nissan (ticker 7201.TSE) and Subaru (ticker 7270:JP)
- An Apple Car could be five-years away so it might be too soon to invest
- The auto-industry just had its worst year in decades but now EV sales are beginning to rise again offering a broader investment opportunity
What is happening with Apple Car?
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.
Why would Apple go to Japan?
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.
What are the risks for investment in Japan autos?
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.
Bigger picture of EV turnaround
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.