Recently, there has been much noise growing around Apple, as the company has announced issuing an electric car by 2020. While the information gets thousands of comments in techblogs and elsewhere, MarketWatch's columnist explains why e-car will not provide great revenue for the company, neither will it add up anything for Apple's investors.
The problems with Apple's e-car are rooted deeper than whether the company can or will build a successful electric car.
The greatest trick Silicon Valley ever pulled was convincing the world
that tangible profits and real value to shareholders don’t have to
exist, says Jeff Reeves.
Investors like a good story, and thus they simply buy whatever narrative is put in front of them. But that’s all the Apple car is or will ever be for the next several years — a good story. Here’s why serious investors should ignore this non-issue of an Apple car.
If compare with e-car maker Tesla, its revenue is 1% of Apple’s: Apple racked up $74.6 billion in revenue last quarter. In almost the same period, iconic electric car company Tesla Motors recorded $957 million in automotive sales. Thus, even if Apple could instantly sell as many cars as Tesla, those sales would constitute only 1.3% to total revenue next quarter.
More to that, Apple's "other products" are nearly 3x of Tesla's: “other products” line item, including things like Apple TV and Beats headphones, did almost $2.7 billion in total sales last quarter. So in order for the Apple Car to be more meaningful than these other gadgets, Apple would not only have to instantly become a peer with Tesla, it would have to nearly triple its auto revenues.
Despite rational reasons, the news keep bolstering Apple stocks, mostly because investors continue swallowing the nice story.
Recently, the Wall Street Journal revealed an in-depth report about “The Billion Dollar Startup Club” — a veritable who’s who among the most fashionable names in tech. However, MarketWatch claims that a lot of companies on that list
are far away from reaching profitability. Thus, before investing in sounds-good startups, better make sure you are buying something of substance, not just hype.
