Cupertino-based tech giant Apple Inc. (NASDAQ:AAPL) is gearing up to test its self-driving technology on the roads, assuming recent media reports are accurate. Apparently, Apple will be testing this technology with its employee ferry vehicles. The effort, code-named PAIL for “Palo Alto to Infinite Loop” — Apple’s HQ — will shuttle AAPL employees to various offices around Silicon Valley. Reportedly, more than 5,000 employees use the company shuttle to travel to work.
Analysts have drawn parallels between Apple and Alphabet Inc’s (NASDAQ:GOOGL, NASDAQ:GOOG) self-driving technology efforts. In Dec 2016, the company spun off its self-driving car technology unit into a standalone company called Waymo under the Alphabet umbrella. Waymo does not plan to manufacture a self-driving car. It is working on the underlying technology.
Alphabet, then Google, took the automobile industry by storm in 2010 when it unveiled a fully operational driverless car that drove around its Silicon Valley headquarters. The driverless car project had become an integral part of Alphabet’s X labs, which was formed to test some of the most-advanced ideas of the company before being spun off.
Project Titan — Backdrop
For a while now, there has been tremendous speculation about Apple’s autonomous car-technology development efforts, which is apparently codenamed Project Titan. As usual, Apple refrained from commenting on the matter as it loves to maintain secrecy regarding projects it’s working on.
However, in June this year, CEO Tim Cook while talking to Bloomberg, stated that the company was indeed working on a self-driving car technology AI (artificial intelligence) project. As a matter of fact, he referred the project as the “mother of all AI projects.”
On being asked about whether Apple will eventually make its own car, Cook said “We’ll see where it takes us. We’re not really saying from a product point of view what we will do.”
Project Titan has been in the news since 2014–2015. Initially, it was reported that Apple was working on an “iCar”. Later on, the “iCar” rumors lost steam as the project was reportedly marred by conflicts and management troubles. Following this, Apple decided to prune some of the workforce assigned to the project. In January 2016, with the resignation of Steve Zadesky, things became more blurred. However, Bob Mansfield was reportedly brought on board at this point.
It was then speculated that Apple may not be designing a full-fledged car but an autonomous self-driving car technology platform.
Why Self Driving Cars Technology?
Self-driving car technology has gained immense importance in the past few years. Tech and auto behemoths like Apple, Alphabet, Ford Motor Company (NYSE:F), Tesla Inc (NASDAQ:TSLA), Volkswagen AG (OTCMKTS:VLKAY), Daimler AG (OTCMKTS:DDAIF), Uber and Lyft are directing resources to develop this technology.
Alphabet has reportedly made the greatest progress in developing self-driving technology with the unit being more than eight years in incubation and the technology powering more than 2 million self-driving miles.
Apple’s arch rival (in the smartphone space) and also a major supplier, Samsung Electronics, scooped up Harman International Industries Inc (NYSE:HAR) for $8 billion last year. Harman is a leading name in the automotive space.
iPhone remains the mainstay of Apple’s revenues. With iPhone 7 and 7 Plus performing relatively well and the excitement building up for iPhone 8 (dubbed as a super cycle), Apple can breathe easy for now.
However, stiff competition, especially from cheaper Chinese handsets like Oppo, Vivo and Xiaomi, is emerging as a big concern. Apple is under great pressure to introduce new products. Apple Pay, Apple Watch and Apple Music are some of the new ventures undertaken by the company. Also, revenues from App Store are growing.
Apple is working on developing technologies such as AI and augmented reality/ virtual reality (AR/VR), which are fast emerging as money-spinning business opportunities. The company’s interest in the autonomous car project is understandable as it is now being labeled as another profitable opportunity.
According to Boston Consulting Group estimates, the autonomous car market will be worth $42 billion by 2025 and $77 billion by 2035. Per Statista, the market for fully autonomous vehicles will grow to almost $6 billion while partially autonomous vehicles market will reach $36 billion by 2025.
However, analysts are sceptical about self-driving cars being feasible before 2020, at least. Also, stiff competition and stringent regulatory control will prove to be massive impediments to growth.
Zacks Rank and Stock Price Movement
Currently, Apple carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Over the past year, shares of Apple have registered growth of 48.1% compared with the industry’s gain of 46.6%.
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