Apple has hit the brakes on its plans to build an electric car, according to a report. Apple's move could materially improve the operating margins of AAPL stock, said a Morgan Stanley analyst.
Apple's exit from the electric vehicle race comes as consumer enthusiasm for electric cars wanes and competition intensifies as Chinese companies make a big market push.
"The reported cancellation of this project, if true, would show Apple is exhibiting some welcome cost discipline on longer-tailed future projects," said Morgan Stanley analyst Erik Woodring in a report.
As part of the electric car project, Apple was developing autonomous, self-driving technology.
Woodring added: "Apple's EV/AV efforts were too far behind well-funded competitors to represent a viable path towards commercialization and product differentiation."
Wedbush analyst Daniel Ives supported Apple's decision.
"Softer demand for EVs and competition fierce," he said in an email. "EVs a different landscape from a few years ago. Apple saw writing on the wall."
AAPL Stock: Shift To Chatbot Artificial Intelligence
Apple told employees of the decision to cancel the electric car project on Tuesday, according to a Bloomberg report. The iPhone maker reportedly had 2,000 employees working on the EV project, which started almost a decade ago.
"It does not get much more shocking than this," said Roger Lanctot, automotive analyst at TechInsights. "If you have more money than God and you decide not to pursue a particular concept it is a massive rejection of this value proposition."
Apple is shifting research and development resources to artificial intelligence.
Wedbush's Ives added: "On one hand this is a modest disappointment as the view within Cupertino was that with roughly 2,000 employees on this initiative that an Apple Car was still on the medium term horizon. On the other hand, the laser focus within Apple is ramping up and executing a broad AI strategy within the Apple ecosystem as it appears the vast majority of these engineers and developers will now focus their efforts on AI."
Apple trails Microsoft and Alphabet's Google in "chatbot" generative AI technology. Apple reportedly is developing its own AI training models.
Meanwhile, Google has pulled back on ambitious Moonshot projects as it prioritizes artificial intelligence.
On the stock market today, AAPL stock rose 0.8% to close at 182.63.
Tesla Struggles With Profit Margins
Tesla, Ford, General Motors and Rivian Automotive have scaled back on EV production.
Meanwhile, Tesla and China's BYD, the world's largest electric-vehicle makers, are battling in China.
Tesla is struggling to grow with profit margins that are now in line with traditional automakers. Apple may have been turned off by recent developments in the EV market.
Apple stock has retreated 5% in 2024. But AAPL stock has gained 23% over the past year.
