Will Apple Inc. (AAPL) Remain The Smart Money’s Darling If It Goes Automotive?

Tesla Motors Inc (NASDAQ:TSLA) encountered numerous roadblocks while developing its first vehicle, the Roadster, followed by the release of the Model S, which also went through an arduous process. Apple can cover the development of the car with sales in its other segments, but again, with high prices and an increasing quality of products offered by competitors, if the economic situation worsens, Apple’s sales will most certainly plummet as consumers switch to cheaper alternatives.

The timing for the release of the car might also be a problem for Apple. The tech giant plans to release a car in the next four years, according to previous reports. However, we are already in the era where a fully-electric vehicle is already passing from being something innovative to something traditional, thanks to Elon Musk. Aside from Tesla, which has the best EV so far, BMW’s i8 and i3 models are also pretty good. Volkswagen, which is in the middle of the biggest emissions scandal, has also recently expressed its commitment to switch towards electrification in the near future. Apple Inc. (NASDAQ:AAPL) was the first with the iPhone and the iPad, but it will have to come up with something really cool in order to capture attention and disrupt the auto industry. A self-driving car will also not be considered an innovation by the time Apple completes the project, since Tesla has made a significant leap in this area and Alphabet Inc (NASDAQ:GOOGL) is also on the verge of releasing its own self-driving car to the mass market.

At the end, we should remember the words of short-seller Jim Chanos:

“[…] what Tesla had is innovation and a head start in this market that other companies are now catching up to. And they have to become a car manufacturer. And becoming a car manufacturer is a lot more difficult than becoming a high tech darling,”

The transition towards being a car manufacturer will be difficult and expensive for Apple and it’s not clear whether investors will be ready to support it. After all, smart money investors consider that Tesla Motors Inc (NASDAQ:TSLA) is overvalued at its current levels and has a long way to go before their sentiment is likely to change.

Disclosure: None