Autonomy & Apple as a Service

  • The New York Times reported that Apple has signed a deal with Volkswagen to manufacture electric T6 Transporter vans outfitted with Apple’s autonomous sensor suite to be used as self-driving shuttles for employees.
  • This is significant because it plays into the fourth pillar of our Apple as a Service investment thesis: optionality.
  • Autonomy is one component of optionality that is currently not reflected in Apple’s share price along with AR, original content, and health.
  • Coming soon: We’re working on a sensitivity analysis to frame up Apple’s opportunity in autonomous mobility.

As Apple’s market cap approaches $1T, it begs the question: can shares move higher? At Loup Ventures we believe the Apple story is well positioned for future appreciation based on a long-term, sustainable investing paradigm. We call this new paradigm ‘Apple as a Service,’ which includes four pillars: stable iPhone, Services, returning cash to investors, and optionality (AR, content, health, and autonomy). Yesterday’s New York Times report on Apple’s deal with Volkswagen to build autonomous vehicles gives us some clarity regarding the optionality component to Apple as a Service. Investors are currently not giving Apple shares credit, given it’s nearly impossible to model. Eventually, that tide will change, and we expect shares of AAPL to benefit from this opportunity.

What has been said? The Times report detailed Apple’s plans to build a small network of autonomous shuttles for inter-campus employee transport, now with the manufacturing muscle of Volkswagen Group. The report also said this project, which is long overdue, is taking up nearly all the attention of Apple’s car team, so it is reasonable to assume that the project will progress quickly. The T6 Transporter’s frame, wheels, and chassis will remain intact, but Apple will no doubt make serious changes to interior and exterior design elements, along with adding computing power, sensors, and an electric drivetrain (unclear from who).

Why Apple has an interest in autonomy. We believe Apple’s endgame is a software and services platform enabling autonomous mobility fleets. The concept of an autonomous service is a departure from Apple’s current hardware and content services business. Specifically, delivering their experience through third party hardware is a strategy that Apple rarely employs. That said, we believe, given the complexities of manufacturing a car (just ask Tesla) and the size of the opportunity, it makes sense for Apple to partner their way to autonomy.

The fruit of the Volkswagen/Apple partnership will likely yield an Apple-like experience based on the Times’ report that Apple’s talks with other automakers were ended due to disagreements on who would own the customer experience and data. This leads us to believe that Apple will have a considerable amount of input and control over the design and experience of the end product.

Tim Cook has said, “We are focusing on autonomous systems…It’s a core technology that we view as very important…We sort of see it as the mother of all AI projects.” Today those efforts are manifested in an autonomous shuttle for internal employee transportation, but this undoubtedly serves as a controlled proving ground for broader ambitions.

Disclaimer: We actively write about the themes in which we invest: virtual reality, augmented reality, artificial intelligence, and robotics. From time to time, we will write about companies that are in our portfolio.  Content on this site including opinions on specific themes in technology, market estimates, and estimates and commentary regarding publicly traded or private companies is not intended for use in making investment decisions. We hold no obligation to update any of our projections. We express no warranties about any estimates or opinions we make.