Apple Car’s Cancellation is Good News for the Company

From OilPrice.com: According to a recent Bloomberg report, tech giant Apple Inc. (NASDAQ:AAPL) is scrapping plans to produce an actual automobile, and instead focusing on the technology to power cars — and that’s good news for the company and the stock.

Creating a self-driving car seems to be the top priority of tech and car companies around the world. Everyone from Toyota to Uber to Apple has been testing the capabilities of a car that does not need a driver to operate it. A new industry has been created that investors are watching as it will likely take off in the next few years.

More and more companies are in the race to have the first completely self-driven vehicle. Tesla has created an auto-pilot feature, and Uber has also gained momentum in the self-driving car space by purchasing Otto, and testing actual self-driving cars in Pittsburgh. Google is also in the mix of course, pouring millions of dollars into their testing projects. The biggest question mark in the nascent industry thus far though has been Apple.

Apple is facing declining iPhone sales and therefore has reportedly decided to try and create a car themselves. However, there have been setbacks with this initiative. Apple just laid off dozens of workers involved with the car project, and progress in their mission is looking slow and bleak. In a recent reboot of the project, it seems Apple is reportedly shifting away from designing the actual automobile, and focusing more attention to the base technology of the vehicle.

This shift could bring about an industry change where tech companies focus less on the car itself and more on the internal platform of the car and its operations system. With more emphasis being placed on batteries, and underlying technology, the future of transportation could eventually bring major changes for consumers. For the moment, all electric cars are a priority for auto-makers, so Apple’s move may take some pressure off the old-school Detroit trio. Ultimately it remains unclear if the self-driving car industry will have more in common with the technology industry, rather than the automobile space.

Traditional auto companies have responded to the threat from ride-sharing services by creating additional business lines and pushing for global operations. Ford Motor Company just purchased Chariot, a shuttle service, in the hopes of keeping their efforts in expanding to different transportation services. Ford has also announced it is creating “Ford GoBike”, a bike-sharing service for metro areas. At the Citi 2016 Global Technology Conference, General Motors Company released progress on their new product: the Chrevolet Bolt EV. The vehicle is an all-electric long-range car (200 miles on a single charge), priced below $30,000, and contains enhanced features like pedestrian alert notification, and Wi-Fi. Additionally, there is a small fleet of the electric cars in San Francisco testing self-driving capabilities. For any major motor company, actions like these are key. Otherwise, survival in producing traditional cars will prove difficult due to the competition from high-tech firms. Automakers now need to shift their view of themselves to more of a technology company, and not just a car manufacturer.

While there is no clear winner of the self-driving car race at this stage, investors definitely need to keep an eye on the space. It’s unclear at this stage if the future in autonomous vehicles will belong to tech companies or traditional automakers. Both groups are investing heavily to create an autonomous vehicle, and they are getting closer. Apple’s reboot shows that there may be more ways to make money in the space than investors have considered thus far.

Apple shares rose $0.63 (+0.58%) to $108.76 in premarket trading Wednesday. Year-to-date, AAPL has gained 2.73%, versus a 4.58% rise in the S&P 500 during the same period.

This article is brought to you courtesy of OilPrice.com.

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