Apple has stopped making cars! Wall Street applauds: Making cars is not profitable, not worthy of Apple.

On February 28th, it was reported by the media that Wall Street analysts generally believe that Apple's decision to abandon car manufacturing has caused a stir in the industry, but they consider it a wise and decisive move.

According to analysts, including Sam Fiorani from AutoForecast Solutions, Apple's entry into the electric car market faces five major "dilemmas":

1. Slowing demand for electric cars and intensified competition in the industry: Global electric vehicle sales growth is expected to be the slowest since 2019, according to Bloomberg data. The weakening demand for electric cars is intensifying competition among major car manufacturers. Even industry leader Tesla is not immune and has been forced to adopt price reduction strategies. Traditional car manufacturers like Ford Motor and General Motors have also expressed concerns about the weakening demand for electric cars in their recent financial reports.

Moreover, the electric car market is becoming saturated, especially in the high-end market where many mature and emerging competitors have already established their market positions and brand awareness, such as Tesla, Rivian, and Lucid.

1. Significant risks: Car manufacturing is a capital-intensive, technologically complex, and fiercely competitive industry. Building cars from scratch entails huge research and development investments, establishing production facilities, and integrating supply chains. In a mature market that is not very friendly to new entrants, such investments are not only huge but also high-risk. For Apple, even with technological and financial support, the returns from car manufacturing are not sufficient to offset the risks and challenges involved.

2. Apple's outsourcing habit: Apple is accustomed to outsourcing the manufacturing of most products to other companies, making it unlikely to assemble cars on its own. However, the stringent safety, reliability, and performance standards of cars require more direct manufacturing and quality control, which may limit Apple's operational model.

3. Establishing a new marketing model: Apple needs to establish a completely different sales and service network to support car sales, which may include dealer networks, repair services, and customer support. This is a relatively new and complex challenge compared to its existing product line, and may not be as directly effective in the automotive field as it is in the consumer electronics sector.

4. Limitations of data advantage: While Apple has gained a wealth of data through the widespread use of the iPhone, helping it gain an advantage in other business areas, in the automotive industry, manufacturers typically rely on data generated by the vehicles themselves to improve products and services. Therefore, Apple may not have a significant advantage in data utilization in the automotive sector. According to media reports, Apple tends to be cautious when exploring new product areas. In the past, Apple has tried to enter product areas beyond its core business. If these attempts indicate limited revenue potential in the new areas, Apple will decisively abandon these plans and focus its resources and energy on more profitable areas.

For example, there were rumors that Apple would manufacture its own high-end smart TV. However, as the profit margins in the LCD and LED TV market declined, Apple withdrew these efforts and chose to focus on manufacturing external displays.

Taking all these factors into consideration, Apple's executives have decided to discontinue investing in the car project. This move has gained support from Wall Street analysts. Morgan Stanley analyst Adam Jonas stated in a report to investors on Wednesday morning:

"If Apple's decision to cancel the car project is true, this signifies:

1. Apple is concentrating its attention on areas it deems more important;
2. By canceling a project that may require substantial investment and has uncertain success, Apple demonstrates its emphasis on cost control and financial discipline."

Moving away from the car project, Apple is venturing into AI.

Looking ahead, analysts including Fiorani and Jonas point out two areas Apple can focus on:

1. A better strategy for Apple to enter the automotive industry is to focus on software development rather than directly manufacturing cars. This strategy allows Apple to leverage its strengths in software and interface design to create value for car users. Apple CarPlay integrates iPhone functions and apps into a vehicle's infotainment system. Through Apple's car software CarPlay, Apple can increase value to the automotive industry by focusing on its core competencies while enjoying higher and more stable profit margins. Fiorani stated, "By participating in the development of these advanced software systems, Apple may gain greater economic benefits than directly manufacturing cars."

2. Shifting focus from car manufacturing to high-growth areas like generative AI. Analysts believe that despite the costs associated with canceling the car project, Apple's decision to realign its focus towards generative AI and other high-growth areas based on market and internal advantages is in line with the company's long-term interests. Jonas mentioned, "Compared to the car project, generative AI can enhance Apple's moat."