EVs are a cornerstone of sustainability. Most historic automakers, including Ford, GM, and Volkswagen, have tested battery-powered cars.
Besides automakers, some significant IT businesses are interested in EVs. Apple (NASDAQ: AAPL) has apparently been developing an EV for years. This makes sense in many ways. Apple is known for consumer electronics innovation. This week, Apple said it is discontinuing Project Titan, its in-house EV project.
Technology analyst Gene Munster of Deepwater Asset Management is well-regarded on Wall Street. Munster proposed an intriguing suggestion while Project Titan seemed to have died out in tech. Munster suggested Apple buy Rivian on CNBC Tuesday. This is intriguing for several reasons.
Rivian has had some success in the competitive EV market. However, the corporation appears to be in a "one step forward, two steps back" cycle. Thus, new issues occur whenever it appears to be starting afresh.
Apple, the consumer electronics giant, is struggling. The company's income has steadily declined as consumers wait longer to upgrade iPhones, iPads, laptops, and wearables. Apple's Services business is growing, but hardware sales are low. Apple needs more growth drivers.
Across the equation is Rivian. 57,232 automobiles were produced in 2023, up 135% year over year. This is optimistic, but it's not easy from here. In the fourth-quarter earnings call, management stunned investors by predicting flat production in 2024.
Apple and Rivian face a similar issue: Luxury consumer goods demand is low in an economy with higher interest rates than consumers have seen in years and rising inflation. Apple and Rivian are desperate to develop and thrill investors. Are they a good fit?
A deal with Apple might change Rivian. Apple's financing and larger crew of engineers and technologists would be available to it immediately. Apple would enter the EV market and add another product to its ecosystem.
Apple has around $73 billion in cash and equivalents. Rivian is worth about $11 billion.Apple could buy Rivian in an all-cash deal at a premium and still have plenty of cash. A closer look at Apple's purchase history casts doubt on such a merger. Apple's 2014 $3 billion purchase of Beats Electronics was its largest. Apple spent $7.4 billion on its 10 largest acquisitions.
Data shows Apple rarely makes big-ticket deals. Its acquisition of Rivian is intriguing, and it may make strategic sense for both companies, but it's doubtful. Big purchases aren't in Apple's DNA, and I don't see that changing soon.
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