Following recent news of Apple’s work on a self-driving car, Tesla’s shares have fallen and Morgan Stanley analysts say the iPhone maker poses a major threat to the US company.

In a new investment note , Morgan Stanley analysts say tech players such as Apple represent “much greater competition for Tesla than traditional carmakers.”

Morgan Stanley explains that Apple’s interest in entering the electric car industry is likely due to its desire to “improve the driving experience with the vertical integration of hardware, software and services.” At the same time, the company can also enter a “large, fast-growing industry” where it can “greatly improve the user experience”.

Apple has the key ingredients we believe are critical to success in the future automotive industry: access to capital, the ability to attract and retain top talent, proven hardware design (from HMI to battery), and a rich ecosystem. We believe the value of the service opportunity (MAU x ARPU) embedded in the Internet-of-Cars (IoC) could potentially dwarf the automotive business itself (unit x price).

Tesla shares fell rapidly following news of Apple’s willingness to enter the auto industry, and Morgan Stanley expects the company to represent significant competition for the current leading electric vehicle maker .

According to the note, the iPhone maker is also in a unique position to “bring forward new innovations in terms of autonomy and renewable technology”.

Reuters predicts that Apple Car production could start in 2024, but that delays linked to the pandemic “could push the start of production into 2025 or beyond”.

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