To The Moon

Apple Killed Its Car Project. Tesla's Stock Barely Budged

The $Apple(AAPL)$   car is, apparently, no more. Shares of $Ford(F)$  , $General Motors(GM)$  , and Tesla barely reacted. There is good reason for that.

On Tuesday, Bloomberg reported that Apple was abandoning its long-gestating car project in favor of working more on generative AI. Bloomberg cited internal documents. Apple didn't respond to a request for comment about the report.

The threat of an Apple car has loomed large over the industry for a long time. It even has its own Wikipedia page outlining all the reports and rumors that have surfaced over the past eight-plus years. Over that span, there hasn't been much detail, let alone a prototype shown at an auto show.

The Apple car was ultimately supposed to morph into a self-driving electric vehicle -- a threat to Tesla, as well as anyone else that makes cars. By that logic, no Apple car should be good for the existing auto industry. The report even got a reaction from Tesla CEO Elon Musk. He tweeted a salute and cigarette on Tuesday afternoon.

$Tesla Motors(TSLA)$   stock, however, barely budged, remaining near the lows of the day and closing up about 0.2% at almost $200 a share. Ford and GM shares also closed higher, by 0.4% and nearly 1%, respectively.

The S&P 500 and $NASDAQ(.IXIC)$   rose 0.2% and 0.4%, respectively.

It might be a surprising reaction for some investors who think one of the world's most valuable companies -- that generates roughly as much free cash flow annually as the entire global auto industry -- getting into cars was a big deal.

While an Apple car might have been disruptive, it was always a low-probability event. The odds of an Apple car ever hitting roads were always very low -- they might have gone from 10% to 0% on Tuesday. What's more, if an Apple car ever were created it wouldn't have arrived on roads until late in the decade, at the earliest.

The reasons an Apple car was a low-probability event are myriad. For starters, automotive profit margins aren't very attractive. Competition is fierce. Most of the value is derived from the hardware portion of the car -- not the operating system. Building cars is also capital-intensive, and the process doesn't lend itself well to outsourced manufacturing.

Even potentially big events won't move stocks if they were unlikely to ever happen.

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