Apple Bails on Its Electric Car, So What’s That Mean for Tesla Investors?

Apple stock (NASDAQ:AAPL) is out, but does that mean Tesla stock (NASDAQ:TSLA) is in? Let’s take a dive to see what investors should do.

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The interest in electric vehicles (EV) seems to be waning, and Apple (NASDAQ:AAPL) has become the latest casualty. Apple announced the company would be ending its Project Titan, and this could have a knock on effect on other EV stocks and, in particular, Tesla (NASDAQ:TSLA).

What happened

Apple announced the company would be discontinuing its EV project, Project Titan, earlier this year. The tech stock would then use the resources towards investing in talent, as well as initiatives deemed more important for the immediate future.

It’s clear that would include advancements with Artificial Intelligence (AI), specifically generative AI projects. In fact, the company announced this week that it would be partnering with Alphabet to include its Gemini AI in iPhones.

Analysts saw the initiatives as a strong financial move, prioritizing investments with the potential for higher returns. It also allows the company to return to its core strengths in consumer electronics and software. This is where resources would be better spent, even though it means taking a wash on the last decade of investment.

Challenges in EV stocks continues

While analysts liked the move by Apple stock, it does raise some questions as to companies already invested in EVs. The broader EV industry is facing headwinds due to rising interest rates that are impacting consumer spending. This could make it a difficult time for a new company to come on the scene.

In fact, it has already been hard for already established companies. EVs are more expensive than the comparable internal combustion engine (ICE) vehicles, and that comes down to battery technology. Plus, investors would have to wait for more charging infrastructure, which is still in development. And the speed and time in which it takes to charge an EV remains far longer as well. As for a company like Tesla, there are even more issues to contend with.

Where Tesla stock lies

When investors think of EV stocks, it’s of course likely that Tesla stock springs to mind first. And there are both positives and negatives to this news coming from Apple. While there is reduced competition with Apple out of the picture, Tesla still has a lot of pressure on hand. This is especially from China, the country with the most production and consumption of EVs.

That being said, Tesla stock does have the advantage when it comes to innovation in this area. The company could differentiate itself by developing faster charging solutions and longer-ranging batteries to attract customers.

But there is only so much it can do. For now, the company’s biggest win would be to find a way to bring down the cost per vehicle. Not just for the consumer – though that’s necessary – but of course for production as well. If its able to improve margins in this respect, then we could see Tesla stock soar upwards once more.

Bottom line

It’s a mixed bag of results when it comes to Apple’s decision and Tesla as a fallout. Overall, it’s a good thing that Apple is focusing on where it’s had success in the past. Especially with more competition among smartphones and tablets.

As for Tesla stock, more innovation is needed before I consider buying this stock. While it’s likely to come eventually, and EV stocks will certainly be a part of our future, it’s not clear when that future might arrive.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Alphabet, Apple, and Tesla. The Motley Fool has a disclosure policy.

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