Shares of Apple (AAPL) are in the spotlight on Tuesday following a report yesterday afternoon from Reuters claiming that the company is moving forward with its self-driving car technology and is aiming at 2024 to launch a passenger vehicle that would include its own battery technology. Commenting on the news report, Morgan Stanley analyst Adam Jonas said that Apple could present "far more formidable competition" for Tesla (TSLA). While Citi analyst Jim Suva acknowledged that the iPhone maker would be Tesla's most director competitor, the analyst said he is "very skeptical" that Apple will actually produce a car.

SELF-DRIVING CAR PLANS: Apple is moving forward with self-driving car technology and is targeting 2024 to produce a passenger vehicle that could include its own breakthrough battery technology, Reuters' Stephen Nellis, Norihiko Shirouzu, and Paul Lienert reported, citing people familiar with the matter. The iPhone maker’s automotive efforts, known as "Project Titan," have proceeded unevenly since 2014 when it first started to design its own vehicle from scratch, the authors noted. Doug Field, an Apple veteran who had worked at Tesla, returned to oversee the project in 2018 and laid off 190 people from the team in 2019, the publication added. According to Reuters, central to Apple’s strategy is a new battery design that could “radically” reduce the cost of batteries and increase the vehicle’s range.

'FAR MORE FORMIDABLE' COMPETITION TO TESLA: After the Reuters report citing undisclosed sources said Apple is targeting production of a passenger vehicle as soon as 2024, Morgan Stanley analyst Adam Jonas noted that it has "long been the auto and tech hardware teams' collective working assumption" that Apple will design and engineer a car one day. The firm's teams have also "long felt" that tech players like Apple "represent far more formidable competition" potentially for Tesla than the legacy automakers, Jonas said.

Monday's story on Apple and its "Project Titan," after a period when such stories have remained "relatively dormant," are a reminder of the potential scope of competition for capital, talent, and eventually market share with the EV arms race still in the early stages, Jonas added.

'VERY SKEPTICAL' OF APPLE CAR: Also commenting on Reuters' report, Citi analyst Jim Suva said he is "very skeptical" that Apple will actually produce a car. Auto sector profitability is "much lower," so the outcome of this is likely a further push by Apple of its operating system into consumer and enterprise markets, Suva told investors in a research note of his own. As far as the read-through to auto suppliers, Citi believes Apple's plans could lead to greater content opportunities for exposed suppliers, Aptiv (APTV), Magna (MGA) and Veoneer (VNE).

In terms of a manufacturing partner, Magna seems best positioned, and the article does mention past Apple-Magna talks, Citi analysts noted. While they regard this as a positive headline for Magna, they wouldn't be surprised if some traditional automakers also sought to partner with Apple where excess capacity is available. For the time being, Tesla will likely be viewed as the most direct competitor to an Apple car, Citi added. General Motors (GM) and Ford (F) might initially be somewhat less competitively exposed since full-size pickup trucks and SUVs make up the vast majority of their profits, Citi's analysts argued.

PRICE ACTION: In morning trading, shares of Apple have gained about 4% to $132.95. Meanwhile, Tesla's stock has dropped over 2% to $634.21.