Apple Inc. may be giving up on self-driving cars since it won’t be anywhere near as profitable as its current gadget offerings, according to an investment analyst.
The huge investment cost for selling cars would be “catastrophic” for Apple’s valuation, said Richard Windsor, an analyst at Edison Investment Research. The margins for getting into the car business are nowhere near the 40 percent gross profit margins Apple earns on the iPhones, iPads and other products, Windsor said.
“How can you make 40 percent gross margins on pressed steel, wheels, brake pads and seats when the others who are buying all these things in much greater volume can’t do it?” Windsor said. “It’s just not feasible.”
Automakers sometimes make no money on the vehicles they sell. Windsor says that earning profits instead from the financing they provide to customers. Even if the car carries the Apple badge, reach profitable margins appears to be hopelessly unobtainable to Windsor.
While the technology giant has been putting together a team, including recruiting engineers and experts in battery and robotics technology, it has never confirmed that it is going to build a car. Apple is likely now turning to contract manufacturers to work on its electric car project, which has reportedly been dubbed Project Titan within the company, Windsor said.
A recent report in the Telegraph reported that Apple is developing an electric car in a German research lab. The Telegraph picked up a German newspaper report that the company has hired 20 automotive industry employees and brought them to Berlin to work on an Project Titan.
There may be a former Tesla executive joining the team. An online publication, Electrek, reported that Apple had hired a former engineer from Tesla Motors to work on “special projects” related to its electric car initiative.