So what do you think? When the autonomous all-electric 2021 Apple car is launched at Tesla-style Apple boutique stores, will it come in silver, gold, and space gray? Will 400 miles range be enough for you?
Or are your eyes already starting to roll because you’re one of those who are coming to doubt the notion that whatever Apple is doing on an automotive project, it’s not about to dive headlong into car manufacturing, sales and distribution?
Since an in-depth Feb. 13 Wall Street Journal report by Daisuke Wakabayashi and Mike Ramsey laid out the case on why we could possibly see an Apple car, the Internet has seen a frenzy of speculation on the idea.
Since no one knows, and Apple isn’t saying, why all this guesswork? Part of it is there are more than a few clues that could lend to a credible theories regarding Apple and the car business.
What are these? Let’s take a look at just some of the reasons for the conjecture on: 1) Why Apple could be working toward becoming a vehicle producer, or 2) Why there’s no way Apple is about to bog itself down in like that.
Reasons In Favor
Probably the most thorough connecting of the dots is the original Wall Street Journal report where Apple insiders and other sources were anonymously interviewed, and in the view of the reporters, it was worth it to go out on a limb and do the story.
The WSJ speaks of a project “Titan” with a minivan as a first vehicle type. It’s implied it could be all-electric, and likely also with autonomous capabilities. All sorts of supplier connections and other indicators reportedly underway by Apple do appear like a vehicle is the end goal. Insiders explicitly have said as much too.
Apple is now flush with $178 billion in cash and its market capitalization is $754 billion. As AutoGuide points out, this company valuation approaches double the combined market caps of the five largest automakers: GM, Ford, Toyota, Fiat-Chrysler and Honda which add to $420.14 billion.
It’s been said Apple is looking for new markets to conquer. It has a history of either making markets, or entering markets and winning with perceptibly superior products and service.
It’s been said its star designer Jonathan Ives does not particularly like American style cars, and personally drives an Aston Martin and a Bentley for all the compensation he’s gotten hitting home runs with other Apple products like the iPhone, iPod, iPad, and now iWatch.
Apple, it’s been said, might want to profoundly change the automotive landscape with disruptive, even revolutionary ideas a la Tesla – perhaps on steroids.
The iDevice maker could afford to blow $5 billion on a car project, and if it goes south, could write it off without crippling it as would be the case for companies with shallower pockets. It’s also been known to get part way, and then decide against projects.
As it is, the expenses are accruing for an automotive-oriented project as Apple aggressively poaches employees from Tesla, and others with relevant experience including top-level talent like Mercedes-Benz’s head of its Silicon Valley R&D unit.
“Apple tries very hard to recruit from Tesla,” Tesla CEO Musk said to Bloomberg adding the company offers key Tesla employees a 60-percent raise and a $250,000 signing bonus to defect. “But so far they’ve actually recruited very few people.”
Wired magazine on Feb. 13 reported 46 Apple employees whose LinkedIn profiles showed they used to work for Tesla.
Apple has been so aggressive, it allegedly recruited a battery scientist despite a non-compete contract from A123 Systems who made $600,000 per year. Wanxiang-owned A123 was none-too-pleased and is taking Apple to court over its taking him and a few of its top employees.
The WSJ reports Apple CEO Tim Cook approved project Titan a year ago and put veteran product design Vice President Steve Zadesky in charge. Cook gave Zadesky the go-ahead to create a 1,000-person team and poach employees, reported the WSJ, citing “people familiar with the matter.”
“Working from a private location a few miles from Apple’s corporate headquarters in Cupertino, the team is researching different types of robotics, metals and materials consistent with automobile manufacturing, the people said,” wrote the WSJ.
What the overarching project Titan entails beyond battery development, cars, and perhaps related systems is a mystery, and other reports say Apple’s specific auto division has about 200 employees.
At any rate, Bloomberg’s own insiders have said Apple now wants its car project ready in five years by 2020.
On Feb. 9, before the WSJ story broke, Business Insider reported after seeing a mysterious gas-powered Apple van in San Francisco with lots of equipment on it, and was contacted a few days later by “an employee at Apple” about its “vehicle development.”
“Apple’s latest project is too exciting to pass up,” the person said having mentioned Tesla employees “jumping ship” to get involved. “I think it will change the landscape and give Tesla a run for its money.”
If Apple is developing autonomous vehicles, it will actually follow Google which since 2010 was working on autonomous modified Toyotas, and more recently commissioned driverless vehicles by Roush.
Something similar could work for Apple. EVs are environmentally clean, and could be platforms to launch all forms of technology.
Apple could make its mark in a new industry, and assuming it succeeds, keep the legacy growing, and extend its influence into our very lives.
But is this really what’s happening?
Apple may have a golden touch, but the car business is not the electronics business.
In 2014 it reported 40 percent profits and the car business might offer 5-10 percent, maybe more. Its business model is to go into high-volume industries dominated by low margin companies, then offer premium products people will covet and spring for.
This was the observation yesterday by a Time article noting Apple sells “affordable luxury” but to apply that formula to the car business would just mean expensive luxury.
Instead of a GM-level price tag, expect a BMW or Mercedes level sticker price if it is an Apple. At that level, there can be handsome profits, but not what Apple is accustomed to.
Couple that potential impediment with myriad complexities in the car business, lack of distribution network, and flat out lack of experience or even superior technology – (yet) – thus the hiring of industry experts.
Entering car manufacturing, Apple would also be going outside its specialty into a completely different field. Historically, its move from desktop computers to laptops to iPods, iPads, iPhones, has meant far-more related products and not nearly the leap it would be to go into car building. If a computer crashes, that’s one thing. If a car crashes, it’s quite another.
One could point to Tesla, and it is defying the odds but it has not been especially profitable at this juncture – though at its fourth quarter earnings announcement, Musk made a statement some found outlandish: that its market cap could equal Apple’s by 2025.
Tesla is also planning a Gigafactory and a Model 3 and more, its present market capitalization is high above fundamentals, and it has more to prove.
But maybe Apple could acquire Tesla, or duplicate or better its business model including battery factory, so one could still potentially see Apple entering manufacturing while also emboldened with its money and track record.
However another view Apple is not aiming to enter auto manufacturing came from Automotive News, which knows the car business better than generalist writers, and AN’s Gabe Nelson summed the news saying odds were slim.
The thrust of Nelson’s analysis also tied together a statement by Apple CEO Cook saying Apple wants to integrate its iOS operating system deeply into peoples’ lives, and Nelson suggests the car Apple could be building may just be a development mule for its technologies. This would give it deep-level experience in systems integration.
Several been-there-done-that automotive executives were quoted saying they did not think Apple was planning on duking it out with the majors in an unfamiliar business full of land mines and fewer potential rewards.
“Apple can enter the automobile business in multiple ways,” said former GM Vice Chairman Bob Lutz. “Do I think they are going to work with vehicles? Yes. Do I think they intend to produce entire cars? No.”
“Apple would never lock themselves into three-to-five year product life cycles,” said Steve Wilhite, who was Apple’s vice president of global marketing from 1999 to 2000 and he’s done marketing for Volkswagen, Nissan and Hyundai. “Their technology and imagination are just too fertile to do that. They’d have to find the right automotive leader to partner with them and fundamentally change their development model. And I don’t know who that would be.”
On Wednesday the chairman of of Daimler AG and head of Mercedes-Benz, Dieter Zetsche said he is not losing sleep over rumors of Apple entering his business.
“If there were a rumor that Mercedes or Daimler planned to start building smartphones then [Apple] would not be sleepless at night,” said Zetsche. “And the same applies to me.”
So What is Apple Doing?
Nelson suggests the car Apple may be developing is to increase its competence integrating advanced technologies. Its CarPlay infotainment interface is one. Beyond that could be autonomous systems, and more that could be sold to all the other automakers.
Apple could stick to what it does best, and let the carmakers worry about the headaches, thin margins, regulatory hurdles, warranty and recall issues – not to mention learning about all the nuances of drive train technologies, vehicle chassis and handling dynamics and more.
What’s more, Apple is definitely marketing its CarPlay system – something incidentally Toyota has decided against, while Ford says it is on board. And, if it wants to market more technologies, how would that work while also competing with its customers – trying to beat them at their own game?
That is, for Apple to work both as a supplier and then become a direct competitor and possibly even dominator of the EV market could sabotage job one of selling its in-car technology – and it would sabotage those potentially larger profits.
To date the negative view of Apple entering car manufacturing appears more likely than the positive, but who knows?
Apple has shown itself quite clever to date, so maybe it can see a way into the business in a way with synergy for all?
Sooner or later we will find out for sure.