“Like a siren, it calls,” Horace Dediu writes for Asymco. “The Auto Industry is significant. With gross revenues of over $2 trillion, production of over 66 million vehicles and growing it seems to be a big, juicy target. It employs 9 million people directly and 50 million indirectly and politically it must rank among the top three industries worthy of government subsidy (or interference). Indeed, in many countries – the US included – government interference makes it practically impossible for a producer to go out of business, no matter how poorly it’s managed or how untenable the market conditions.”
“But this might be the tell-tale sign that danger lurks. Theory suggests that incumbents going out of business is an essential indicator of industry health,” Dediu writes. “Without their exit, entrants are never allowed to bring disruptive ideas to bear and innovation simply stops. Is this interference with mortality the only indication of entrant obstacles? Are things about to change? Is there pressure for innovation? Can we spot other indications of a crisis in this industry?”
“As technology companies listen to the siren’s song they should contemplate the basis of survival in the industry,” Dediu writes. “Whether your approach and innovation sustains the hegemony or changes it will largely depend on your business model being asymmetric to the incumbent. Determining what is and isn’t symmetric should be the first step in your analysis.”
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Simplification occurred in the desktop computer over 20 years from designs with a dozen or more physical boards in them to designs using just a few boards, where the separate boards are often wireless components and a high performance GPU.
Autos; not so much. In autos, how many pieces are there in the engine, transmission, differential & other drive train components?
I’m not predicting Apple will make an auto, but they are overly complex than need be for the typical vehicle use around town.
You are correct. But if the car uses an electric motor, the number of components drops significantly.
If Apple were to design a car, all the components would be built by companies that are experts in their fields and then assembled in a modern robotic assembly plant.
And Apple is certainly positioning itself in the energy sector – specifically solar.
Electric cars do not have a transmission at all. Overall, electric cars have far fewer pieces and parts than gas-powered cars do. Electric cars are also free of many of the maintenance hassles associated with car ownership, since they don’t require oil, transmission fluid, brake fluid, fuel tanks, pumps and filters, etc. They’re just not as complex from a mechanical point of view. Electric cars are all about the battery, the electric motor, and the software. Apple can do this.
My BMW i8 has 2 speed trans connected to the electric motor.
When the wheels are the motors (12 pole inverted squirrel cage induction motors) and each wheel is driven by its own adjustable frequency drive, there are no moving parts other than the wheels and the suspension/steering system. You get all wheel drive for traction control, two wheel drive for cruising and efficiency and regenerative braking.
Apple’s innovation potential for cars is similar to what existed for the Mac and iPhone.
Before Macintosh, most personal computers (even Apple’s) were designed to be like something that came before. The “mainframe.” The primary interface was a command line. Before iPhone, smartphones were mostly designed to be miniaturized PCs, complete with tiny keyboard, stylus instead of mouse, and menus on the screen. Something that came before. You can even say that before Apple Watch, existing (and contemplated) “smart watch” designs were attempts to make an iPhone fit on the wrist…
Most current electric cars are designed to be like a traditional fossil fuel car, with the combustion engine replaced by an electric motor. That’s why they mostly look and operate like what we expect for a “car.” That’s what “big auto” knows how to build. Apple does not have any of that “history.”
> Whether your approach and innovation sustains the hegemony or changes it will largely depend on your business model being asymmetric to the incumbent…
That’s just someone trying to sound overly smart in asking if Apple will provide its tech to support the existing auto industry, or disrupt the industry. Apple is not Microsoft. Of course the answer is disruption. Apple will re-invent the electric car by imagining its potential in a world where fossil fuel cars never existed.
In other words, Apple will skate to where the puck is going to be. I happen to think that’s very possible.
In this case, it’s more like skate to where the puck is currently prevented from going. 🙂
The incumbents probably haven’t a clue about the location of the rink, much less the puck.
And when they show up, Apple won’t even be playing hockey…
Rink hell. These goofballs in the auto industry are looking for the baseball diamond.
Hooo Ahhh!
When you’re right …
…you are right!
“But this might be the tell-tale sign that danger lurks. Theory suggests that incumbents going out … is an essential indicator of …. health,” Dediu writes. “Without their exit, entrants are never allowed to bring disruptive ideas to bear and innovation simply stops. Is this interference with mortality the only indication of entrant obstacles? Are things about to change? Is there pressure for innovation? Can we spot other indications of a crisis … ?”
Auto executives AND politicians.
Here’s for the crazy ones at Apple and Tesla, where ever they are going.
“That’s just someone trying to sound overly smart…”
Horace Dediu is not ‘trying’ to be smart – he really is. Over the last 7 years that Asymco has been on line, he’s called every one of Apple’s moves well before anyone else got out of bed. The guy is pretty much a market genius.
On the other hand, the barriers to entrance into the auto industry have fallen substantially. Existing car companies are stuck with huge, outdated, and perhaps unnecessary infrastructure that forces them to continue to think “inside the box”, so they are not likely to dream of, let alone achieve, true revolutionary innovation. (They cannot even fix known mortal flaws, like faulty ignitions switches or tires, in years — why would anyone think they can re-imagine an entire car in a similar time frame?) They continue to peddle relatively big, heavy, powerful, fast, gas-guzzling vehicles to satisfy the ego needs of insecure people, like they have always done. And most car companies are doing nothing to reduce the adverse impact of cars on the environment, other than adhere to government CAFE standards (which are too little and too late for what we all need to do to reduce our carbon impact on the planet).
The good news is: a new company does not have to take on the world’s car companies. All it has to do is produce 1 excellent model with a fabulous design and great features that people are willing to pay a lot of money for. All in all, I don’t see creating a new car as such a bleak business opportunity as Horace does. On the contrary, I think the car is ripe for re-imagination. And to the victor, the spoils !
Thank you for articulating a fond hope for many of us.
Re-imagination, motivation and means to do it.
😉
Apple won’t be taking on just the auto industry—big oil and steel have huge stakes to protect. Plus, Apple won’t find many friends in the early going.
Apple can BUY all the “friends” it needs, either outright or through influence. A good justification for keeping the cash hoard around, and not squandering it on unnecessary things (like stock buybacks when AAPL is already moving upward and hitting new highs).