“Apple earns high profits because it goes into high-volume industries dominated by low-margin players who sell relatively affordable products. Apple then makes a premium product, one where you can’t get similar specs for less — there is no other computer or smartphone with the software or build quality of an iPhone 6 or Macbook Air — and prices its offering a few hundred dollars more than the competition,” Jacob Davidson writes for Money. “Then it earns billions off this relatively small price increase by selling high quantities of units.”
“In other words, Apple makes premium versions of things everybody needs at prices most people can still afford,” Davidson writes. “A similar strategy for an Apple car then, would be to sell a premium-quality car with higher margins (Apple’s gross margin in 2014 was close to 40%) at a still-affordable price.”
“The problem for Apple is that it’s a lot easier to increase margins in a low-cost industry than a high-cost one. Even if an iPhone 6 costs 100% more than a cheap LG smartphone, it’s only $200. Same thing with the Macbook Air, which is twice the price of a low-end Windows laptop but still affordable at $1,000,” Davidson writes. “But trying to get similar margins in the automobile market means a price increase of thousands of dollars, not hundreds. Double the price of a $22,970 Toyota Camry, or ask for even a 50% premium, and you’re in BMW territory. (That company’s cheapest sedan costs $32,000.)”
Read more in the full article here.
MacDailyNews Take: The biggest obstacle for some when it comes to divining the potential success of an “Apple Car” is an appalling, woeful, utter lack of imagination.
An “Apple Car,” like all Apple products, would deliver something(s) that nobody else could ever hope to offer (until they begin infringing Apple’s patented IP and/or trade dress, of course and, even then all they can seem to muster are half-assed knockoffs; see: Mac, iPod, iPhone, iPad, etcetera). Obviously, Apple wouldn’t bother if it were just another freakin’ car.
People like Jacob need to stop thinking of an “Apple Car” as yet another “car” that’d be in competition with the other “cars” out there and – gulp! – Think Different™.
Think of the “Apple Car” as the:
• Mac vs. the “personal computers” on the market in 1984
• iPod vs. the “MP3 players” on the market in 2001
• iPhone vs. the “cellphones” on the market in 2007
• iPad vs. the “tablets” on the market in 2010
• Apple Watch vs. the “smartwatches” on the market in 2015That’s how Apple operates. There won’t be an “Apple Car” if it doesn’t deliver things that are revolutionary, unique, and better.
Related articles:
Apple Car: Forget ‘electric,’ think hydrogen fuel cells – February 20, 2015
Apple working with Intelligent Energy on fuel cell technology for mobile devices, sources say – July 14, 2014
North Carolina regulators approve Apple’s 4.8-megawatt fuel cell facility at Maiden data center – May 23, 2012
New aerial images of Apple’s planned NC fuel cell, solar farms published – April 7, 2012
Apple’s massive fuel cell energy project to be largest in the U.S. – April 4, 2012
Apple patent application reveals next-gen fuel cell powered Macs and iOS devices – December 22, 2011
Apple patent app details highly-advanced hydrogen fuel cells to power portable devices – October 20, 2011
What color would your 1st apple car be ?
I see a white one for me !
😉
Ps. high end cars have healty 30% margins.. Thats in line with apples buisness models !
I would pick Space Black and put a cool skin on it.
Lol
BMW makes little profit from the sale of new cars. It is the service if those cars where they expect to make most of their profit.
Ahhh. Someone is a little misguided. BMW doesn’t charge for service for the first four years Ior ownership. Onto my third BMW in eight years and never had a service bill.
Well, if you change cars every few years you wouldn’t pay for service. I plan on keeping mine for he next decade. Anyway, this is what the dealer told me and I can see many older vehicles in the service center.
1) we don’t know if apple is making a car
2) IF they are making a car then they would only do so, as Steve Jobs has said for other products, only if they can make a ‘substantial contribution’ and leverage their tech advantages, i.e the Apple Car would be a substantial leap frog.
It’ll be a ‘ ultra smart phone’ not a ‘better flip phone’.
3) Margins?
what’ s wrong with smaller margins if the market is big enough? money from a NEW market even with smaller margins is somehow bad?
Note: Apple drop it’s OSX, iOS margins to ZERO , note also that Msft makes near half it’s money from OSX equivalent: Windows… So in straight comparisons Apple’s move makes no sense. But OSX, iOS drives hardware sales, who knows what an Apple Car ecosystem would do? If some countries (who are talking about it now) force car companies to phase out gas, diesel cars due to pollution problems in 20-30 years time where would a Electric (or hydrogen or whatever new tech) car company stand?
(even as they diss Apple every car company in the world is scrambling to build this ‘New Car’ and the PATENT the heck out of what they have learnt).
——
(much above is speculation of course and so is every article on AppleCar because he truth is Apple has said nothing… )
Graphene batteries !
Plus ~~~~~~~~~
I’m sure when Apple Watch is announced live onstage, one of the first comments will be “no we aren’t announcing a car today”. Lol
Apple will create a revolutionary mobile office, an Internet-powered tour and discovery guide, and a breakthrough transportation tool —into one small and lightweight rechargeable device.
MDN Take is exactly right. Apple’s products offer something unique. That’s why they are popular even if more expensive. It’s about DESIGN and STRATEGY to enter a market with a product (and user experience) that the competition cannot replicate. (When that’s NOT the case, Apple’s CEO makes sure you know it by calling the product a “hobby.”)
Therefore, the “Apple Car” will offer something that no competitor can match or even offer. If that’s not the case, Apple will not do it. (A car will NOT be a “hobby.” 😉 )
Problem is that MDN has suggested nothing that would represent this new totally different innovative take on mobility that Apple could offer other than some obscure speculation on a different form of motive power without the merest indication of how thye could actually achieve it while developing the required supporting eco system. I have great respect for their capabilities but a break through in battery or hydrogen generation any time soon on their part to differentiate them from the ‘android’ cars seems unlikely while less overtly high aiming though still technically advanced cars like Tesla already seem to be creating a strong market play in the only existing segment that would appear attractive to Apple. Time will tell but the publicity is doing them no harm in areas where some no nothing hacks perhaps significantly claim they have become uninspiring, while perhaps obscuring real developments/interests.
I’ve speculated about the “how” myself; it’s a FUN exercise. But it’s more important to know that Apple is NOT playing the ME TOO game with a car product. The exact details are less important, because no matter how hard we all try to guess, Apple will surprise us with something unexpected that seems “obvious” in hindsight.
If Apple does not have that “something” that gives the “Apple Car” an insurmountable advantage, Apple won’t do it at all. That’s probably why the complete (non-hobby) Apple TV is long-rumored but never produced.
I think it’s likely no one will ever “buy” an Apple Car. Instead, you’ll hail an autonomous Apple Car from your iPhone when you want to go somewhere, it’ll show up within minutes, and drop you off at your destination, payment automatically handled via your iPhone.
That won’t work very well in rural Nebraska.
Well either Apple has some really cool ideas that no one has thought of in an automobile or the rumors are just that – rumors.
Time will tell.
Rumors, rumors and more rumors.
Apple hasn’t said one thing about building a vehicle of any type so basically everything we hear about some Apple vehicle is some media pundit’s imagination working overtime. It’s just a way for leeches to get more hits on their websites. Honestly what would Apple selling a vehicle five years from now have anything to do with today. All this nonsense about what Apple can do and it can’t do five years from now. I guess these bloggers are running out of AppleWatch rumors. I’d bet very few outsiders know exactly what the iPhone 6S is going to have in it and that’s probably only months away.
Soon: “You’re driving it wrong!” 🙂
The real problem with an Car is that each year the newer model becomes thinner and lighter, but the battery life doesn’t improve. We all buy Cars on 2 year leases, subsidized by cellular providers for full, always-on networking, but we all want the new model.
The real problem is where do I recharge my Car, and does plugging my iPhone into my Car drain my Car’s battery faster?
Then Apple releases Car+, the 8 passenger two-day battery Car. Too large for some garages, but yet Apple can’t keep up with demand. The media claims Apple just took Tesla and Nissan’s electric cars and improved them slightly, and maybe not even with better battery life (how many miles can you get? becomes the new internet meme).
And then the media strikes, showing us claims of people who bent their Car+s because all they did was sit in them. Tim Cook denies the problem, saying Cars are made of an incredibly strong titanium-adamantium-Liquid Metal blend, and releases videos of stress tests to prove people are, in fact, crazy. All this hubbub does is fuel more Car+ sales, which results in a constant 4-6 week delivery notice on the Apple Car website.
Apple shuns SEMA, but yet is the talk of the show because everyone and their second cousin are modifying Cars, creating wraps and attachments for Cars, and in general trying to make money off of Cars’ popularity and pop culture status.
And just when Apple catches up to demand, the next Car comes out. And we all want it.
Tesla CEO Elon Musk has revealed just how far Apple is willing to go to bring his best workers over to Cupertino. In fact, Musk actually told Bloomberg that Apple is “offering $250,000 signing bonuses and 60 percent salary increases” for jumping ship.
This is a two-way street, however, and Tesla has been aggressive in its own right poaching Apple employees. Earlier reports have indicated that Tesla has stolen away more employees from Apple than it has from any rival car company, which just shows how important software will be to future Tesla offerings.
OK, I’m all in with Apple, (I love my 6+, my iPad minis, and my MacBook Air) and I’m very excited about an apple car.
Nonetheless and IMHO, the writer of this story makes a very fair point that is kind of ignored by the mdn take.
Yes, apple can and will offer absolutely unique qualities, but if they’re going to get the same kind of margins they’ve been getting up to now, it seems very likely that their prices will need to approach luxury pricing.
Middle class buyers can save up for a luxury phone a lot more easily than they can for a Mercedes. I’m not saying apple can’t find a way to make this work, but I’ll be most interested to see HOW.