Why Apple developing a car makes no sense – or all the sense in the world

“In the span of just about two weeks, the notion that Apple is working on an electric car went from crazy unsubstantiated rumor to a claim bolstered and corroborated by venerable publications like the Wall Street Journal. The Journal, for instance, relayed that Apple CEO Tim Cook has already approved the formation of a 1,000 strong car development team,” Yoni Heisler writes for BGR.

“Adding even more specificity into the mix, Bloomberg recently reported that Apple is aiming to have production kick off by 2020,” Heisler writes. “What’s more, Apple has already begun assembling an impressive team of folks with deep and broad expertise in automotive development.”

“It’s time to jump back to reality,” Heisler writes. “While the idea of Apple bringing its design expertise to the auto industry is certainly intriguing, the Apple Car hype train has run amok, fueled by rumors and an abundance of wishful thinking. Amidst all the speculation and conjecture, there hasn’t been much in the way of a serious discussion regarding the myriad of reasons why Apple getting into the car business, and developing its own car no less, makes little to no sense.”

Read more in the full article here.

MacDailyNews Take: It is a mistake to look at the way the market is today, with low margins, and therefore conclude that Apple would ignore the market. The same goes for current technology. Who says Apple’s working on an electric plug-in car, for example?

Apple blows up markets and current technology for grins.

If you looked at the mobile phone market in 2002 and told people that, in five years, Apple begin to completely remake the cellphone industry, soon reaping nearly all of the profits in the process, with a $799+ pocket computer, you’d be laughed out of the room. (Of course, that didn’t stop us.)

Yes, it makes no sense for Apple to be developing a “car.” Apple developing a car makes perfect sense when you expect them to bring new things to the table to the table that will blown up and remake the current market. That’s what Apple does. If Apple can’t deliver paradigm shifts, then they don’t enter the market.

Related articles:
Germany’s Continental AG wants to partner on possible Apple Car – March 5, 2015
Nissan CEO on Apple Car possibility: ‘It’s obviously good news’ – March 2, 2015
Apple legal filing adds ‘Vehicles’ to its list of company activities – March 2, 2015
Do not underestimate the Apple Car’s Potential – February 23, 2015
Apple’s ‘Project Titan’ could reshape the auto world – February 22, 2015
Apple Car: Forget ‘electric,’ think hydrogen fuel cells – February 20, 2015
Apple hiring auto engineers and designers – February 13, 2015

15 Comments

  1. First Apple patents on car navigations systems with intricate mapping and other features were files as far as back in 2009. So car-related research is a long story already, and always was long beyond just attaching iPhone to the car UI.

    Lets see what we eventually will get from this.

  2. “…large hard drive …. FireWire port … AM/FM tuner …”

    Its amazing how much SteveJack got right in 2002. The few misses were pretty harmless.

    Hard drive ==> Flash drive
    Firewire => Lightening
    AM/FM tuner => Internet radio

    All I knew at that time was I hated the awful Windows phones and Palm was strangely determined to waste every opportunity to significantly improve their stuff. I could only dream of Apple or anyone else producing something better.

  3. I think Apple will design Cars because:

    From Ive and Newson’s perspective it is a dream job. It will stretch their skills of design, manufacturing and usability to the limit, and result in an object that many at Apple would love to have.

    From Cook’s perspective it is a large market, dying to be remade, where significant good can be done (energy efficiency, part of the transition to clean energy), and lets Apple go to another level that another computer product would not do.

    And from Apple (Steve Job’s ghost) perspective it will be skating to where the puck will be, because computers are going to take over cars.

    The mobile generation will choose cars for how smart, connected, beautiful and fun they are, not for particular technical specs. If Apple doesn’t go into cars they would be leaving the door open for another computing company to fill in that growing hole.

    Apple will redo everything in a car to simplify, lower maintenance cost and hassle, improve safety, improve easy of use and fun and style, and above all the computing interface for the driver and passengers using Siri, iOS and all their software assets. People will make fun of their first care for looking like a toy or something, but it will sell like crazy.

    1. I think some lard butt voted you down. They are very touchy about their condition, although it’s probably caused by a glandular condition, or the high calorie count in the air they breathe.

    2. Trolldude, are you concerned about your weight? If you get back under your bridge again, Mommy will send a goat across and you can eat to make yourself feel good again. In the mean time, leave those Apple people alone to enjoy themselves and those great products.

  4. By market cap Apple is the world’s largest company but it’s product line is not huge . Diversification is inevitable and Apple will be in the future at the heart of transportation , health care and banking . amongst other industries . Will Apple be making a car-who knows but I think that it is fair to say that Apple will be in many many cars in the near future and it won’t just be communications and entertainment .

  5. Joswiak, cited in the article, said “If you can’t enter the market and try and be the best in it, don’t enter it … At Apple if we can’t be the best then we are not interested in it.”

    That suggests Apple has a long way to go, before they make a decision to move to production or abandon the project. Autos count for about 100 million vehicles a year and 1 billion smartphones where Apple takes home 90% or so of the profits.

    I could see Apple becoming an integrated supplier of batteries and computing and communication equipment to auto companies, though. Those are Apple’s strengths.

  6. Will Apple make a car? Only they know. Should they make it? That is a subject to debate. I, for one, think that they should, but I can think of a thousand reasons why one would say they should not.

    So what interests me most is the question — Can they do it? The question covers not only the technical capability but also the “business” of car making and selling.

    I spent 12 years in auto industry (Ford), 8 in US developing new cars and 4 in Japan, developing and marketing the cars to Japan. I have followed the car industry for last 40 years. Bases on that experience my answer is a solid Yes!

    First, money — Apple has plenty. A concept to customer car program starting from scratch will need less than $25 Billion. Apple generates that in less than 6 months.

    Second, access to basic technology — The base car technology is roughly 125 year old. Refinements of over a century and the wide use means that there is plenty to engineering talent that can be hired. Cars can be roughly divided into body, chassis, power train and electronics. The first two are well understood and are fairly mature from engineering point of view. Fossil fuel is old technology for power train, but electric/fuel cell is new and that is where Apple may have some challenges to overcome. Electronics has a lot of room to grow and innovate (e.g. drive less car) and that is where Apple will really do well, in my opinion Car Play is just the start. I think that Car Play is “toe in the water” like iTunes was, which eventually lead to iPod, iPhone, iPad and soon iWatch

    Third, high end technology — From basic transportation, cars have evolved into a high technology machine. Most car companies however, design the vehicle but then get the parts made from OEM suppliers. Apple will have no difficulty getting the same suppliers to provide parts — like Apple getting the CPU, RAM, Hard Drive, Displays from other. Part of the job is just supply chain management. More complex than Apples current supply chain, but given the DNA of the Apple CEO, very possible.

    Fourth, the distribution — People will be lining up to open dealerships.

    Fifth, Marketing — Just slap the apple Logo on! It will be an Apple ‘Cart’ to over turn all other apple carts.

    Six, Apple Sauce — That special touch that only Apple can provide. Look, feel, driver interface, etc.

    One final thought — Cars manufacturers work on about 15% gross margin on low end and 30% on high end. On the premium end the the margins can be much higher, but the volumes are low. Since Apple likes to work with 45-50% margins, they will need to think about the volume/margin tradeoff carefully.

    (Just dreaming for now, but this is quite possible) – There are about 60 million vehicles sold annually. If Apple “does a Mac” and just gets 5% share at $50,000 each, it will add $150 Billion to the top line and about $50 Billion to the bottom line. At a PE of 10, this will add $500 billion to the valuation. By the way, Tesla is only making $100,000 + premium sports cars, sells a few hundred units, looses money and is valued at $25 billion.

    So, will they — only they know. Can they — hell yes. Should they? Would love to help them try!!

    1. Perhaps Apple is developing a 2 seat electric commuter car with a cargo area in place of a back seat. Electric cars need no transmission or drive train, if each wheel has its own electric motor. An e-auto with 100 mile range, and top speed of 75 mph, would probably suffice go commuting to and from work. If e-auto could be recharged at work range would be less of a problem. Biggest problems, battery drain and recharge time. Apple adds value with computerized electronics. 😀

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