On CNBC’s “Closing Bell,” on Monday, former GM Vice Chairman Bob Lutz discusses why Apple shareholders shouldn’t be excited about the company’s development of an electric car.
CNBC: Is Apple doing he right thing here entering this market?
Lutz: Uh, no, I don’t think so. If I were a shareholder, I’d be very upset because they are currently engaged in a very high-margin business. The automobile business, at best, is a very low margin business and you can’t show me one company in th world that, to date. has made a nickel on electric cars. They are generally money losers and the only reason that everybody is producing them is because they are necessary to meet European fuel economy regulations and US fuel economy regulations. But there is absolutely no reason to assume that Apple is going to be financially successful in the electric car business.
CNBC: Do you think [Apple] will be able to bring some sort of approach to it, given their experience in batteries and consumer devices that’s at all going to change the economics of this in the next couple of years?
Lutz: No, no, abso… First of all, Apple has no expertise in batteries. They don’t make batteries. The specialized electrochemical companies make batteries. And Apple’s going to buy batteries, like everybody else. And when it comes to actually making cars, there is no reason to assume that Apple, with no experience, will suddenly do a better job than General Motors, Ford, Volkswagen, Toyota, or Hyundai. So, I think this is going to be a gigantic money pit. But, then it doesn’t matter. I mean, Apple has an embarrassment of riches. They don’t know where to put the cash anymore. So, if they burn $30 or $40 billion in the car business, nobody’s going to notice.
CNBC: Would it be feasible for Apple to have another company manufacture vehicles for them?
Lutz: Well, yeah, they could. They could get Hyundai-Kia or a Japanese or a Chinese manufacturer to manufacture cars for them and then they would put all of their software and their interconnectivity in it afterwards. But, I don’t see the… I don’t see the advantage to that… An electric car is, from a cost standpoint, the toughest way to go and, by the way, the electric car market is still miniscule. That just doesn’t make sense… One of the thing they probably hope to do with their electric vehicle is to sell the electric vehicle credits to other manufacturers who need them. And currently for Tesla, that is the only large sustainable source of revenue that Tesla has. I mean, they’re losing a ton of money on the cars. So maybe that’s the calculation, but, I’ll tell you what, if I were a board member of Apple, I would ask some serious questions about this whole thing.
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Direct link to video here.
MacDailyNews Take: The man worked for General Motors. He has sclerosis of the brain. (It’s a condition of employment at GM). This guy’s thinking is so in-the-box, his head ought to be gift wrapped with a bow on it.
We transcribed this interview with a dinosaur because we wanted it for posterity and because it reminded us so much of this:
We’ve learned and struggled for a few years here figuring out how to make a decent phone. PC guys are not going to just figure this out. They’re not going to just walk in. – Palm CEO Ed Colligan, commenting on then-rumored Apple iPhone, Nov. 16, 2006
And this:
I give [Apple] two years before they’re turning out the lights on a very painful and expensive mistake. – David Goldstein, Channel Marketing Corp. President, commenting on Apple’s opening of retail stores, May 21, 2001
Lutz: “I don’t see…” That much is certainly true.
Lutz’s asserts that “Apple has no expertise in batteries,” however:
To make all-day batter life possible, we have developed new battery technologies. We actually changed the construction and internal chemistry of the cells which are now manufactured in discrete sheets. These sheets are stacked in a terraced structure developed along with the external enclosure. The design allow for 35% greater battery capacity. – Jony Ive, Apple’s Chief Design Officer, March 9, 2015
Lutz’s “idea” that Apple would simply shove their software into cars afterwards is a pure ignorance, or at least a fundamental misunderstanding, or how Apple works and what makes the company a success. Hardly surprising coming from a dinosaur who worked at shit-box maker GM. Apple is a design-first, design-centric company. Everything is focused on making the designer’s vision happen. The designers run Apple. They don’t sit around waiting to stick chrome moulding all over badly-made shit-boxes twenty years after it’s become passé.
Lastly, who said Apple is going to make an “electric car” as people like Lutz think of them today?
As we wrote back in March: When Apple enters markets, it’s because they can bring something(s) so unique to the table that significant disruption is inevitable.
Don’t just think “electric car,” when there’s so much more possible than what’s out there today. Think hydrogen fuel cells.
Apple doesn’t enter markets simply to compete with the rest of the existing dreck. Apple only enters markets when they can disrupt them. See: Palm, BlackBerry, Nokia, etc. In other words, it’s never too soon to start praying for more government bailouts, GM et al.
When Apple looks at what categories to enter, we ask these kinds of questions: What are the primary technologies behind this? What do we bring? Can we make a significant contribution to society with this? If we can’t, and if we can’t own the key technologies, we don’t do it. That philosophy comes directly from [Steve Jobs] and it still very much permeates the place. I hope that it always will. – Apple CEO Tim Cook, March 18, 2015
SEE ALSO:
Apple speeds up electric-car efforts, aims for 2019 ‘ship date’ – September 21, 2015
Apple meets California DMV officials to discuss ‘autonomous vehicle’ – September 18, 2015
Documents confirm Apple is building self-driving car, Project Titan further along than many suspect – August 14, 2015
Apple Car development proceeds apace – July 27, 2015
Apple hires veteran Fiat Chrysler auto industry executive – July 20, 2015
What’s up with Carl Icahn’s sudden obsession with the Apple Car? – May 18, 2015
Survey: 77% of hybrid or electric vehicle owners would likely buy an Apple Car – May 13, 2015
Apple’s ‘Project Titan’ could reshape the auto world – February 22, 2015
Apple Car: Forget ‘electric,’ think hydrogen fuel cells – February 20, 2015
Meet Steve Zadesky, the reported leader of Apple’s ‘Project Titan’ – February 17, 2015
Forget the rumor: Apple will never build cars – February 17, 2015
The real battle Apple is waging in autos – February 17, 2015
O’Leary: Yes, give me the Apple car – February 17, 2015
Will Apple become a car maker or a platform/content aggregator? – February 17, 2015
An Apple Car is exactly what investors want – February 17, 2015
Apple’s electric car dreams may bring auto industry nightmares – February 17, 2015
Jean-Louis Gassée: The fantastic Apple Car is a fantasy – February 16, 2015
Apple is already positioned to be a car company in many ways – February 16, 2015
Why Tim Cook would want to build an Apple Car – February 14, 2015
Apple working on self-driving electric car, source says – February 14, 2015
Apple’s project ‘Titan’ gears up to challenge Tesla in electric cars – February 13, 2015
Apple’s next big thing: The Apple Car? – February 13, 2015
Apple hiring auto engineers and designers – February 13, 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
The one thing Apple is well known for is its ability to pivot; to turn on a dime, without much regard for ‘legacy’. Testaments to this are (among many other things):
68k to PPC architecture (they gave it a few years and discontinued support for legacy 68k code);
System 9 to OSX (they gave dual boot, then the Classic emulation, then discontinued it)
PPC to Intel (they gave Rosetta emulation, then a few years later, discontinued it)
They have consistently entered markets where they had no prior expertise and completely disrupted them.
I’m still not sure if Apple is indeed working on a car (electric, driverless, whatever). If they are, it will be with a very healthy profit margin, unlike any other car, and will be the most coveted model on the market.
The iPhone cost over $800 when it first came out, when competition was half the price. So did the iPad, and the Apple Watch. Expect Apple car to cost twice the “comparable” (very relative term) model from the competition. And expect it to outsell everyone else.
And it certainly won’t be POS ugly fiberglass bloat.
Would be nice if liquid metal might finally made its Apple debut or like the Delorean, Apple changed the exterior landscape…
Considering its dramatically rubbish dynamics outside of time travel anyway, I’m not sure the DeLorean is a good basis for positive lessons … Other than to prove ex GM execs are the last people to listen to when talking about the future of cars.
Delorean is a stainless steel car that does not rust, design wise it was ahead of its time and it broke all the automotive industry rules.
You should read ‘On a clear day you can see General Motors’ ( the fascinating story of Delorean and the fabricated witch hunt against him.
Your examples are all consumer electronics.
Cars are not consumer electronics.
Moving from one IC architecture to another or one operating system to another cannot be compared to building a car from scratch.
Apple has only disrupted markets in their field – consumer electronics.
That is a reasonable argument, but I’m pretty certain Tesla never dealt with automotive industry before plunging head first, and they seem to be doing quite well (all things considered). Apple has massive amount of resources that can buy whatever experience may be necessary.
As far as being an insider in the industry being an advantage, I’m not really sure that is going to matter to Apple; they were most effective as the disruptive force when they entered as outsiders (music, mobile).
Cars are not YET consumer electronics, but that is the direction they are headed. Electronic cars are vastly less complex hardware-wise, and offer considerably more power. Energy density and cost are the only reasons they haven’t become mainstream yet.
Building a car from scratch may be difficult, but I put my money on Apple figuring out the hardware, well before the car manufacturers figure out the software. It won’t even be close.
There’s no end of people, with not a clue as to what Apple is actually working on, loudly proclaiming that Apple is building a car (of some type).
Personally I do not see Apple entering a market that requires so much capital, and only generates an average 6% operating income (compared to Apple’s +10 year 31% average).
There are other industries/markets larger than automotive (devoid of governmental regulation) that can generate more revenue, more gross margin, and much more Net Income than making a car (no matter how advanced).
Right, as usual. Apple—like Thomas Edison, another hotbed of innovation—burns through project after project before presenting a winning product. The difference between them? :— The insane parasitism of today’s media, and their lapdog analysts: so desperate to earn a living wage that they prey on readers’ psychological fears more blatantly than did their forebears in the century-past era of Yellow Journalism.
Dinosaurs babbling, earnestly growling, but blind to the meteor brighter than the rest.
Here we go again. CEO shouts “AAPL is doomed if they get into our business. They don’t have the experience to make phones/software/tablets/ etc.”
Not to forget, Lutz blew a ten year EV lead by killing GMs EV-1 project and selling the IP rights to large-format NiMH batteries to Chevron, who never built any batteries and refused to license the technology, effectively shutting that door for battery development.
The nice thing about technology is eventually the nay-saying fossils die off and the real possibilities come forth. Tesla cracked the egg on BEV cars and its never going back into the shell. A lot of money is going to be made refitting the worlds automobile fleet with BEVs. A lot of money is going to be lost trying to retain the existing paradigm.
Apples rumored acceleration of their EV release date seems to coincide with Teslas plans for the Model 3. Maybe they’re going after the same space.
Exactly, Old Swinger! Nokia, Motorola, and Palm said similar things about Apple’s R&D investments in the iPhone, and that effort turned out to be fairly successful.
There is no guarantee that Apple will ever develop or market a branded car, of course. Some R&D ends up at a dead end or yields a bit of knowledge that leads off in an entirely different direction. Most likely, in my opinion, is that Apple is looking at the car from a user/system viewpoint and trying to figure out how to make the car satisfy the needs and desires of the passenger. Apple’s solution may be fairly generic in the sense that they could license it to any automaker and not have to build their own vehicle.
In his defense, that’s what he’s expected to say. Downplay the threat, try to point out the differences between his marketplace and the ones Apple has entered & disrupted. Unfortunately for Mr. Lutz, his company’s outstanding stock is less than a quarter of Apple’s cash, which means his executive suite could be the next arena Apple disrupts if there really is a plan to build an Apple car.
Perhaps Apple sees a rescue market for excess sapphire as windshields?
Most phone manufacturers are finding that selling phones is a money pit.
Most desktop PC manufacturers are finding that selling PCs is a money pit.
Most laptop manufacturers are finding that selling laptops is a money pit.
Apple makes heaps of money out of all three of those categories while established companies can’t.
There are two fundamental components to an electric car: the energy storage technology (battery or fuel cell) and the motor technology. Both are up against fundamental physical limitations, and Apple will not get a free pass on the laws of physics.
The contribution that Apple could make is the force the standardization of components such that they are interchangeable across manufacturers and develop some of the electronic components.
Apple will also not get a free pass from any competitor out there, in addition to the normal items cited against the project.
I understand Apple has decided the “iPhone effect” is terrific and they think they can enter the auto business in the same way with high priced, high margin vehicles.
At least a few other car makers could decide to follow Apple and do the same, and they have the dealers and marketing to take high margin customers away from Apple.
The concept that Apple can innovate a new better solution that lowers costs has not been what Apple has done. Hence, I don’t see Apple doing what a hundred other battery design teams have tried to do in designing a new cheaper, better battery from scratch. Not impossible, but not likely.
It is anything but a forgone conclusion that Apple can pull this off. That is the risk of innovation.
Apple has better brand recognition than any automaker and it won’t have any dealers acting as profit sucking middlemen.
Not only do I expect them to have powerful and reliable electric motors, powerful batteries and great electronics UI throughout, but I expect that Jony’s design team and engineers will fundamentally rethink how the chassis is manufactured. They will manufacture major components in a way that no one has done before.
Example: Who would have thought of manufacturing a computer casing out of a solid block of aluminum? No one because, well, it was crazy expensive right? But they did it and, it was the strongest laptop chassis out there and had so much functionality machined into it that the number of parts and manufacturing steps was greatly reduced. The laptops ended up being super profitable.
You and Bob Lutz are making the same mistake the cell phone makers made – the fundamental component for cars will be the computer.
Before the iPhone the emphasis was on placing calls. Now we all carry extremely personal computers(be they iOS, ‘droid or other) that can be used to make a phone call.
Cars are in the same transition, they’re becoming computers on wheels that will do more for you than the cars that came before. The computers are already taking over bits and pieces of the driving with things like cruise control that changes the speed of the car in reaction to the speed of the car ahead of you.
https://en.wikipedia.org/wiki/Autonomous_cruise_control_system
Darrell, I agree. The question will be if Apple can generate high margins with their auto.
Competitors like Lexus, BMW & MB are not going to sit idly by.
Darrell, I agree with your post to a large extent. Where I differ is that, while the car is becoming a computer on wheels, it does not need to be a standalone computer. Apple is focused on mobile computing and the IoT. Increasingly, people possess computing resources and an online identity that travels with them and syncs with a variety of computing resources during their day. In that context, cars are simply a more complex form of an appliance with embedded computing and internet connectivity. That is why desktop computer sales are slipping relative to laptops and such. Unless you need workstation performance/storage or want a centralized media hub, people increasingly prefer mobile options. That is why Apple needs to get iCloud squared away. When it works properly, it removes most of the aggravations of a mobile computing experience.
We barely understand the laws of physics. Human knowledge and understanding has barely scratched the surface.
I bet you would do well in the 1800’s good old boys club… “We have learned everything possible, there’s nothing left to learn.”
That’s what this is all about, such rigid thinking, as to be unable to get passed the edge of the forest.
You don’t know what you don’t know, until you know it. 🙂
Gollum—ever the sceptic, and eagle-eyed at that! All the decorated and accomplished scientific heroes of the past have said what you have said: it isn’t over, it will never be over, because our native wit is profoundly exceeded by the complexity of the cosmos that contains us…we are scarcely more than an impudent mote, however wiggly and hopeful.
The way you say that – sounds a bit patronizing.
Sorry about that. Paraphrasing Dyson or Chrurchlamd or something, But you said it better
Thanks, I bet when they said it, they were being patronizing. No harm I appreciate the support.
And, they’ll cost $60,000. I don’t understand who’ll buy them. People already have 3 cars. Why not mass transit? Lutz may be sclerotic, but it’s too early to bury him.
You can see the vacant look on his face – no imagination. Sock-puppet of the oil and gas industry.
The out-dated ideas of the industrial age must give way to something much more enlightened. Though not perfect, I am glad for the influence of individuals like Steve Jobs and Elon Musk who go against the grain and seek to make a dent in the world for good. “The crazy ones…”.
That’s what I was thinking – at the very least Bob “Can’t Do” Lutz is the poster child of who NOT should be in charge or making decisions on electric/hydrogen cars and the future of transportation. He’s thinking INSIDE the last century box and the same old same old has-been. Is it any wonder this technology has mostly been moribund at the big U.S.Automakers who’s heart isn’t into disturbing the status quo? The old CEO’s gotta go, the Peter Principle just kicked them in the shins.
Lutz The Klowny Klutz. Lutzi Luddite.
I think Lutz may have a point…there are so many regulatory, union, and safety issues when it comes to cars. Tesla tried to come in and disrupt things and look how they’ve become mired in dealer / support / manufacturing issues. It can be done but I think Apple should be very careful.
I don’t think Tesla is “mired” and what is with “union issues”? Could you be specific? As far as the rest, are you against seat belts, speed limits, etc.?
I met him about 20 years ago, extremely talented individual, he tended not to stay long with the companies he worked for because he has a very low BS tolerance. There are tons of that in any bureaucracy , corporate or government organizations, no real difference although a distinction is that corporate has to perform better, faster and quicker in order to survive. most actually don’t survive. Not true in government bureaucracies. Some of you will obviously disagree, but….. I spent 20 years in automotive from dealer level to national offices for two companies. On a scale of 1 to 10 building, marketing, and servicing cars being a 10 for comparison, computers somewhere between 2 and 4. Add in the problem of electricity supply and other problems of chemistry, and physics: Well, good luck with that. Tesla hasn’t sold nearly enough cars to know what they will experience down the road to know what they will be facing in the dealer/support/manufacturing areas if they ever sell more than a few thousand cars a year, not a clue.
TIT, Nonsense! The Tesla Model S earned a 5-star safety rating, both overall and in each individual category, from the National Highway Traffic Safety Administration (NHTSA).
What dealer issues? The only issue is that they’re breaking the paradigm of a dealership network and some (Republican-led) states are trying to prop up their donor friends that own dealerships from the legacy auto industry. Tesla has already won this tussle. High correlation between states that aren’t allowing Tesla showrooms and states that didn’t accept ACA Medicaid Expansion money.
What service issues? In the (reportedly infrequent) need for unscheduled maintenance, a guy shows up with a rental car for the owner to use, they haul the dysfunctional car away on a flatbed and bring it back a few days later, freshly detailed and working flawlessly. Tesla makes roadside calls. Dealerships don’t.
What manufacturing issues? Tesla makes all they can sell and have a multi-month waiting list. That’s a good thing. They make more cars every month than they did the month before. That’s a good thing. They have zero inventory sitting on a dealers lot that they hope to sell someday without too much discount. That’s a very good thing.
Where is this mire of which you speak?
Lutz is a has been that blew it big time. GM will never recover from his short sightedness.
I will give you there is some concern that Teslas robotic manufacturing workers may unionize. Even Elon Musk worries about that.
This guy is an expert. He knows all about money pits. 😏
When it comes to all thing Apple, it never ceases to amaze me that the “experts” in any given field simply refuse to learn from the idiotic quotes made by “experts” in other fields. Ballmer, Colligan, Goldstein, Baslisle (sp?), the “once upon a time” chair of Nokia….all made ridiculous fools of themselves by short-sighting Apple. Here’s another to add to the pile.
Its really easy to slam Lutz for various reasons, however he makes some good points that come from experience, and some are really obvious.. The cost of these cars is prohibitive.. The market is still next to nothing for these vehicles. To achieve any mileage, they need to be small, thus, less safe. there are a slew of other reasons..
The idea that Apple is somehow going to change the paradigm for electric cars is not realistic, the industry also as noted is ridiculously regulated.. Hydrogen powered vehicles would be a far better way to go..
You should read more about Tesla Model S. It got the highest safety ratings.
When Apple announced the iPhone, people kept saying, smartphones occupy a niche, and that dump phones sell a lot more. But the game changed. Electric is the future. If Apple is getting involved, they’ve done their home work.
To be disruptive AAPL needs a non plug in solution such as a fuel cell. However px is not competitive. Article yesterday about cost challenges of plug in electric infrastructure.
Internal combustion cars with legacy problems are literally money pits waiting to be recalled. Battery technology will soon miniaturize and become more efficient on a curve akin to Moore’s Law, so battery cars will become more profitable over time.
Apple will bring disruptive technology to the car category that the competition cannot match. Perhaps the top of the line model comes in dent-proof liquidmetal – that would be nice.
Tesla and Apple have already cornered the a-stock of the worldwide battery supply for the next couple years. Do all these fancy automakers realize they are going to need to get to the back of the line for batteries? Whenever I read a “so-an-so” is the next Tesla beater in 2017 or 2018 – where they gonna get their batteries from? Most likely they will be releasing limited luxury models when Tesla and Apple are releasing $20-30K models on a large scale. Skate to where the puck is going to be… wayne gretzky
Is is very easy to trash the guy as a “GM executive loser”. But please answer why Apple is not now making a TV set, which is a much more natural extension of their business. Why? The same reasons they are not probably apply to cars as well. I think Lutz is right.
Apple isn’t making an Apple TV set because it hasn’t worked out a way to make a decent profit from doing so.
Apple is working on an Apple car because it has worked out a way to make a decent profit from doing so.
That is the only logic conclusion one could draw from their apparent continued development efforts.
Apple will not make a 40% margin on any car.
When Apple entered the mobile phone market in Australia, an executive import from the USA running the local Telstra carrier said re the iPhone that “Apple should stick to its knitting.” The rest is history…
Sure, the guy is thinking about all his GM stock going down.
Actually Bob Lutz worked at Ford, Chrysler, GM and BMW. He is not stupid by any means.
A car is ill advised unless they have some uber secret thing nobody else has figured out.
The ground is filled with corpses of car maker wannabes and shuttered operations. There is also a huge capacity glut for luxury cars- the only part of the market that has the kind of margins Apple usually expects.
When Apple announced the iPhone, people kept saying, smartphones occupy a niche, and that dumb phones sell a lot more. But the game changed. Electric is the future. If Apple is getting involved, they’ve done their home work.
The auto industry is a $2 trillion market. It is in the throes of a huge technology change. The industry is dominated by obsolete companies, management, and thinking. The industry is also tied to dying technology, plants, infrastructure, labor contracts, and distribution channels. It is perfectly ripe for Apple to step in with a revolutionary product featuring insightful thinking, design, and performance, and producing a superior “user experience”. If anyone can do it, I would put my money on Apple over Tesla, Google, and any existing car company.
The Internal Combustion Engine (ICE) is rapidly becoming obsolete as the market shifts to electric vehicles. It is just a matter of time. No car company is betting the future on ICE, according to Levi Tilleman who wrote, _The Great Race: the The Global Quest for The Car of the Future_ (Simon and Schuster). When the book was published in January 2015, there were already about 15 electric or hybrid-electric vehicles for sale in the US.
Incidentally, GM had some EVs when California made them do it, but GM destroyed them all as soon as they could, even when drivers begged GM to let them buy the cars (which were leased). So GM totally blew any lead they had at that time.
Most people do not know that burning 1 pound of carbon produces 3.67 pounds of carbon dioxide (CO2). It is basic chemistry so you can look it up for yourself. (Hint: don’t forget to add the weight of 2 oxygen atoms for every 1 carbon atom that make up CO2.) As 1 gallon of gas contains 5.5 pounds of carbon, burning 1 gallon of gas produces 20 pounds of CO2 when burned …even though we don’t see it because it is invisible, odorless, and tasteless. But CO2 does 2 things very well: traps heat in the atmosphere and causes acidification of oceans when absorbed by water.
The impact of burning carbon and producing huge amounts of CO2 is meaningful, given the relatively small amount of CO2 that exists in our atmosphere to begin with: CO2 accounted for only 280 parts-per-million (ppm) of the atmosphere before the Industrial Revolution. Humans burning huge amounts of carbon and producing staggering amounts of CO2 (at a multiple of 3.67!) has increased our atmospheric CO2 concentration by about one-third in the past 150 years, which is a meaningful amount. It explains how humans are contributing to planetary warming and causing oceanic acidification (our oceans absorb about ⅓ of atmospheric CO2), with huge adverse effects on the planet’s ecosystems. So things must change. And EVs and hybrid-EVs are here and growing. I saw the first electric truck was introduced in Europe recently, too.
e-cars have fewer moving parts than ICE cars, so should be easier to build and maintain. They should last longer, too. And even today, let alone tomorrow, cars already have a huge software component, which plays to Apple’s strength. (Is anyone else impressed with how Apple has improved device performance and battery life …simply through its software innovations? I, personally, think it is incredible.)
Cars of the future may not require traditional car dealers. An Apple car store would be well worth designing from scratch. I can picture a high-tech glass pavilion from which a few great car models are sold, each of which can be easily customized (sort of like the Apple Watch approach to few products in the line, with huge customizability).
Does anyone care that GM sells 1-in-every-10 cars on the planet? I mean, is GM in your stock portfolio? Didn’t think so. It is a mistake for anyone to think that Apple needs to match size, or wits, or whatever with the existing car manufacturers. All Apple has to do is what it always does: design one awesome product in the category that is so insanely great that discerning people want it.
Apple cannot afford NOT to make a bid in The Great Race to design, produce, and sell the car of the future. They are better suited than most companies, including existing car companies, to do this.
Tom H – What a great informative well balanced comment. Apple has proved time and again it can and will enter new markets and dominate through exciting innovation. Design led. Not sales driven. I am amazed at the sheer blind arrogance and hypocrisy of some of these “experts”.
Bob Klutz will rue the day he said this drivel. Reminds me of this…
http://daringfireball.net/2006/11/colligan_head_stuck
now…about those diesel emissions:P
What a jackass. Apple didn’t have experience in the mobile phone business in 2007. Look at them now. And why ask this guy anyway? His company had to be bailed out the the taxpayers! Union goons drove GM to the brink of bankruptcy, and guys like Lutz were too cowardly to put them in their place.
Apple’s greatest challenge will, be in the end, NADA (National Automobile Dealers Association). Thanks to Henry Ford, who forced them, during the Great Depression, to buy his entire production output, they lobbied heavily and got state laws on the books that prohibit car sales unless through a ‘franchise’ model (i.e. a dealer). Tesla is fighting an uphill battle against a very deep-pocketed NADA, and states are, one by one, passing (or amending) laws restricting direct-to-consumer sales (ostensibly, “protecting consumers”).
The amount of dealers’ power over auto industry is absurd. Automakers can’t open their own dealerships, they cannot shut down a brand unless all the dealerships for the brand agree to go out of business, or agree to sell their business to the automaker. Oldsmobile was a good example, costing GM over $1B in payouts to dealerships, and they still had to fight many lawsuits. It is now illegal in most states to sell cars online, unless the online retailer has a physical franchise dealership in the state.
Automobile retail industry is the cancer of the auto industry. Dealership protection laws (the ‘Franchise Laws’) are adding untold billions of unnecessary middleman cost to the industry. Cars would be cheaper and easier to buy if automakers were allowed to sell directly.
The franchise dealership model is a value subtracter in many instances and it is a discriminatory system as non-white and lower middle class buyers typically get less favorable deals when negotiating.
Predrag wrote: “Apple’s greatest challenge will, be in the end, NADA (National Automobile Dealers Association).”
Apple reps have been spending lots of time in Washington DC lately. One sign that Apple is serious about a car will be legislation attacking the car dealer requirement. Californian politicians in the Senate and Congress will have a huge incentive to introduce such legislation – Tesla, Apple, etc.
CA is one of 26 states that _allows_ direct sales to consumers.
See fuller post from on next page.
How predictable was that??
The moment I saw Lutz in the title I knew there’d be howling from the MDN crowd.
Sorry chaps, Lutz is absolutely correct, on every point.
1. Not one car company has made money on EVs. Tesla is losing $4k on every car sold. Look it up. What does THAT tell you? Market leader Nissan is also losing money on every Leaf.
2. Tesla excepted, EVs are only being produced to satisfy eco regulations.
3. There is no reason to think that Apple can switch from electronics to cars and make it work. None. The iPhone, iPad and Watch are still devices, so the tired old ‘they’re not going to just walk in” quote from a decade ago is irrelevant. Cars are not small electronics that can be built for a dime in China.
4. MDN’s question, “Who said Apple is going to make an “electric car” as people like Lutz think of them today?” is amusing. Nobody has said anything of the sort, Lutz included. Apple is mum, the press gets wind of Apple talking to car people and hiring car people and boom, we’ve got the iCar.
THE only way for Apple to bring something new to the car market is for them to be quietly sitting on some amazing new battery tech. What else? Composite materials? Remarkable aerodynamics? Autonomy? Yawn.
I’d love to be wrong here but I’m going to “iCal” this one right now and be back if/when iCar hits the streets having burned through $30b or so of Apple’s cash.
There’s a huge difference between losing $4K on every car and spending more than the profits are currently covering. A look at Telsa’s Income Statement:
https://www.google.com/finance?q=NASDAQ:TSLA&fstype=ii
Current quarter has (in millions):
$954.98 revenue
$741.61 cost of revenue
———————
$213.37 gross profit
So they are making a profit on the cars they sell. The thing is they’re still in startup mode and thus are spending more than their profits are bringing in. That money’s going to things like:
1) ramping up production of the Model X
2) developing the Model 3
3) building the Gigafactory
4) expanding their supercharger network
Another way to look at it:
1) You run a small cookie bakery
2) Your first quarter you sold 10,000 cookies
3) Your profit was $20,000
4) Your cost was $10,000
5) Your gross profit was $10,000
6) You borrowed $100K to build a bigger bakery
7) The media spins it that your bakery lost $90 per cookie sold.
Apple needs new fields to conquer.
Perhaps a car is just the first step.
The future of tech are intelligent machines: robots and their kin .
Those who think they even electric cars are ‘too complicated’ aren’t going to own that future.
Lutz is afraid that no one is going to remember him in a few years so he went on TV.
I think he just succeeded.
First, what most people don’t get it is that ONLY Apple has high margins in their hardware market segments. NO ONE else has Apple’s margins in personal computers, mp3 players or smartphones. NO ONE. Samsung made good margins for a couple years but has now fallen back into the typical pack. So, for those who think Apple is entering into a low-margin business does not understand that ONLY Apple knows how to make high margins in hardware in their business segment.
Second, Apple is not going to build an internal combustion gas engine. An electric car simply needs controls to move the wheels at varying speeds and then be able to stop. That is ALL. Everything is handled by software. The rest are OFF THE SHELF parts. The hard part was the engine and transmission – NO LONGER NEEDED (well, in the combustion sense of mixing air/gas and driving pistons). An electric car is just software and batteries. Look at Tesla. They can simply download software that makes your car go faster. Can GM do that? No. The rest of the car is simply comfort and safety.
http://my.teslamotors.com/sv_SE/forum/forums/where-can-tesla-sell-cars
Most states — 26 — allow Tesla direct sales to consumers. These include the entire West Coast: CA, OR, WA; plus ID and CO. It also includes NY, MA, and FL (among others) on the East Coast. And a number of states in the midwest and southeast. My guess is that about 60%, or maybe a bit more, of the US population could buy a Tesla in their state today if they wanted to, since populations are highest on the coasts.
24 states disallow direct sales at present, but Tesla is fighting 2 of these states (looks like New Mexico West Virginia). These may be precedent-setting cases, after which other states may have little choice but to revise their anti-competitive laws ?
In any event, this sort of “strategic game” scenario suggests it is just a matter of time before “NO” states change their laws. People who really want a Tesla will buy it in another nearby state. People in NJ can simply buy their Tesla in NY or PA. And maybe Tesla can work around some states’ laws against direct sale to consumers by “leasing” their vehicles instead.