Why cars are Apple’s next big market

“Few industries are as highly regulated as the global automobile industry. Just this week, Volkswagen discovered it could be facing a federal criminal probe for allegedly cheating on toxic emissions tests,” Dawn Chmielewski writes for Re/code. “So why would Apple, the envy of the corporate world for making gadgets everyone wants, bother to venture into an industry so fraught with pitfalls? Some $2 trillion in potential annual sales, or even a fraction of that, has convinced the iPhone maker to move from the exploration phase to committing to a deadline to deliver an Apple-branded car.”

“Apple has made a practice of slipping into a sleepy market and making it its own. It has had amazing runs in PCs, digital music players, tablets and phones. But the global smartphone market, which accounts for nearly 70 percent of Apple’s revenue, is slowing down,” Chmielewski writes. “Sales are expected to rise 10 percent this year industrywide, down from the comparatively torrid 27.5 percent rate of 2014. Clearly, Apple needs big new markets to upend to justify its status atop corporate America and grow its $657.8 billion market capitalization.”

Chmielewski writes, “The global automotive market fits the bill.”

Read more in the full article here.

MacDailyNews Take: Or Tim Cook is just humoring Jony. 😉

The reason is the same reason it’s always been: Apple has, or thinks they have, something(s) unique to the category that will make a significant contribution to society.

SEE ALSO:
The deeper reason for an Apple Car – September 23, 2015
Volkswagen emissions scandal spotlights need for an Apple Car – September 23, 2015
Morgan Stanley: Apple Car, if true, ‘one of the most important moments in transportation’ – September 22, 2015
Former GM Vice Chairman Bob Lutz: Apple Car ‘is going to be a gigantic money pit’ – September 22, 2015
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

30 Comments

  1. Pffft, Tim “the steward” Cook will screw it up like everything else he touches. Apple has no business extending itself into yet another market it is utterly clueless about. Watches should have been the.canary that notices investors that Apple is a ship without a captain, darting aimlessly for another cash cow that will never materialize. Especially if Tim Cook stays CEO.

    1. Progressive companies need to take risks. People said what you’re saying to Steve Jobs about the iPhone but those people were wrong. I understand your frustration, but I know I can’t predict the future. Sometimes even a blind squirrel finds a nut. Apple can afford to experiment and I find it a bit more reasonable than stock buybacks. For $200 billion, Apple could have easily started its own car company by acquiring one and changing the name. I feel Apple should have done almost anything other than throw away money on stock buybacks but the Board of Directors must have agreed to it, so there’s nothing I can say.

      I don’t think Tim Cook is going anywhere, so you’re out of luck. Maybe we should just hope for the best but always be ready for the worst.

      1. Buybacks make sense when shares are undervalued. Apples shares were, and are, undervalued.

        If Apple can take a share out of circulation that’s rightly worth 50-75% more than they paid, it can provide the best return on thirds dollars. All of the remaining shares are worth more, and they never have to pay a dividend on the shares they’ve bought back (forever).

        A buyback is Apple admitting the best possible place to invest those dollars is in Apple.

    2. Joe,

      It must be hard for you, going through life with so little mental capacity.

      Perhaps it’s escaped your notice, but when Apple enters a market, they hire the top experts in that field. They did this for retail, phones, media players, and if they get into cars, you can bet that they’ll be employing the best automotive engineers and designers in the world, because they can certainly outbid anyone else for them.

      -jcr

      1. John, I wish you were correct, but you are not. What “top experts” are you thinking of? Hiring a few auto engineers from other companies is not what it takes for auto leadership. Hell, Apple can’t even get Maps to work accurately or allow the user to input multi-waypoint routes. What makes you think that they have the brainpower to out-compete the real innovators of the auto industry?

        Apple today takes almost all its profits from the iPhone and the iOS app store, which is essentially just skimming 30% off of 3rd party programmers innovation. Apple has lost its nimble abilities and is just looking for ways to burn its cash other than donut shaped offices.

        Think a minute at what Apple has done since Jobs created the iOS app store. Cook put a hardware designer in charge of software GUI that the majority of users dislike or tolerate, but definitely few love. Churn on Retail leadership has been embarrassing – so Cook blew his wad on an empty pantsuit who has done precisely nothing since she arrived. Cue has paid more attention to his Ferraris than he has the Apple media business, as evidenced by the slow and unimpressive evolution of Apple TV, which is getting outsold handily by the competition. The Watch hasn’t earned Apple a dime so far, but by categorizing itself narrowly, it’s #1. But in a major metropolis, I have seen a total of three in the wild, none of whom praised it at all. Mac Pro and pro-level software are in free fall. iPads are being outsold by the competition due to poor hardware specs – up until the iPad Pro, Apple’s screens and memory were inferior. Now just the memory spec is inferior. iCloud is a joke. the $3 billion spent on Beats would have been better spent on Syria refugees, the shiteous Apple Music being clearly led by clowns who have no clue how music collectors want to manage their collections. Likewise Photos is atrocious. iWork still doesn’t have all the features it had 6 years ago.

        What exactly does Apple lead anymore? One thing: nice hardware design. And even that is going off the rails now that products are being offered with inferior performance and battery life in an endless quest to make devices paper thin. Enough is enough. Apple has lost its leadership. Getting into the car business to keep Ive interested in staying on board is not where Apple needs to be. Apple needs to fix its businesses: better software GUIs, better security, more memory for affordable prices, more pro level software and hardware, less OS bloat, industry-leading specs, and so forth. Apple no longer leads, it follows. If and when Apple ever releases a truly new and innovative product again before the competition, then you can claim that Apple is still an innovator. Right now it’s bloating into the next Microsoft.

        1. Green:

          This is what I’ve been saying for a long time. You nailed it. I have been vocal about why Apple bought Beats? Why Apple? Crappy headphones that you don’t create… makes no sense. But wait, it was all about recreating Apple’s iTunes right?

          Well, that backfired, didn’t it Tim? A bunch of people who all think they know what they’re talking about and you get a product like Apple Music. It’s the worst product I have ever seen from Apple. A confusing hot mess of painful suffering for users.

          The Apple Watch… no need for it other than for Cook and his runs. Just get a Fitbit and link it to your iPhone with the App.

          And Angela Arendts… Since day one I have been saying I have no idea why Apple hired her. She knows nothing about technology. All those stupid videos and Emails she sent to staff… what a waste of skin and money. Jesus: Apple Board of Directors, PAY ATTENTION, you have the wrong person leading Apple. Tim Cook is not the person to lead Apple. He is “not a product guy” as Jobs worried and exclaimed in his biography.

          Well Mr. Jobs, you were right. Bang on. Your intuition about Cook not being a product guy is correct. And it’s causing your company to lose itself.

          When we look at Apple products, I wish we finally had better screens on iPhones… ones that don’t wash out in daylight or other lighting conditions. Samsung has AMOLED… Apple needs to do something here…

          Anyway, the very fact that most of Apple’s top and bottom line are from the iPhone and App Store, something Steve Jobs created, is a testament and evidence of just how good Jobs was. This is still Jobs’s Apple. Apple and Tim Cook are still riding his coattails. Imagine if there was no iPhone… Tim Cook and Apple do not have an answer to the iPhone.

            1. But edeas, you said: “Anyway, the very fact that most of Apple’s top and bottom line are from the iPhone and *App Store*, something Steve Jobs created…”.

              So I was simply responding to your statement. But if you want to change your mind, we get it…

    3. I agree that Cook is steering a ship in a few different directions rather than staying course. At the least, he’s unsteady on the steering wheel.

      The Apple Watch is the very first thing under Cook that is a new category product. While MDN will say they love it, the market is saying otherwise. There is no metric that shows it’s selling well. Everything we know is that it’s selling just ok. The reason the Apple Watch isn’t doing as well as some had hoped is for two simple reasons:

      First, watches do not make good computing platforms, period. The screens are way too small and the way they need to be used is awkward. Nothing will change this. Second, they don’t do anything really any better than a smartphone. In fact, they seem to do most things WORSE than a smartphone. They thus have no reason to exist, especially when you’re paying up to $1000 for a huge screen smartphone with 3D Touch. The last thing you’re going to be doing is letting it burn a hole in your pocket. You’re going to use it not just because of how much it costs, but simply because the smartphone is the modern human’s swiss army knife. Smartwatches are dead.

      This is a problem in that Tim Cook has failed to understand this, taking his company down a path of smartwatches that will likely end up being a rabbit hole: a discontinued product.

      Now we have Apple Music. Yet another Cook new category product (paid streaming music). With all due respect to you folks and Apple, the UI and UX of Apple Music is terrible. I can’t use it as much as I’ve tried. It’s horrible. If they revamp it I’ll take another look. But right now it’s not a good product.

      When it comes to the car, Tim Cook has shown through the Apple Watch and Apple Music that his vision is flawed (and Apple’s as a whole) and his ability to do a good version 1 new category product isn’t good. Or version 2, etc.

      I also think that Apple doing a car would be very cool. No doubt, they will bring innovation into it and launch an iconic design with lots of technology. But I see some clouds on the horizon for them. For one, Cook leading Apple will likely result in a product that isn’t near as groundbreaking compared to if Jobs was at the helm. I think this alone will be a major problem for Apple’s Car.

      The other thing is that not all automobiles suck. This isn’t like the cell phone industry. In fact, there’s some pretty incredible vehicles out there. From Porsche, to the Tesla Model S, to the Volkswagen New New Beetle, the Lincoln MKC, even the Kia Soul, and so forth. I’ve also seen some incredible prototype videos from Nissan, Toyota, Volkswagen, etc. even from years go. Stuff that is mindblowing like wheels that turn 180 degrees that eliminate parallel parking; pivoting seats and dome shaped cockpits; huge in dash screens and sleek designs…

      These auto companies have massive patent portfolios and a ton of innovation under their belts. The car is perhaps the most sketched up product in terms of the plethora of designs and vision for the future. All of this means that Apple is entering into a world that is so well established I see problems for them. They won’t be able to be that much more innoative than the big automakers. That’s one problem.

      The other problem is they can forget about having an edge with design. There is so much prior art. So many car designs both real and imagined. And so many cars with incredible designs as it is, they will struggle to have any kind of design edge.

      I think the Apple Car would be very cool, but I’m not sure that it’s even needed anymore. Automobiles are getting quite remarkable without any help from Apple. I’m not sure it’s an industry that needs “fixing” and because of that, there may be no reason for Apple to enter the industry. If they do, they do so at a massive upfront expense in R&D, sales, marketing, and distrubtion.

    4. You would de surprised hearing this from me, but it was also said that Apple should stay out of the phone business. I do agree though, for other reasons.

      If history is any lesson, by analogy:

      -We would have to buy Apple fuel (in whatever form)
      -The car will only drive on pre-approved roads

      Regulation will not allow Apple the level of control they desire. If there’s car tech coming out of Apple it will be on something they have complete control over, and which would further lock-in the customer into the ecosystem.

  2. And when that happens, all you anal ists and know nothing ‘pseudo journalists’ will be eating crow once again.

    Maybe now ad blockng will force publishers to hire bona fide journalists that investgate sources and facts for their garbage ‘articles’ and raise the bar before spouting ignorant shit and basless speculation about Apple and everything else, becuase they’ll actually have to earn their keep with quality content…

    1. If Apple releases a car and it turns into a hugely profitable business, then the analysts will once again be able to dismiss Apple’s business as a one-legged stool which offers no scope for future expansion.

      They do that every time that Apple enjoys a runaway success. The iPod was dismissed as a one legged stool and in recent years, the iPhone business has frequently been talked down using the same description.

      However wrong they have been and no matter how many times Apple pulls off what many imagine is impossible, the analysts will always find a way to reach new heights of absurdity.

  3. At one time in America in the early 1900s there were well over a thousand car companies. Anyone with a dream, some cash and ambition could build a car and sell it. Apple has vision and plenty of money to spend and they certainly have a chance of creating a new car company although there’s no guarantee of success.

    I have to laugh at these pundits who say Apple has no chance at all to build a decent vehicle and there’s already too much competition. No one with a dream should ever give up because someone tells them they can’t do it. Apple has to at least try to build a vehicle and let consumers decide if it’s worth it.

  4. A car is just a huge gadget. That is basically all it is. Apple can play the game of bringing fresh, new, and innovative ideas to this particular gadget’s design, functionality, and “user experience” as well as anybody — in fact, better than any company that exists today, whether it is Tesla, Google, or any existing car companies. Apple has as good a chance, even better, than anyone out there today in creating a cool modern car.

    Does anyone out there think Apple could not line up manufacturers in China who would _love_ to do this manufacturing work?

    The beauty of electric vehicles is that most of the complicated moving parts related to traditional internal combustion engines (ICE) — the parts that required the most routine maintenance — are unnecessary. With EVs, you need batteries & motors, which can last for many years without requiring any maintenance at all.

    When Prius’s first came on the market, some people made a big deal about how long the hybrid battery would last, and cried that replacing the hybrid battery at 100,000 miles would be extremely costly. But all the critics were wrong. The Prius hybrid battery lasts a long time: up to 300,000 miles are reported. Each battery consists of 28 individual cells, and the least-performing cell dictates the total battery performance. But it is easy to test and replace low-performing cells, for as little as $30 (diy) to $50 (the hybrid shop) each, to regain full performance. I recently bought a 2001 Prius with less than 100,000 miles on it for $2600 for a (poor) friend who desperately needed a car, which had its hybrid battery “rebuilt”, and she is getting 52 miles per gallon in that 14-year-old Prius.

    The point is: EVs should last a lot longer, with a lot less maintenance, than traditional ICE cars.

    I really think Apple is in as good a position to make a contribution to “the car of the future” as anyone out there. And is probably better-suited than most.

    1. TomH:

      The fatal flaw in your conclusion that EVs should last longer with a lot less maintenance than traditional ICE cars is one thing: batteries degrade: every. single. day. That’s whether they’re being used or not. With use they die even faster. The batteries on electric cars are the most expensive component. The battery in a Tesla Model S costs on the order of $25,000+ alone.

      1. Sorry, edeas, you are wrong. Have you ever owned an EV or hybrid EV? If not, then you just don’t know what you are talking about.

        My 2007 Prius has routinely achieved over 50 mpg every year. The hybrid battery still runs like a champ. Been getting 61 mpg for the past 4000 miles under very good driving conditions here. And the used 2001 Prius I just bought for a friend gets 52 mpg, too.

        Aside from the hybrid battery, the 1.5 liter internal combustion engine is optimized for efficiency, not “high performance”. The car has only needed oil changes and a set of new tires since 2007. Part of engine efficiency may be due to the car’s electronic-continuously-variable transmission. The car does not shift: gearing and engine output are optimized over a continuous range.

        I loved my previous car, which was a Mercedes Benz. But my Prius is a lot greener and a lot less maintenance.

        Prius hybrid batteries are lasting 200,000 to 300,000 right now. You can replace the entire Prius hybrid battery for $1700 ($1400 for 28 cells @ $50 each, + 300 service charge). You can also replace individual battery cells (there are 28 in total) for $30 if you do it yourself, or $50 at a shop, like the franchise: “The Hybrid Shop”. (Check it out online.)

        Batteries and motors are not the expensive “doomsday” issue some people make them out to be. And we are in the middle of a huge innovation in battery technology. It is all feasible now, and getting better.

        1. TomH:

          Your comparison and analysis fails. You are comparing a hybrid vehicle that uses cheap, NON-LITHIUM ION BATTERIS with a ICE engine to a 100% electric vehicle THAT USES LITHIUM ION BATTERIES. A 100% electric vehicle requires expensive, large battery cells that are LITHIUM-ION.

          “Expect the Toyota Prius to use lithium-ion batteries when it’s redesigned for the 2015 model year. That’s the latest from Hideki Iba, general manager of Toyota’s battery division, though he cautions that the new battery technology may not make it to entry-level Prius models DUE TO COST.

          The switch to lithium-ion batteries would be a big one for Toyota, as the Prius has used nickel-metal hydride (NiMH) batteries since it debuted as a compact sedan for the 1999 model year. While many competitors already offer the newer lithium-ion technology, Toyota has stuck it out with NiMH — PRIMARILY DUE TO PRODUCTION COSTS.”

          When it comes to cost of maintenance, a study conducted at the Institute for Automotive Research (IFA) at the Nürtingen-Geislingen University in southern Germany put EVs at a POTENTIAL 35% less cost for maintenance.

          The problem is:

          -EVs cost more to buy upfront, and this will be the case for several more years;
          -The typical things that need maintenance such as tire rotatation and replacement, wheel alignment, fluid fills like washer fluid, brakes, and so forth are required on an EV, not just on ICE vehicles. Tires may wear even more on EVs because of instant torque and heavier vehicles;
          -EVs are not free to drive. It cost money to buy the power to charge the batteries; and
          -EVs require battery maintenance (checks, replacements, etc.).

          Regarding cost of mainteance of EVs and the LEAF:

          “What Nissan does not tell you is there is more to it than that, and it will cost you. We looked at the Nissan Leaf’s two-year service schedule and we noted that the brake fluid will have been changed twice, 33 inspections would have been performed, the cabin air filter replaced twice, and the tires rotated 4 times. The Prius, like all Toyota/Lexus/Scion vehicles comes with two years, or 24,000 miles of scheduled service free. That includes everything, and there is no charge.

          Don’t believe the marketing hype, or owners that write into blog sites saying they just ignore all the required maintenance. Internal combustion engine maintenance costs have dropped dramatically over the past decade. Tire rotation, inspections of drive components, brake fluid changes, HVAC filter changes, and tire replacements even up the EV to ICE car cost ownership costs over the long run. The two market leaders in electric vehicles do not offer maintenance costs saving in the real world.”

          I’m all for EVs and change. I like EVs. But they cost a bundle to buy upfront, have crappy range, and will end up stressing the power grid. They are also not free to drive. Lights are going to go out. Tires need rotating. Fluids replaced. Filters. And if you think there’s “no moving parts” in an EV think again. I’ve driven a Leaf for a while, and there’s lots going on under the hood. If the connector fails to charge, you’ll be calling a tow truck and need service.

          These are complex machines, just like ICE vehicles.

  5. Who knows what Apple is planning? Plug-in EV? Fuel-cell EV? Hybrid EV? You think you know what Apple is going to do. But no one knows. Levi Tilleman, who wrote the book, _The Great Race: The Quest for the Car of the Future_ (2015, Simon & Schuster) has noted that EVs will be simpler and cheaper to build and maintain than ICE vehicles. If you disagree, I suggest you take it up with him. Or write your own book to challenge his statement.

    15 years ago, there were no EVs or hybrid EVs available in the US. Today, there are about 15 models. Do you really think they are all anomalies, with their makers facing a doom of biblical proportions, with human sacrifice, cats and dogs living together, and mass hysteria? Or can you accept that they may reflect an important market trend?

    Yes, there are challenges. But they are not insurmountable. The technology is available and improving rapidly.

    I understand people really _love_ their Teslas. Even today’s range is not an issue. And since many families have 2 cars, there is no reason one could not be an EV, regardless of current limitations.

    Hybrid EVs are a transition phase. Anyway, they are a huge improvement, in terms of pollution, compared with cars with internal combustion engines, so I don’t see the need to split hairs. 1 gallon of gas produces 20 pounds of CO2 when combusted, and the planet needs to seriously re-think our use of hydrocarbon fuels. Even the Pope thinks so. It would not bother me if Apple came out with a great hybrid EV, or plug-in hybrid EV, or whatever. Does not matter. Apple will push the design and technology envelope as it becomes available.

    Over and out.

    1. TomH:

      Yes, we get it. You’re not special because you like EVs or think they are the future or quote some book meant to make money. I too like EVs and see them as the likely future. But that future is not here yet. We are still years away from it.

      RANGE IS A PROBLEM. You talk about Tesla but to get a Tesla is at least $70,000. It’s incredibly expensive and out of reach for many. There’s nothing special about it. It has the range because it costs so much money. You’re paying for batteries. The costs will eventually come down, blah blah.

      The best sellling EV, the Nissan Leaf, in REAL WORLD performance, will give you about 120 km range (go do the conversion into miles Mr. American). You can commute for a day or two of average driving, but having to charge it up so much is annoying. I know because I’ve driven one for some time. It’s annoying. Always having to plug it in. And any long trips are a major problem.

      But in the end, there will be socio-political issues with lithium mines. There will be stresses on power grids. We’ll be polluting the earth with emissions in terms of generating power to charge EVs. To make their batteries. And so forth. EVs are simply a modern version of ICE and the oil industry. It’s not a complete solution but one that shows promise.

      Regardless, currently, EVs still cannot compete with ICE vehicles on price and range. Period.

      1. “I too like EVs and see them as the likely future. But that future is not here yet. We are still years away from it.”

        There are now nineteen (19) different plug-in EVs for sale in the US in 2015-2016. The first 100% EV was marketed in 2010. Things are moving fast. See: http://www.greencarreports.com/news/1080871_electric-car-price-guide-every-2012-2013-plug-in-car-with-specs

        5 sell for less than $30,000
        6 sell for between $30,000 and $35,170
        8 sell for prices up to, and over, $100,000

        Affordability does not appear to be an issue. Yes, range is limited. But it will improve with time and technology. Still and all, the existing driving range is adequate for a lot of people.

        For those who need a longer driving range, there are many hybrid-gas/electric EVs on the market. (Prius alone has 3 hybrid gas/electric EV models: the Prius, Prius c, and Prius V; and Toyota also offers hybrid gas/electric EV options in their Camry, Avalon, and Highlander. And this does not account for all the other car manufacturers’ hybrids.) These hybrid gas/electric EVs fill-in the continuum between pure ICE cars and our EV cars.

        Incidentally, the range on my Prius is about 500 to 600 miles. That is about 40% to 50% more than for the standard ICE car with a driving range of about 300 miles. I’ve reduced the frequency of my car fill-ups by nearly half (despite the small tank size, which is less than 12 gallons; my typical fill-up is 8 to 9 gallons), which is an unexpected, but very nice, benefit of the car. Been getting over 50 mpg since I upgraded to Prius (from my Mercedes Benz) in 2007.

        I just don’t understand what you mean when you say EVs are not here yet.

  6. Look, you all see every quarter what happens when AAPL misses a “target” or has “disappointing” profits. AAPL is still down more than $20 per share and down even further today.

    What the heck do you think will happen after Apple dumps God-knows-how-many-billions into a nascent car project that fails to yield spectacular profits – or ANY profits at all – for years. And what happens if the aforementioned “disappointments” continue periodically?

    This is shareholder money Apple is playing with and, as a shareholder, I am not comfortable with this potential scenario.

  7. There is nothing wrong with Apple trying to make a ripple in the universe with a car project.

    I just do not see it happening out of Detroit, Washington, or even Redmond.

Reader Feedback

This site uses Akismet to reduce spam. Learn how your comment data is processed.