Driverless cars could be the smartphone of the future, or at least it seems that this is what Apple is banking on. One thing is for sure: Apple, Inc. wants a piece of the automotive pie. Since the company has amassed overseas reserves of over $210 billion over the years, it can afford spending on expensive projects.
Courtesy of Steve Jobs, Apple has always been very secretive of its projects, which is why nobody knows what is going on with the company’s latest one, dubbed Titan. It has worked out well in the past to withhold information about its products from the general public, sales of previous iPhones have proven so. Being able to surprise consumers with theatrical unveilings emphasizes the unique role of Apple on the market. But where do you draw the line between giving it the benefit of the doubt and putting its shareholders at an informational disadvantage?
There is a very blurry line between facts and speculation when it comes to Apple.
Let’s see what we know so far:
- The project is said to be scheduled for release in 2020.
- Some 1,000 engineers are working on Project Titan.
- R&D spending has been tripled compared to last year to $9.7bn this year.
- Apple has registered a number of domains such as apple.car, apple.cars and apple.auto.
- The company is hiring engineers with automotive background and poaching car experts from Tesla, BMW and Ford.
- Several locations of interest include a secret lab in Berlin, another one in Vienna, a former Pepsi bottling plant in Sunnyvale, CA and an Irish plant in Cork that received a €300 million investment in 2014.
- BMW and Daimler have refused an offer to work together on the project.
- A partnership between the company and a South Korean battery maker was made.
- The company has 10 technology patents regarding a self-driving platform.
- Apple has expressed interest in testing at GoMentum, a testing facility used by Tesla and Google.
Regardless of the fact that the software was not responsible for any of the fatalities, news of people dying in self-driving cars are casting a shadow over the concept. Needless to say, there are ethical and legislative issues involved, but we still have a couple of years to go. The fact that Tesla is having quality and production issues despite being the best electric automaker further supports the notion that there is still a lot of development to do. Nevertheless, Google has been very busy with patenting its work and working closely with authorities to ensure there are no contradictions – something Apple should be doing too.
There are a couple of reasons why it might look unwise for Apple to attempt to enter the automotive industry. First of all, the company has completely outsourced manufacturing of its products and therefore has no experience in the field whatsoever. Traditional automakers have a huge lead here, it’s highly unlikely that Apple will be able to catch up, although the arrival of Chris Porritt, Tesla’s former VP of vehicle engineering, David Masiukiewicz, Tesla’s former senior CNC programmer for hardware prototypes, and Kevin Harvey, Andretti Autosport’s former CNC machine shop supervisor might offset some of the disadvantage. In fact, Apple has poached so many car experts from Tesla that Elon Musk calls it the ‘Tesla Graveyard’. Moreover, the electric car industry is currently not profitable (Tesla, the leader of the market is losing 23% on each and every car it sells), and everyone who has been paying attention to the IT world knows that Apple is not a charity organisation (see AirPod). In addition, it’s hard to see why it would make a better autonomous vehicle than traditional automakers or Tesla. Daimler CEO Dieter Zetsche put it like this: ‘If there were a rumour that Mercedes or Daimler planned to start building smartphones then [Apple] would not be sleepless at night.’
We must also remember that the company won’t be able to retain the attractive profit margins it previously enjoyed. Apple will be forced to surrender its current rate of 18% and price its car according to the industry average of 5% if it wants to offer competitive prices. Most large automakers are earning percentages similar to the industry average (General Motors: 7%, Daimler: 6%, BMW: 8%, Volkswagen: 2%, Toyota: 8%, Ford: 5%).
Car manufacturing requires an incredibly complex supply chain. Since the automotive industry is quite old, these supply chains are overlapping with business networks – business networks that Apple cannot buy its way into. They are not just a matter of money, but the result of years and years of partnership and close cooperation. Automakers even have the option to put pressure on their suppliers to discourage them from partnering with Apple.
There is reason to believe that the project changed direction when former head of Blackberry’s automotive software division Steve Zadesky was replaced by long-time Apple executive Bob Mansfield earlier this year. Simultaneously, the company also let go of some of its engineers. It now seems that Apple abandoned the original goal of making an entire car, a somewhat greedy and risky idea in the first place. This change of direction might make it easier for the company to monetise its product, since potential partners would be more likely to cooperate if the threat of a potential competitor ceases to exist.
The engineers are focused on developing a platform instead – this would enable the company to supply the tech to a new electric, self-driving car made by someone else. However, when attempting to go down this road, both BMW and Daimler quickly showed Apple the door, making it very clear that they are currently not interested in a partnership.
An emphasis on connectivity and modularity of the platform should further increase the marketability of the product. Apple is playing on home ground when it comes to connectivity and needs to make up for the lack of experience in other fields anyway. Offering an advanced self-driving platform with great connectivity capabilities could be a crucial bargaining chip when negotiating with possible future partners.
All in all, the obstacles on the road towards an iCar seem insurmountable. A lot can happen in 4 years, so it might be too early to go digging graves, though. Supplying some of the tech to the car could be a middle ground that automakers accept. Nevertheless, it would be very convenient for car manufacturers to shop for auto parts and company phones from the same vendor.
What is your opinion about Apple’s car plans? What do you think the correct direction would be?
References:
http://www.macrumors.com/2016/01/08/apple-car-cars-auto-domains/
http://english.etnews.com/20160809200001
http://www.businessinsider.com/bob-mansfield-to-lead-apple-car-project-2016-7
http://www.techinsider.io/apple-hiring-people-with-car-experience-2016-4
http://www.businessinsider.com/apple-steve-zadesky-quits-2016-1
https://electrek.co/2016/04/19/exclusive-apple-tesla-vp-chris-porritt-car-project/
