This week, I covered the news that Apple really does seem to be moving forward with its project to build a self-driving car (Confirmation of Apple’s Autonomous Car Plans). ‘Project Titan’, as it’s known to us mere mortals, will be an electric vehicle that can cart users in relative comfort from point A to point B – presumably while telling them how cool, hip and trendy they are being.
The rumour began in February this year, when the Wall Street Journal reported that Tim Cook had given his approval to the project back in 2014, and that the company planned to recruit as many as 1,000 people to work on the car. That’s pretty stunning news from any company, but especially for one with no background in the automotive industry.
First, let’s look at the reasons why it makes sense for Apple to invest money into the car market. The company certainly has the capital: more than $160 billion, just sitting around. They could buy a small country, so realistically, devleoping a car should present no problems – at least on the cash front.
Second, the car as we know it is due for an overhaul. Discounting some improvements to efficiency, safety and power, we’re still driving the same thing today as we were in the mid-20th century. Apple is known for its beautiful, simple but revolutionary products. The automotive industry might be the perfect target for such a visionary company to tackle.
Third, Tim Cook is an environmental evangelist. Earlier this year (http://tinyurl.com/kp44q52), he announced plans to invest $850 million in a solar power plant that will generate enough energy to run all of Apple’s operations in California. Cook went on to elaborate on Apple’s green stance: “…I know this is a financial conference, and I’m sure some of you are interested in…’Is that a good use of funds or not,’ and, y’know: quite frankly, we are doing this because it is right to do, but you may also be interested to know that it’s good financially to do it”.
Some compelling arguments, and put that way, perhaps you see the reasons that the internet had a collective meltdown back in February. Apple fans crawled out of the woodwork to scream about how their baby would smash the complacent automotive industry. Of course, as is often the case, the internet hadn’t let simple facts stand in the way of its claims.
iCar concepts have been making the rounds for monthsPoint one: Apple is an IT manufacturer, not a car company. With the company’s cash pile, this isn’t an insurmountable problem – it would simply contract the engineering and production to another company, as it has done with Foxconn and the iPhone. With the right deals, Apple could build a perfectly satisfactory car.
But this is Apple! ‘Satisfactory’ is not on its radar. The company wants to be disruptive – and in the car business, that means risky. Electric cars are slowly making their way into the mainstream, but even the world’s most prominent electric car company, Tesla – ‘the Apple of the car industry’ – has been operating at a loss for more than a year, despite rising sales and revenues.
Tesla’s upcoming Model X is more than two years behind schedule, and the company ended last year at a net loss. In fact, its most recent finance results, from the 5th August, showed a net loss of $184 million. Taking risks in the car business often means extended periods of trading without making a profit. How long would Apple be happy to do this for?
Point two: curated experiences. Apple specialises in staying with the customer throughout the buying process: see iTunes. That’s a lot more difficult to do with an electric car. You have loan vehicles, maintenance, service and, of course, charging. Apple and Tesla could join forces to roll out a fleet of new supercharger stations. It’s the stuff that green dreams are made of, but it takes control further out of Apple’s hands.
BMW has been trying to develop electric car services itself, under the ‘360 Degrees Electric’ branding. However, because many of these were run by third parties, they had a rough start. It may not have been BMW’s fault, exactly, but it reflects badly on the company. Apple certainly wouldn’t want that.
Finally, Apple’s very business model is counter to the automotive industry. The company likes to produce high-margin goods which it can control directly, like the iPhone. It usually creates new product categories or opens existing ones to the mainstream.
In many ways, the idea of the iCar is similar to the idea of the iTV. Both are relatively low-margin products, in industries full of legislation and rivalries. Everyone has one – they’re already a mainstream product – and they have a long lifecycle. It’s one thing to abandon a two-year phone contract; it’s quite another to try to get out of a lease agreement and have money left over to afford an iCar.
A TV is much closer in design and technology to Apple’s current product portfolio than a car. However, rumours have been circulating for more than six years, and we’ve seen no movement towards production. If the iCar were to become reality, expect a long, long wait.
If Apple is serious about entering the automotive market, then perhaps it should stick with what it knows. The infotainment systems in today’s cars are often terrible. Voice recognition is poor, touch screens are unresponsive and Bluetooth connections drop out. This also applies to Apple’s CarPlay! The company should buckle down and use its expertise in small screens, user interfaces and the user experience to redesign its CarPlay product, producing a a good-looking, simple and fully-featured central console. Car manufacturers would be fighting each other to take it up. – Tom Allen
