Whether or not Apple will break into the automobile industry is one of the hottest topics these days. Since the finding of Apple’s development team found working on an extensive automobile project, Apple has been silent regarding this effort, leaving it as anyone’s guess as to what Apple is up to. This has brought forth speculation from every corner of the tech and automobile sectors, but while only Apple knows what its offerings will be, a few signs suggest we won’t be seeing an Apple-branded car anytime soon.
First, the market may simply not be one that Apple is poised to tackle. Apple’s business model is built on a high markup for its hardware products (15-30%), while offering software and supporting services for free (or nearly free). With cars, the margin for profit is much smaller (6-9%), and in addition, would require massive investment into the infrastructure for converting raw materials into technology that has already been somewhat perfected by long-standing players in the auto market. Furthermore, automobiles are not sold directly by manufacturers, so Apple would have to determine a method of establishing dealerships, outfit its Apple Stores with test-drive lots, or otherwise determine a new sales and distribution method.
This sets the stage for the difficulty Apple would face by jumping into full auto manufacturing, and the burden this would put on its investors; so while nothing can be taken off the table, as with Google and its smart car efforts, one might not expect Apple to dive right in and create a car of its own. However, Apple does have much to bring to the automobile industry, but this is more in the way of software support services and computational hardware, as opposed to auto hardware.
If you look at what Apple offers to its consumers, Apple mainly brings portable computational power and connectivity services. As with Google and similar tech companies, the power it wields is to bring you closer to the data and information you are searching for, as opposed to bringing you an efficient mechanical device.
When it comes to autos, Apple’s strength is in services like Siri and CarPlay—efforts that integrate current Apple’s software and cloud offering with existing autos. Unfortunately, these offerings currently have been somewhat of an appendage to an existing car, where you still need to set your iPhone in a cradle and then basically interact with it through the car’s stereo and various controls.
These offerings are somewhat non-specialized in nature, and the implementation of these in autos has depended largely on the auto maker’s development. It has been somewhat hobby-like in development, it has not really taken off. However, it appears Apple’s current car project is a step in the direction to change this, and solidify its auto offerings.
Currently your iPhone does not know the type of car you have, its capabilities, and offers no direct interaction with the car’s systems. While the efforts are anyone’s guess, through a good relationship with a reputable auto manufacturer, Apple could implement these to bring an augmented automobile that can interact directly with you through your phone, iCloud, and Mac. You could possibly track it, run maintenance on it, monitor its status, remote-start and stop it if desired, communicate with anyone in it, have it compute exact locations of when and where to get gas for the cheapest trip based on your driving, teach you how to most efficiently drive your car, among many other possibilities. Right now you can buy an app for almost anything, imagine doing so for almost anything about or related to your car.
With years of auto experience behind current manufactures, for Apple to jump in and try to convert raw steel and glass into an automobile would be an almost impossible and very risky hill to climb. Perhaps eventually we may see Apple take on this effort, but for now we might expect only collaboration with current auto manufacturers to implement very special services into automobiles.
Apple can simply BUY BMW and make it a subsidiary to do its bidding. And to then have the manufacturing capability to make the Apple Car, BMW style.
I agree with the above. Apple has the cash to buy an auto company. And putting the Apple brand on a car would increase it’s prestige and value. It may be that Apple just doesn’t have enough opportunities to spend it’s cash on computer related companies
Topher, in my opinion, this is one of your most astute analyses of Apple’s business strategy. Of course business analysis is not your primary focus, but I think you hit this one right on the head. The better integrated Apple’s current products can be with the automobile in general, the more broadly their devices will appeal to consumers. Rather than offering one brand of Apple car, Apple products may eventually be a must have accessory in every car sold. How could they better distinguish their mobile platform from Android? The growth potential in this direction is almost unlimited. And, given the fragmentation of the Android platform, it’s unlikely Google will be able to compete in this arena to any significant degree.
Indeed, coherent Apple mobile integration in many brands of automobile could be the next big thing, turning what is now a hobby into yet another huge revenue generator. Imagine what that would do to the price of Apple stock. I suspect this is precisely what the Apple car is all about—providing auto makers with a well integrated mobile communications system/environment. Car makers have already gone all in on computer assisted driving. However, at the moment “smart” car technologies are extremely fragmented. Everyone has their own expensive development projects. Imagine if Apple could pick up some of that development slack and provide a more unified smart car experience. Of course they will need some serious expertise to pull it off—and some serious capital reserves to finance it. And who has more reserve cash than Apple?