Full disclosure up front:
- I have worked with automotive companies and suppliers, and with Google, in some minor roles.
- I hold no stock of Apple or any automotive companies or suppliers.
- I have no inside information that’s going to go into this bit of analysis, it’s all publicly available (and linked).
Now, let’s dive right in.
The tech news have been full of buzz about rumors of Apple building a car. The thinking isn’t silly, of course: A tech company sitting on a giant pile of cash, lots of movement in the connected car space, where parties as diverse as car manufacturers, web giants (Apple, Google, Nokia/HERE), mapping companies (TomTom, Nokia/HERE, Google), big data and connectivity companies, even a new car manufacturer (Tesla), and many more are shuffling for a seat at the table. It’s a backdrop for epic drama, disruption and intrigue. It’s even code-named “Project Titan”, and how ambitious and gigantic does that sound, eh?
So is Apple going to compete with Tesla and working on their own car?
I don’t believe so. And here’s why.
So Apple puts a few hundred “staffers” (note: not all engineers) on a project involving cars or mobility, including a bunch with an automotive background. So we know Apple is thinking about the connected car space. We already knew that, because Carplay.
There’s a huge struggle going on around the connected car ecosystem: Who owns the data, the platform, the users? Is it manufacturers, Apple/Google (ie. the stacks), suppliers, telcos? Apple wants a big chunk of this huge – and rapidly growing – pie. (Talk about metaphors gone awry!)
Competing mobile operating systems in cars
Even today, only some of the most advanced manufacturers enable their users/customers to switch between the mobile OS in their car (see this Audi press release), and that doesn’t mean just plugging in one phone or another; as far as I can tell it still requires a full on switch between platforms. So much for integration – and that’s one of the smoothest integrations yet.
It’s all about integration
So, much like Google and the others, Apple has a team working on product development and integration. I would wager it’s mostly the latter. It takes a lot of manpower to work with manufacturers and suppliers to work on OS integration, systems, infrastructure. It takes long product development cycles that you’d have to work closely side by side, with Apple engineers and designers embedded at the manufacturers, and the manufacturers engineers and designers embedded at Apple. Securing a larger part of the growing ecosystem by being deeply embedded in the industry is a solid business case.
Also, hundreds of staffers aren’t really all that much. Don’t take this the wrong way, a few hundred people working on anything are huge, but building a car, from scratch, would take a lot more I’d assume. After all, this head count will include project managers, designers, engineers, software developers, interns, researchers, marketers…
Apple v Tesla?
So I’d say there’s simply no compelling business case for Apple to build a car. Yes, Tesla is making money as a disruptor in the field. That doesn’t mean that Apple will, or would even try to. In fact, I’d argue that there’s huge overlap in the potential pool of buyers for Apple and Tesla cars, that is: high-tech, expensive, status and design focused cars.
So, might Apple be interested in buying Tesla in 18 months for $75b, as Jason Calacanis speculates? This appears to me to be a more likely scenario than Apple starting from scratch. But again, I don’t see why they would. The money to be made by being part of the backbone of the more mainstream (if upscale) automotive market is just so much larger than selling luxury cars. And after all, Apple has always positioned itself as an upscale, but still sortakinda affordable mainstream brand, albeit with a price tag. That fits squarely with lots of car brands like the Mercedes’, Audis, BMWs and Teslas of the world.
TL;DR: Apple isn’t building a car but a team to work on systems integration with car manufacturers and suppliers.
