There have been rumors about Apple building a car. I dont believe that is true. Here is why.

The rumored Apple Car

Over the weekend, Wall Street Journal carried an article suggesting that Apple was working on a car codenamed “Titan“. Every major and minor news outlet decided to give the story its own spin speculating on why it could be the death of Detroit and that it could be a $50 billion opportunity. It is expected to be a self-driving car with top automotive experts working on it in a secret Cupertino facility.

Apple

 

As cool as I think the idea sounds, I don’t think Apple is making a car. At least not in the conventional sense like GM, Ford, Toyota or even Tesla. Here are some reasons why.

  1. Apple is a consumer electronics company, a really, really good one at that. The farthest it has ventured from its core business is the Apple Watch. And we are not yet sure how well that will do over time (yes, it will sell a lot, initially). To get into the automobile manufacturing business is a stretch. There is a ton of competition, and a lot of learning to happen. One could make the argument that if Tesla could happen in 10 years, why not Apple? Sure, but Tesla needed support from Daimler-Benz, Toyota, and Lotus cars. Could Apple cobble together one such partnership- difficult to say. If Benz or BMW or anyone else for that matter were to suspect Apple building a car, rest assured they would not partner.
  2. There is not much money in the car business. Apple makes a lot of money with a healthy 30% operating margin on its products. As its most recent quarter showed, that business is doing extremely well and the margins are actually trending up. The automotive business does not offer those margins[Tesla][GM].
  3. Building a car is not just about assembling a bunch of good engineers and designers and throwing money at it. Even with a visionary like Elon Musk at the helm, it is mighty challenging. And these are good times for Tesla. Imagine how it was 10 years ago. Yes, Apple has a ridiculous amount of money, something Tesla never did. But that doesn’t solve all the problems of building a cool new car.
  4. Google has been working on its driverless car initiative for years now. And they still have ways to go before they can offer an affordable car that can drive by itself. And that will still need industry partnerships and support.
  5. Above all, why should Apple build a car? What is in it for Apple? Not the kind of margins it enjoys. Not the marketshare or the revenues. Not the industry position. It doesn’t fit into something Apple would do. Apple does a few things and ridiculously well at that. The car does not fit that profile. Could Apple build an interesting car- sure. But why?

Obviously, Apple is up to something in the automotive or related space. There is never any smoke without fire. Here are some possibilities of what Apple is doing with the rumored engineers, facility and investments in the space.

CarPlay and Apple Maps

Apple is building its CarPlay offering to be a serious IoT/automotive technology platform. The current car dash systems are convoluted and poorly designed silos. Apple has iOS in a billion devices across the world. CarPlay has the potential to extend its capability to one more facet of our lives. Apple has a big presence in our homes (Mac, iOS devices, Apple TV), in our pockets (iPhone), soon in our wrists (Apple Watch) and at work (iPads, IBM partnership). The car is a logical spot for Apple to want to be a dominant presence.

CarPlay also offers Apple the thing it covets most- a comprehensive crowd sourced maps infrastructure. Something Google has and it doesn’t. With a few hundred million connected cars on the road synced up to iOS (and hopefully Apple Maps), Apple can catch up to Google’s market dominating Maps offering.

Some rumors have suggested that the minivan spotted across town could be for Maps purposes. This would make a lot of sense. Apple is trying to rapidly scale its Maps efforts and this would be a logical step.

Internet of Things(IoT) and HomeKit

Internet of Things is taking off in a big way. The connected, contextually aware and personalized experience that seamlessly transitions between home, travel and work is the Holy Grail of IoT. Vendors are still trying to work through disconnected standards and interop issues. Apple has dipped its toes in the space with HomeKit but hasn’t really made much of it.

Google through its Nest acquisition has a head start on Apple and it is starting to put the automotive piece of the puzzle together with Google Maps and partners like Chamberlain garage door openers, Mercedes Benz and Automatic. This segment has a lot of opportunity to grow and Apple would want to be a part of it sooner than later.

Tesla

In many ways, Tesla is the Apple of the automotive industry. They are highly design focused, technology driven and have a highly detail oriented. If Apple were a car company, they would be Tesla. If Apple were to be building a car, they would have started thinking a year or two ago at which time the most logical thing to do would have been to buy Tesla. They would have gotten a next generation automobile platform, a battery innovator, and most importantly, Elon Musk. It is easy to see Musk as the heir apparent to Tim Cook someday. Nothing would thrill Apple shareholders than to see a visionary like Musk, very much like Steve Jobs, come on board and set the long term vision and direction for Apple. At this point, Tesla has its own roadmap and a plan to get really big. It might be too late for Apple to buy Tesla.

In summary, I do not believe Apple is working on its own self-driving car. It is probably working on a multitude of things related to iOS/Apple integration and experience as related to cars. But not to make its own branded cars.

A really good take on this topic is by long time Apple observer, Jean-Louis Gassee. You should read it if you find the topic of interest.

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