About that Apple Car

By now, unless you are living in a cave deep under the ground far away from humanity or if you don't care about Apple or Technology at large, you should be familiar with the latest rumor that Apple is working on a electric, self-driving car. To be clear these rumors have been around for a while now, but there has been an awful lot of smoke around this supposed fire pit in the recent few days. So what's changed now, for so many Apple bloggers who hand waved this rumor as just one of the more outrageous click bait attempts? Lets jot down the points (in no particular order), shall we..

  • It started (well at least this new phase of this rumor) with a Wall Street Journal post claiming that Apple was working on a self-driving electric car project named “Titan” and it had “100s” of employees working in the project.
  • Then there were sightings of a mysterious cars rather mini-vans, that supposedly belonged to Apple with an array of advanced equipment mounted on it all around the Bay Area and even in smoother parts of the country. These cars almost achieved paparazzi status overnight! 
  • Even before the WSJ article there was our "next Steve Jobs", Elon Musk saying some daring things like Tesla will meet Apple's marketshare in the next ten years (assuming Apple just sits on its backside for the next ten years!) in his company's recent earnings call. But aside the seemingly over pompous self challenges, the more important piece of new that sprung from Tesla's side that is relevant to this post, was that Musk said that though there was a lot of employees moving between the two companies (Tesla and Apple), there were significantly more employees moving from Apple to Tesla than the other way around and this was in spite of Apple's arduous efforts. Now why would Apple try so hard to get employees from Tesla? 
  • Most recently there was a report from 9to5mac (titled dramatically beginning with the word "Revealed") where Mark Gurman did some of his "investigative" work to get more details into all the employees related to this project that Apple had hired relatively recently. The list seemed to go on and on and while Apple hiring top guys from Ford and BMW's R&D department might be just a coincidence, why does Apple need to hire a specialist in designing safety systems including everything from airbags to seatbelts to radar and night vision systems, modeling, prediction, and verification of motor and gearbox performance and efficiency, transmission and mechanical design. etc.? 

While this is not an exhaustive list of the rumors around this topic, it is sufficient to serve as a prologue to this post. So where there is so much smoke, shouldn't there be some fire? I am going to structure my thoughts on this topic, like I generally make an argument, i.e., go over the bulls and bears of the argument and then try to come to a conclusion. 

Just another Apple Car concept (Source: iJailbreak.com)

Just another Apple Car concept (Source: iJailbreak.com)

Bull case

Apple needs another big thing: Apple Watch is almost ready to launch and Apple is all prepped up for another blockbuster product release. But if you are Apple you are already thinking about future products, years in advance and that is one of the reasons of Apple's tremendous success. So after the iMac it was the iPod, iPhone followed closely by the iPad and now the Apple Watch. So what's next? Remember though Apple says 'no' to so many things, it considers a whole bunch of things to say 'no' to. So what can the world's most powerful company like Apple's next big thing be? Anything. That's right. There is nothing this Apple can't take up as its next project. That is not to say that the project will be successful but it can at least try. So why not an electric car?

We were looking at multiple categories of products, and thinking about which ones to do.
— Tim Cook on Apple Watch idea's conception

A big enough 'next' project: The word 'big' here does not just relate to any one particular metric, but to a lot of them, like the impact factor, the profit margin, Apple's self-set vision, contribution to its ecosystem, etc. So though Apple could take up literally anything as its next project, I bet the above mentioned factors would narrow even the list of things to say 'no' from for Apple to a mere few. But I think the electric car market is the next big thing in the consumer industry, particularly in the days of (well deserved) higher awareness of global warming, fluctuating cost of fuel and just overall saturation of the auto industry. Till the Tesla cars showed up there was nothing ground shattering that was happening in the car industry and frankly it was getting too boring. So it makes sense for Apple to think of its version of this consumer product. 

Cheddar ($$$) does matter: Though there are a bunch of car manufacturers out there who do not make much profit compared to what Apple makes from its iPhones and iPads, things will change with an Apple car. Remember Apple competes only in "luxury" range of any product. So comparing Ford's profits to an Apple car and deeming it to be too low for Apple to even mull about it a little short sighted. If Apple makes a car, it will place it such that the car stands out amongst its competitors well enough for Apple to justify a higher than usual profit margin, just like everyone one of it existing products. 

Ford, the healthiest US car company, made $835M in net income last quarter, less than 4% of their $34B in sales. Compare that number to Apple’s record-breaking $18B profit.
— Jean-Louis Gassée

Cars and Apple's ecosystem: Apple doesn't make disjointed products, in the sense all of Apple's products (and services) will always coexist, in fact in the most effective way as possible and this is another factor that is responsible for Apple's phenomenal success. So will an Apple car fall in place in its ecosystem. Why not? We spend more and more time everyday in our cars, at least in the cities and if you live in the Bay Area, a minimum of ten percent of your lifetime will be spent on the roads inside your cars. And more increasingly the smartphones play a bigger role in the cars as well. Yes, of course Apple doesn't have to build its own car to integrate its devices into your driving experience but if there is one thing that Apple is obsessed with, it is controlling every point in a consumer experience, bumper to bumper, so instead of (or in addition to) integrating third party cars to its devices using CarPlay, why should it make its own car that falls very well into its existing ecosystem? 

Apple CarPlay helps integrate its iPhones better with third party cars (Source: Apple.com)

Apple CarPlay helps integrate its iPhones better with third party cars (Source: Apple.com)

Apple-ification of the car: Apple never enters a market or category unless it thinks that there is something it can do to make the experience much better than the existing ones out there. Smartphones were ripe for disruption when Apple introduced the iPhone, so was the case for the Mac back in the 80s, as well for the iPod and the iPad and the Apple Watch. So what is so frustrating about the current cars that Apple can fix? A few things, one is the design of the car itself that hasn't changed in a while, two is the connectedness of the car or how the center stack interacts with the rest of the car, three is the electric part of it or how eco-friendly it is but with lesser range anxiety than the existing so called electric cars? But most of all I think the self driving part of it which is the most challenging one to pull off might be the biggest differentiation Apple is aiming for. 

Smartphones were ripe for an Apple style disruption when the original iPhone was launched in 2007 (Source: fromedome.com)

Smartphones were ripe for an Apple style disruption when the original iPhone was launched in 2007 (Source: fromedome.com)

What does Apple know about making cars or does Apple think it can make a better car than industry veterans: Really... this argument, ok let me indulge. Apple was already rumored to be working with Tesla around the 2013 timeframe apparently to share expertise in making batteries that is common to both Tesla's cars and Apple's devices. And Apple has a long history of experience and expertise with materials in general (not to say aluminum can be used to make cars!). More over Johny Ive's and many Apple executives' distaste for the design of the mainstream cars, particularly American cars is widely known. So isn't the company with the "best" design taste and focus, in the best place to solve this problem? Also with sooo much money lying around in Apple, who else is better suited to throw around some dollars to build a giga factory to construct cars? 

We’ve learned and struggled for a few years here figuring out how to make a decent phone. PC guys are not going to just figure this out. They’re not going to just walk in.
— Ed Coligan, former CEO of Palm (at the time of the original iPhone launch)

Bear case

Building a car is much more challenging than building a smartphone: Though the iPhone was light years ahead when Apple unveiled it and though Apple can almost literally pull off the impossible, building a car is going to be exponentially more challenging even for Apple. Simply put there are just too many moving parts, both figuratively and literally! Just think about the number of components Apple needs to design, manufacture and trouble shoot to build an entire car, from carburetors to gear shifts, from the engine to the exhaust, there are just too many complex things involved here. It raises the question as to wouldn't Apple be better off buying a company that is already half way out there and whose CEO is already being touted as Steve Jobs Jr (cough cough Tesla)?

A simplistic look into some of the parts that make up a modern car (Source: General Motors)

A simplistic look into some of the parts that make up a modern car (Source: General Motors)

Google hasn't succeeded so far, Tesla is still struggling: Google has been trying to make a self driving car for a while now and not even close to showing off a demo product. It is neither that Google failing in doing something will/should deter Apple from indulging in that field nor that it is Google's first major failure, but still Apple should take cues from its competitors' failures. And though Tesla has been moderately more successful in the attempt, i.e., shipping actual products that consumers can use on the road, it had not been making a lot of profit from its products, not so far at least (via Reuters). So odds are definitely against Apple, but when when were they not?

Tesla reported a quarterly loss of $107.6 million, or 86 cents per share, compared with a year-ago loss of $16.3 million, or 13 cents per share
— Tesla's Earnings report on 02/11/15 via Reuters

At what cost though: If the first iPhone costed $499 on contract (though it was later reduced to $399 on contract and now it is generally $199 on contract in the US), almost twice or even thrice the price of an average "smartphone" at that time and even now Apple products are at the higher end of the pricing pyramids. So what would an Apple Car, that too a self-driving, electric car cost in this day and age? Or in other words will Apple be able to make a car that is as affordable as a car as an iPhone is as a smartphone today, while still marinating its impressive profit margins? 

Self-driving cars can take over the world: No self-driving cars cannot develop a mind of their own (or can they??). But if Apple making an electric car is a challenge, making a self-driving electric car will be a humungous challenge. However much we humans want to think of us as gods who have figured out everything, we still haven't even figured out how our brain works, completely. If we haven't figured out how our brain works, then how do we get our gadgets or computers to work like our brains? There are so many challenges in Artificial Intelligence that are not just unanswered still, but have not even been questioned yet. And there are other issues like bugs and system malfunctions. If an iPhone fails at any instant due to crash, nothing drastic happens to any lives around it (at least not in most of the cases), but what if a self-driving car freezes in the middle of the highway due to a bug or due to system overload?

Being first and the perception around self-driving cars: When Apple introduced the iPhone in 2007, a variety of smartphones were already prevalent or people were not unfamiliar with the idea of a smartphone. Such was the case with all of Apple products so far, they have never been first to the market. So what does that mean for the Apple Car, will Apple wait for someone to come up with a crappy beta version (like the "smart" watches), first? Also what about the boat load of regulations and government clearances that Apple has to dodge to get a self-driving car approved for general public use? Though Apple's might extends way outside its infinite loop campus, Apple has always been reluctant to play the political card, while its rivals like Google and Amazon have spent a lot of money playing the lobbying game. 

Google Spends Record $16.83 Million On 2014 Lobbying, Topping 15 Tech And Communications Companies
— Consumer Watchdog (Jan 2015)

Apple-ification of the car: This is not a typo, this category for me is in both cases, bull and bear. So what is so frustrating about the modern car that I need Apple to fix for me. Design, experience, driving dynamics, efficiency or autonomous driving capabilities. I am not sure, as a driver that spends a lot of time in the traffic of an over crowded city, I find any of these, a major reason for Apple to enter this field. So wither as usual as a user or a customer I don't know what I need or what I am missing or that Apple's objective/dream for this project has another motivator that I am (or almost everyone out there is) completely missing!

A lot of times, people don’t know what they want until you show it to them
— Steve Jobs

So in summary, given eternity Apple might make anything and everything in this world, but in the foreseeable future (apparently this is happening by 2020), is the Apple car happening? From all the noise surrounding this, it seems more possible than not that Apple is playing in this field and it appears to be more than just a hobby or interest. But as far as reading into the tea leaves, I am not sure that I understand Apple's motivation here, yet. But remember that Apple's biggest strength is to think different and not just surprise its critics with its antiques but even its ardent followers with its out of the box thinking. So we are probably in for a biggie this time, who knows! 

Apple Inc., which has been working secretly on a car, is pushing its team to begin production of an electric vehicle as early as 2020, people with knowledge of the matter said.
— Bloomberg