apple car concept

As big media rides on the ‘Apple researching an electric vehicle’ bandwagon, one analyst lays out why the Cupertino firm could ultimately become a force to be reckoned with in autonomous cars.

Commenting on an influx of stories related to Apple’s rumored Project Titan, Morgan Stanley analyst Katy Huberty explains (via Forbes) why the world’s richest, most valuable company taking on the world’s most disruptable business makes a lot of sense.

While noting that Project Titan may not be a near-term event, she underscored that she wouldn’t be dismissive of Apple’s automotive ambitions.

“The auto industry also needs Apple, we argue, because after over 100 years of status quo, the industry needs a change agent,” she said. The automotive total addressable market is $10 trillion of installed base, with an annual new vehicle revenues of roughly $1.6 trillion.

“This dwarfs smartphones at $400 billion and PCs at $266 billion of annual revenue,” Huberty observed. “If Apple were to corner just 25 percent of the value of the car, it would be equivalent to the entire smartphone industry today.”

U.S. drivers spending about 25 percent of their free time in the car prompted the analyst to opine that “Apple will want to target this captive audience – especially if we go autonomous.”

Apple Car rendering 001

”We note that Apple prefers to develop and design its products in-house, and to outsource the actual production and assembly process,” the analyst continued. “This could be enabled by cars going autonomous – we estimate over 60 percent of the value of the autonomous car will come from software vs. ten percent today,” she wrote.

Indeed, once you go past the engine and car mechanics, it’s all about software. Tesla’s vehicles, for example, receive fresh software updates on a regular basis.

Car firmware updates improve Tesla’s performance and energy efficiency — again, without making any physical change to the car’s design or engine other than refreshing its software.

Among other things, Apple is a software company so if they’re in fact working on an electric car project, software will be key. That’s, of course, assuming that Project Titan is an autonomous car.

It’s time for “some very powerful all-new players who don’t even make cars today,” Huberty wrote, calling it “a push toward Silicon Valley motors.”

By the way, famous industrial designer and Jony Ive’s friend, Marc Newson, who was recently hired by Apple and is now working with Ive, designed a 1999 concept car for Ford, seen below, as well as a bunch of other transportation vehicles.

Marc Newson 1999 Ford concept car

Unlike The Financial Times and The Wall Street Journal which only mentioned an electric Apple vehicle, Reuters has upped the ante by making specific claims of the project being an autonomous self-driving car.

Reuters said the company is “exploring how to make an entire vehicle” rather than just designing automotive software akin to CarPlay. By the way, Mercedes-Benz Chairman Dieter Zetsche recently said he wasn’t concerned about Apple possibly building a car.

“If there were a rumour that Mercedes or Daimler planned to start building smartphones then they (Apple) would not be sleepless at night. And the same applies to me,” he told Australian website Motoring.com.au.

“And this is full of respect for Apple,” he added. “That is what I am saying.” While acknowledging he wasn’t privy to Apple’s product strategy, he struggled to find any rationale for Apple to build a car.

“Why Apple with this kind of margin would now go into this business,” he pondered. “I think investors will hate it because they don’t like conglomerates, they want focussed management on what they understand.”

He’s right about that, car making is a low-margin, heavy-manufacturing business. Not only cars cost a fortune to research and develop, the whole segment enjoys about ten percent return on investment (ROI) compared to Apple’s 25 percent ROI.

It should be noted that Daimler, owner of Mercedes-Benz cars, has lost its North American President and CEO of Research & Development, Johann Jungwirth, to Apple.

Jungwirth is now reportedly charged with assembling a thousand-people team for Project Titan, which is being led by product design Vice President and former Ford executive Steve Zadesky.

More on Apple’s automotive-related hires is available here.

Zetsche’s comment echoes remarks by former GM CEO Dan Akerson, who cautioned Apple to think twice before getting into hard-core manufacturing.

“We take steel, raw steel, and turn it into car,” he said. “They have no idea what they’re getting into if they get into that.”

“Look at the margins of an iPhone versus a car. I’d rather have the margins associated with the phone,” Akerson reasoned.

I don’t know about you, but both Zetsche’s and Ackerson’s somewhat dismissive remarks remind me of another famous quote made by Palm CEO Ed Colligan.

Eagle-eyed readers would recall Colligan’s rather shortsighted comment back in 2006, before the iPhone was announced. “We’ve learned and struggled for a few years here figuring out how to make a decent phone,” he said, adding that “PC guys are not going to just figure this out. They’re not going to just walk in.”

Source: Forbes

  • Tommy Gumbs

    Why on earth would you spend so much time writing about this nonsense?

    For heavens sake they didn’t even make this television that everyone was talking about it.

    But I’ll give you a comment and a Pageview. GL

    • Matt

      There really isn’t much writing here, it’s mostly quoting what other people have said, and In the past I’ve seen iDB post the exact same things that that other blogs have – word by word

      • Tommy Gumbs

        Blogs. Can’t live with them, can’t believe anything they say…..but Ya can’t live without them.

    • I actually found this to be the most informative article I have read on the “iCar” yet. I even shared it with some friends to read.
      Guess that goes to show, to each their own.

  • Frank Anthony

    The iPhone was like this, The iPad was labeled to flop. Now.. The apple car comments has started. Maybe the apple car won’t be as successful as the other products but people/analyst should rather keep shut as last time I checked, Surprises has not totally runout to Apple’s blood. But anyways, Lets wait and see!

    • DatNiggaCosgrove

      No ones buying an apple car

      • R3D

        A bunch of smart guys said exactly the same about the iPhone and iPad. I bet you did too.

      • DatNiggaCosgrove

        Na that’s completely different, if apple made a car it would look as gay as a that concept car up there and be 50k anyone with half a brain would get a Benz you could even get a used GTR For that price…..good luck with ur apple smart car

      • And how old are you if you are using words like “gay” criticize a car? This is 2015, get with the times buddy.

      • 9to5Slavery

        I will buy it

      • burge

        didnt know they was selling them

      • DatNiggaCosgrove

        If they made an apple car obviously they’re gonna sell them…..they’re not gonna make them just so people can look at that shit

      • I really doubt your statement will be true if they ever got a car to production and retail. It would sell like crazy and by then who knows what other technology Apple may have invented that would go into the car. If they came out with the first auto pilot car it would definitely sell. I doubt they would be the first to this though as Google is the leader in a self driving car I believe.

      • Frank Anthony

        Tell that to Tim Cook! Wrong person dude

  • All these car makers are just worried, as they should be. Let’s just wait and see how “innovative” Apple’s take on this technology space would be. Just another meh player (like the iPhone 6+) or something extraordinary (like the first iPhone).

    • I still can’t wait to get my hands on the 6s Plus (when it is released)! I see no need for an iPad anymore with that screen size. I was a doubter that I would ever want a bigger iPhone, but the 6 Plus just looks so good!

  • Chindavon

    Disruptive is what they do.

  • Joey_Z

    MB — Don’t be the next Nokia. Like Jeremy Clarkson just said 2 weeks ago on Top gear and I paraphrase, traditional cars are like typewriters while some American companies are inventing laptops.

    A lot of the R&D cost in the traditional auto industry is spent on material study such as what type of alloys should be used in engines and lubricants. Also ways to manage air and fuel for higher efficiency. None of these exist for electric cars. R&D on handling will be on another level when you have vector power delivered individually to each wheel. It’s been proven by Tesla. Aero cost might still be the same.

    Current self driving technology from automakers are like PDA age in mobile industry. “It’s not very smart and it’s not very easy to use.” Look what Google can do as a side project.

    When you can simplify the power source (producing only 1 type of battery for economy of scale (18650) and put different numbers of batteries for different models VS. producing 50 thousand 4 cylinder blocks and then 20 thousand 6 cylinder blocks) and power delivery, and miniaturize the whole logical part onto a PCB. Compared to the technology that still uses pipes, the efficiency of the new technology will tip the roof off. higher margin then? maybe.

    • burge

      wasn’t that about a BMW ???

      • Joey_Z

        yep, between M3 and i8. I guess I should’ve said electric cars are more efficient than gas cars and American companies are leading the way, in addition to JC’s example.

      • burge

        Just about to say M3 and i8 lol. Just watched it to check I was correct on what I first put.. Lol.

  • 9to5Slavery

    Old white fat men are the traditional industry needs a change in the financial, auto, etc etc

    • DatNiggaCosgrove

      To what skinny white gay dudes?

      • 9to5Slavery

        Those guys are probably in the retail like walgreens and in rehab or working at hot topic or Macy’s

      • LMAO

      • JFC what is with you and the gay comments? Time to leave the closet buddy.

      • AverageSouthNigga

        Is Tim cook not a skinny gay dude?

      • mp

        More women for a start. From memory Volvo had a very good female leader who brought another perspective to the company and auto industry. Anne Belec was her name from memory. She wasnt ceo, yet has there been a female ceo of a car company?

  • burge

    All I think of after I read that was didn’t nokia say there nothing to worry about the iPhone.

    • Matt

      The auto industry is not the same as electronics. They’re both completely different things.

      • burge

        Apple wasn’t into making phones or music devices and just look what the iPod did to the way music is played.

  • Matt

    Hmm, I’m still waiting for that so called Apple iTV…
    There have been electric cars 10 years ago, and there are electric cars today. They’ve stayed the same, and have interested me as much the newsstand icon on my springboard.
    As for making other companies run out of business by the idea of making a car drive itself – I don’t think they’ll affect the market much as pretty much every other auto company is working on the so called “autonomous” vehicles and frankly, I’d rather buy a car from someone experienced instead of someone who creates computers and phones.

    If they even make a car.

  • Dante Arellano

    so just cus apple makes ipads and apple watch they can make a car? Really??????