apple car concept

If you’re looking for the auto industry version of “PC guys are not going to just figure this out. They’re not going to just walk in,” look no further than knee-jerk comments that former GM Vice Chairman Bob Lutz made on CNBC.

His arguments: no one’s “made a nickel” selling electric cars, that market “is still minuscule” so Apple’s Project Titan must be “a gigantic money pit”.

“If I were a shareholder, I’d be very upset,” he added.

Apple is “currently engaged in a very high-margin business,” the former GM executive opined, then caution that “the automobile business, at best, is a very low-margin business.”

“You can’t show me one company in the world that, to date, has made a nickel on electric cars,” Lutz added. But why is then everyone making electric cars, you might ask.

Apparently because electric cars are “necessary to meet European fuel economy and regulations and US fuel economy regulations.” I, for one, don’t think Elon Musk’s Tesla is building electric cars just to meet government fuel economy regulations.

Still, Lutz is adamant that Apple has no business building cars.

“There is absolutely no reason to assume that Apple is going to be financially successful in the electric car business,” he blasted the Cupertino firm.

“When it comes to actually making cars, there is no reason to assume that Apple, with no experience, will suddenly do a better job than General Motors, Ford, Volkswagen or Hyundai.”

But wait, didn’t people use to say the same thing about Apple’s entrance into the cutthroat low-margin handset business? His comment is essentially a repeat of a similarly worded argument that critics like former Microsoft CEO Steve Ballmer leveled at Apple to diss the iPhone as an overpriced device that supposedly no one was going to buy.

Lutz is convinced that Apple’s expertise in building mobile devices is worth next to nothing regarding the car-making business because the company buys batteries for its devices from suppliers rather than build them itself.

“First of all, Apple has no expertise in batteries, they don’t make batteries” he quipped, adding that “the specialized electrochemical companies make batteries” before suggesting that Apple would have to buy batteries for its electric car “like everybody else” in the automobile business.

“So I think this is going to be a gigantic money pit,” he added.

But just how gigantic a money pit Project Titan might end up being?

Well, as Apple has “an embarrassment of riches,” they can afford to burn “$30 or $40 billion in the car business” and “nobody’s going to notice.”

“I’ll tell you what, if I were a board member of Apple I would ask some serious questions about this whole thing,” he summed it up provocatively.

There’s no question that Lutz knows the car making business inside and out but so did the Nokias and BlackBerrys of this world and yet failed miserably to produce a viable response to the original iPhone, so there’s that.

Source: CNBC via Daring Fireball

  • Der Faust

    of course they do…… GM is the LAST car company that should be preaching about who can and can not make cars… remember GM would have gone bust if they had not received bailout funds….

    • Because GM’s electric cars are so successful lol.. Same with blackberry GM is worried that the Apple’s car will kill their Volt.

    • Baseballguy2001

      Spot on about the bailouts, but I think Tesla would fall long before GM or Ford if Apple made an electric vehicle.

      • Gary LE

        Lol first Apple steals Mr. Musk’s employees and the next thing you know their customers too! Lol

  • Simon Moorhouse

    Bear in mind, nobody outside Apple really knows what “Project Titan” actually is other than than standard rumor mill…

    • @dongiuj

      Exactly. Nobody here knows really what’s happening yet almost praising apple for something they have no idea about. That’s just weird.
      As for GM dissing anybody to do with the automobile industry, they need to look at their own huge failure first and quit requesting money.

  • John

    Sounds like this guy was planning on bringing his own electric car company to market or has shares in a similar idea and is now worried about Apple.

  • pnh

    This sounds EXACTLY like what Motorola and Nokia said about the original iPhone. How did that go?

    • coLin

      let’s not compare phones with cars. you don’t really buy a brand new car every year. this is just one comparison

      • pnh

        I didn’t compare phones and cars, just the similarity of the statement.

  • LuisFRocha

    I’m wondering if they’re going to have the same fate as Nokia or Blackberry or Microsoft, who criticized the iPhone in almost the same words. 🙂

    • Guest

      No, they don’t. Apple is a PC company that has absolutely no experience making cars, while most of these major automotive companies have been around for 100+ years. The only way Apple will succeed in the car market is if they partner with another company, and even then, I highly doubt they will put a dent in a company like General Motors, Ford, etc.

      • Shinonuke

        If they hired people with experiences in the automaker industries, then would Apple still be considered to have no experience?

      • Guest

        Good point, I see where you are going with this, but even then, I still don’t think Apple will be able to make a dent in the key players in the automotive industry.

  • Martynet

    “When it comes to actually making cars, there is no reason to assume that Apple, with no experience, will suddenly do a better job than General Motors, Ford, Volkswagen or Hyundai.”

    Didn’t Apple hire people who have LOTS of experience making cars? Which means they could do same or better job making cars. I bet you their car will be awesome and will have similar impact as iPhone in the phone business.

    • coLin

      I think it will be more like the Apple Watch impact. The iPhone impact was during SJ era

  • pauleebe

    Obviously as a former VC he doesn’t want GM having additional competition. Tesla suggests contradicts every one of his comments.

  • Umesh N Umesh

    I am not an apple fanboy…. But underestimating Apple is quite another thing….!!! This is the same company that gave multitouch, while its closest competitor were still developing phones with buttons, I mean Google….!!!!

    • coLin

      Google is not ‘developing’ phones. They make the Nexus lineup which have less buttons than the iPhone

      • Umesh N Umesh

        Bro…. I mean way back during first iPhone launch…..!!!!

  • Chris Wagers

    Loved this last paragraph

    “There’s no question that Lutz knows the car making business inside and out but so did the Nokias and BlackBerrys of this world and yet failed miserably to produce a viable response to the original iPhone, so there’s that.”

  • mike

    the only knee-jerk is the author of this article… We gotta wait and see how everything develops, if Apple decides to build a car, there is a big difference between mobile market and automobile. Most fanboys won’t be able to buy it, and just not talk about how fanboys won’t have the financial status to upgrade every new year to a new model.

    Will be fun to watch how this develops. I would never buy an electric car from mobile makers, and I use Macbook, iPad, and iPhone in my daily life. I would instead get a more reputable car from an automaker who knows what they are doing, a Tesla.

    • Shinonuke

      The Author is simply stating that these people are quick to judge because there is a new kid in the block. Apple have been successful at their development into new industries. Good track records for that. So assuming that Apple won’t do well is immature.

  • Micrones

    He is right about car manufacturing being a money pit and it will take awhile before Apple breaks even and Apple is not that kind of company to wait awhile to break even, Ask Tesla…….which almost went bankrupt.

    Personally, I do not believe Apple is making a car, this is taking it out of its core functionalities and strengths of its business. Smart companies do not do that and i think Apple is smarter than that.

    Companies usually leverage their existing platform and technologies to branch into new industry and there is no way Apple’s present industry factors into electric car manufacturing. making smartphones and laptops is not the same as car manufacturing, not to factor in the IHS safety requirements for the USA before we even talk about EU safety requirements.

    Only Apple knows what they are working on but i bet its a product that augments the automobile but not actually manufacturing a new car.

  • Alborz

    we don’t know if the batteries are going to be the selling point. Apple never showed off numbers on paper but real world use and user experience were always the main features. multi touch a an experience. they never talked about the batteries in the phone. they simply said it lasts a day.
    with the watch, they never said how fast the chips inside were, but what you could do with it.
    same goes with the car. they’re not gonna say how big the battery is, they’re gonna talk about how you can use the car as a tool to make your day better. self driving? ride sharing? picks you up in the morning and at night charges itself? it tracks your calendar and it is ready 10 minutes before it’s time for you to leave? we don’t know. we just have to wait.
    but i’m sure him calling Apple’s effort a money pit is very ignorant of what the electric car market is going to look like and not being able to adapt.
    that kinda answers Gregg’s question as well on why he’s a “former” vice chairman.

    • Toukale

      You can’t make an electric car and not have the battery the center piece. People have mileage anxiety with an electric car. People like me who does not leave in the suburb won’t even be able to consider this car for that very reason. If the car is scheduled to launch around 2019 and 2020, it will not be an autonomous car.

      • Alborz

        the battery is not going to be the centre piece. maybe the range will be. but never the battery. that’s a technical aspect and apple never made technicalities centre pieces.
        it’s all about the experience.
        and what makes you think we won’t have autonomous cars in 5 years? if google is any indication, that’s the year their teams wants to release their autonomous cars.

  • Guest

    It’s funny how almost no one, including Christian, seems to understand that Apple entering the automotive market is a whole lot different than when they entered the phone market. In fact, I think the fact that Christian even brought that up in the article is irrelevant, and shows he doesn’t know much about how the automotive market works.

  • Joey_Z

    Keep in mind that Apple is also known to revolutionize a whole industry. PC (in general) did not exist until Apple II came out, before then, computer was just an expensive toy. Music pirating was a thing until iTunes effectively lowered the cost of buying music below the cost of pirating. Who, except Apple, would have thought that multi touch screen could be a value added feature that allowed Apple to sell at higher margin than other mobile devices that were basically the same device only with different plastic outer shells competing in a price war back then? On the surface, it seems Apple succeeded by their sleek devices. But these devices are actually the result of Apple’s hard work at bringing benefits to different companies from different industries and to work together. Steve Jobs was really good at that. Tim Cook is also very good at this “networking”. For the most recent example, just see how fast banks jump on Apple Pay. If you think Apple is pulling off the project Titan alone, you are wrong, big time.

  • jbelkin

    First, what most people don’t get it is that ONLY Apple has high margins in their hardware market segments. NO ONE else has Apple’s margins in personal computers, mp3 players or smartphones. NO ONE. Samsung made good margins for a couple years but has now fallen back into the typical pack. So, for those who think Apple is entering into a low-margin business does not understand that ONLY Apple knows how to make high margins in hardware in their business segments. That is why the current auto industry should be worried.

    Second, Apple is not going to build an internal combustion gas engine. An electric car simply needs controls to move the wheels at varying speeds and then be able to stop. That is ALL. Everything is handled by software. The rest are OFF THE SHELF parts. The hard part was the engine and transmission – NO LONGER NEEDED (well, in the combustion sense of mixing air/gas and driving pistons). An electric car is just software and batteries. Look at Tesla. They can simply download software that makes your car go faster. Can GM do that? No. The rest of the car is simply comfort and safety.

    • Umut Bilgiç

      One of the best comments here, nicely written sir.

  • Victor

    Not necessarily siding with Apple’s mythical car, which is expected to arrive at exorbitant prices. But does anyone doubt this guy is a dinosaur at this point?

  • gamefm

    I am not a apple fan. However they do have billion cash to fill any pit and walk across it safely, if they do not want to fly over or speed around it.

  • iPhoneWINS

    i agree

  • Chuck Finley

    Speaking of knee-jerk reactions, your knee-jerk reaction to defend Apple’s honour any time anyone says anything remotely negative about Apple is pretty hilarious, Christian.