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