Apple Inc. may already be positioned to evolve into a global automaker in many ways that other Silicon Valley companies aren’t.
The Cupertino, California-based tech company has put a few hundred employees to work on a secretive project to develop an electric automobile, a person familiar with the matter has said. While Apple often tests ideas that don’t get released, the work underscores the company’s long-held desire to play a greater role in the automotive space, which is ripe for more of a merging with users’ digital lives.
Apple, with a market capitalization that’s more than $700 billion, needs to continue growing sales in iPhones, its largest revenue generator, while also expanding into new markets, such as automobiles, if it’s to reach a $1 trillion valuation,” Gene Munster, an analyst with Piper Jaffray Coster said. He added that he doesn’t think Apple would bring out a car in the next five years.
Nonetheless, Apple boasts some advantages versus other Silicon Valley companies with car ambitions. Tesla Motors Inc., which delivers less than 10,000 vehicles a quarter, surprised investors last month when Chief Executive Officer Elon Musk said the company wouldn’t be profitable until 2020.
Apple’s strengths as a potential automaker include:
1. $178 Billion
The automotive industry churns through cash at an astonishing pace. Apple, as it turns out, has a cash hoard of almost $180 billion. As Musk said last week, Apple is “just running out of ways to spend money. They spend money like it’s water over there and they still can’t spend enough of it.”
While the old rule of thumb was that it cost about $1 billion to develop a new car, those costs are now being spread over more vehicles as traditional automakers work to use vehicle platforms for more models. That would be one challenge for Apple, as would a lack of experience building cars but they could acquire those manufacturing skills.
2. The Ultimate Mobile Device
Apple has built its fortune on creating products that are compellingly designed and that integrate software in such a fashion that immerses users’ lives deeper into the Apple world, further hooking them for future upgrades. And it already has car-suited technology — mapping software, for instance — ready to go.
“The car is one of the most important and critical pieces of the puzzle that you need to master if you want to interact with customers wherever they are,”Thilo Koslowski vice president and automotive practice leader at Gartner said. “It’s pretty important to have a phone that’s connected, and can show you your calendar and do all kinds of other things, but now extending it to this other device that happens to have four wheels.”
3. Car Guys?
Apple has a unique mix of executives with tech and auto experience. The company has long hired engineers from the automotive space, often with experience in supply chain management, battery technology and user-interface experience.
Luca Maestri, Apple’s chief financial officer, spent 20 years at General Motors in areas of finance and operations. Eddy Cue, the influential senior vice president of Internet software, is a car enthusiast and on the board of Ferrari. Steve Zadesky, vice president of iPhone product design, who is leading Apple’s car effort, spent time working at Ford earlier in his career. Marc Newson, a well-regarded industrial designer who joined Apple’s secretive design team last year, did a high-profile concept car for Ford in 1999.
4. Retail Network
One of the strengths — and weaknesses — of traditional automakers has been their dealer networks. It’s hard to open up store fronts around the world fast enough to get the scale needed to sell cars. In the U.S., there are added complexities such as state franchise laws that often prohibit manufacturers from selling cars directly to customers.
Apple, of course, already has a giant retail network through its hundreds of Apple Stores worldwide, from Brazil to Sweden to Turkey.
5. Apple Does Global
The automotive business has a global complexity like few other industries, with regulatory, marketing and logistics issues that can trip up the capital-intense business on any given day.
Apple could be creating concepts, or reference designs, to integrate technology to demonstrate to automakers.
To see the original article, go to Bloomberg.com.
