Why Apple should build its own car

Posted by on Feb 18, 2015 in Blog

Why Apple should build its own car

Can Apple build a new car? It’s no more laughable than the idea that Apple, or Radio Shack, could create a personal computer infrastructure in the 1970s and challenge the dominance of IBM mainframes or Digital Equipment Corp. minicomputers.


Multiple published reports of the past week say Apple has hired hundreds of people known for automotive expertise, with an eye toward Apple building a car of its own. The most likely car would be an electric vehicle in the shape of a small minivan or crossover. Even if the Apple iEV never goes forward, the thinking is that Apple has nicely hedged its bets. Research into big electric batteries translates into future iPhones or iWatches that run longer. A carbon fiber car shell that saves lives might make for an indestructible iPhone.

The time is ripe for Think Different vehicles

For a century, the core mindset had been a combustion engine up front, two and sometimes three rows of seats in the middle, luggage in back; dissimilar paired options such as the expensive AM/FM radio with the vinyl roof then or adaptive cruise control and a panoramic moonroof now; and indirect sales through a network of dealers.

It was little Tesla not Ford, GM or Chrysler (not Audi or Lexus) that opened our eyes to the possibilities of the 17-inch LCD display center stack. Great things may come when the automaker, not just the design, is a a fresh sheet of paper. Arguably, the biggest differentiator in new cars is the technology in the dashboard: infotainment and navigation as well as driver safety aids and rudimentary self-driving or assisted driving through adaptive cruise control, blind spot detection, and lane departure warning. The suspension and running gear can be designed by contractors such as Porsche, which for years made more money engineering other cars than building its own. The same holds for setting up a factory and making it run smoothly: incredibly complex but a proven technology, and it can be hired out. Auto plants such as Hyundai’s newest in Alabama have self-driving parts trains; Apple doesn’t have to reinvent that.

Apple’s appetite for growth calls for car-building

In the go-go 1990s, the growth curve for Microsoft, extended forward a decade, would have made one company bigger than the entire world economy, which wouldn’t be possible by selling more copies of Windows and Office. Apple is the world’s most valuable company now in market capitalization – the total value of all the stockholder shares – at $740 billion. Microsoft capped out a $619 billion in 1999, or $880 billion in current dollars. To get to a trillion dollars in value, Apple needs to sell more than iPhones, iPads and iTunes. An Apple TV set would be nice compared to the klunky Internet-enabled TVs sold now, but it would be a small uptick. Apple could invent drugs to cure cancer or AIDs, buy Hollywood, compete with Boeing (Tesla is in the spaceship business), build smart homes — or build a car. That’s the most realistic path to growth that leverages Apple’s capabilities, especially with all the automotive people Apple hired.

Lots of people think they can run a car company. They find it’s more complex than expected, as former Home Depot chairman Robert Nardelli discovered when he ran Chrysler from 2007-2009. Cleaning up Chrysler was tougher than a cleanup in aisle 10. Conversely, Elon Musk thought he could found and build a car company from scratch, and so far has succeeded. Anyone who stuck with Tesla stock has been richly rewarded, at least until now.