Last week when I visited the Frankfurt motor show, I met several senior German car company officials. Normally when it comes to new entrants into the market, the discussion revolves around the Japanese, Koreans, or as seen last year, around Chinese car companies. This year there was definite concern regarding the foray of Silicon Valley companies into the car industry.
Interestingly, there was less focus on
So is Apple making a car, or is it just developing an integrated platform combining communications, media, energy and artificial intelligence to enable autonomous cars? There are a couple of strong indicators that Apple is more likely to develop a full car as opposed to just a platform. The first is that the company has been actively poaching automotive expertise from the research divisions of car companies such as Toyota and Honda. Some of the key names it has hired recently include Megan McClain, an automated driving expert from Volkswagen; Vinay Palakkode, a researcher in autonomous driving from Carnegie Melon; and Doug Betts from the quality division at Fiat Chrysler.
Earlier in the year it settled out of court with A123 Systems, an electric vehicle battery manufacturer, for allegedly poaching several of its employees. One of Apple’s weak spots has been battery life; with this move it has gained a wealth of insight into lithium ion batteries. Other notable hires come from MIT Motorsports, Concept Systems,
The final piece of the puzzle is Apple’s discussions with the California DMV, allegedly around applying for a licence to allow for testing of autonomous vehicle on public roads. To date, 10 companies, including Google, BMW and Honda, have been issued test permits. However, Apple places a lot of importance on privacy, and this move would require disclosing details such as the autonomous features, vehicle identification details, along with accidents and disengagement of controls during the testing phase. This level of transparency is in contrast to Apple’s typical closed innovation approach. A more feasible alternative would be to test vehicles privately. In line with this, Apple has been in discussion with GoMentum station, an operator of a high-security test track. All of this activity is indicative of Apple’s intent to enter the automotive industry by the end of the decade.
So if Apple is making a car, what would it look like? Having followed Apple's journey so far and knowing the automotive industry, my guess is Apple will aim for a mid-segment compact car, most likely a SUV or crossover, and I believe it will be fully electric. I doubt its launch in 2019 will be a fully autonomous car, as we are still a few years away from legislative approval. It will most likely have what the industry calls level-3 autonomous capabilities, which means it will have advanced features like self-parking and traffic jam assist.
So how will Apple build the car? If I was the decision maker at Apple, I would buy a car company like Aston Martin (interestingly an iconic brand and still without a proper home). Aston Martin is a quintessential British brand associated with luxury sport cars; however, it has a checkered past, having been passed around between multiple owners, including by various consortiums, as well as a brief period of ownership under Ford. As an ultra-premium vehicle manufacturer, the brand has strong synergies with Apple’s vision of producing high-end products.
If Apple prefers not to buy a car company, with its wealth of over $180 billion, it can have companies like Magna Steyr or Lotus Engineering build it for them under contract, similar to what it does with its iPhones, which are built by Foxconn in Taiwan. I believe the question now is not “if” Apple will build a car, but more “when” and “what.” Tough luck for the German OEMs, which will surely have a fight on their hands.
