You might be driving an Apple car within a few years. The Wall Street Journal is reporting that America’s favorite computer and phone maker has put together a team to examine the possibility of designing and building an electric-powered vehicle.
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Apple Inc. (NASDAQ: AAPL) CEO Tim Cook has placed product design Vice President Steve Zadesky in charge of the car design effort, The Journal reported. Zadesky, a former Ford engineer, apparently has the authority to assemble a 1,000-person team to research and design the vehicle.
The team is researching robotics, metals, materials, and technologies used in auto making. The team’s members include Johann Jungwirth, who was formerly vice president of Mercedes-Benz Research and Development for North America. Apple also hired well-known industrial designer Marc Newson, who designed a concept car in the past.
Even though Apple is researching manufacturing, it might not actually be planning to build cars like Tesla is. A more likely strategy would be for the company to design features or a model that would be manufactured by an automaker such as General Motors (NYSE: GM) or Ford (NYSE: F).
Car manufacturing is cost prohibitive; a modern auto factory can cost $1 billion to build. Traditionally Apple has concentrated on contract manufacturing, often in China, and building small and relatively simple products that are easy to ship, such as phones and tablets. Autos are big, heavy, and complex and expensive to ship.
Apple might think it could change by using contract manufacturing in China, 3-D printing, or next generation robotics. Mr. Cook and his team might also believe that there is a contract manufacturer capable of building and marketing a car.
Another strong possibility is that Apple will simply sell components such as software and the electronics for self-driving vehicles to traditional automakers. Apple is already providing some solutions for cars in the form of its CarPlay and Siri. In the future, luxury cars like Mercedes, Cadillac, and Jaguar might come with Siri or an Apple package as an upgrade.
Apple Store vs. Dealerships
A big barrier to Apple’s entry into the auto business is the way cars have traditionally been sold in the U.S. and Canada—through dealers. Dealers require a special license, and in many states, they can only sell cars.
Apple has traditionally sold online or through its Apple stores in places like malls. It could not sell cars directly through those channels in many states, including Texas, because of state laws. The dealership network is tough to crack, as Elon Musk of Tesla Motors (NASDAQ: TSLA) has found out, because of the influence dealers have over state legislatures.
Tesla has used a direct sales model involving stores similar to that used by the legendary U.S. luxury carmaker Packard before World War II. Whether Apple would use that model is hard to say or not. One possibility is that Apple will sell dealerships or partner with an existing auto company.
Apple could partner with dealerships; it would have cars on display at the Apple store, but buyers would have to go to the dealership to purchase and test drive them. There could also be a salesperson at the Apple Store explaining the cars to the buyers.
Why an Apple Car Could Be Good for Tesla
Interestingly enough, the appearance of an Apple car on the market could help Musk and Tesla. If it were electric powered, the Apple car would need batteries; those batteries would presumably be lithium-ion units manufactured at Tesla’s massive Gigafactory in Nevada.
News reports indicate that the Gigafactory could make enough batteries for several hundred thousand cars a year. Since Tesla does not have that kind production, it will need to sell to other automakers, such as Apple or GM.
Yet we still don’t know what the iCar or Titan as Time has labeled the vehicle would look like or if it would be a car. It could be a crossover or even a minivan. Nor do we know if it will be electric; Apple might decide to go with a fuel cell like Toyota or a plain old fashioned gasoline or diesel engine.
One thing we do know is that there would be a built in market for the iCar or iVan. All those Apple zombies who spend vast fortunes on iPads, iPhones, iMacs, and Apple TV would probably buy one. That alone could make autos a very profitable sideline for the world’s most profitable company.