What is an automobile? Why do automobiles look the way they do? How does one use an automobile?
Anyone who has owned or driven an automobile would have answers to these questions, formed over the span of their driving careers. Ask the same questions to someone who has never driven an automobile and the answers may be enlightening. Driving an automobile is not natural. We need to teach ourselves the art of navigating a heavy machine, composed of thousand of little parts, through the world. Is the driving learning experience focused on suppressing intuition in order to adapt to a machine that hasn't changed much in decades? Is it possible to make an automobile more intuitive that someone with no driving experience can hop in and get to where they want to go in a much more enjoyable way than what exists today?
By entering the automobile industry, Apple would be rethinking what an automobile should and shouldn't be in today's society, moving past the ideas that we have been relying on for decades, which now represent barriers to making the automobile more natural and easy to use. Apple doesn't appear to be following any rules as it takes its product-focus mantra into industries ready to be disrupted by a new experience created from combining software innovation with revolutionary hardware capabilities and design. Apple wants to rethink the automobile.
What We Know
At this early stage we have a few ideas as to what Apple is currently doing with automobiles.
- Apple set up a team with senior managers in a secret location away from HQ. This is an indication that the project, codenamed "Titan" is past the "kicking the tires" phase. Instead, this would appear to be a legitimate focus for Apple with the intention of this effort leading to products. I was hesitant to jump on board the initial "Apple is doing a car" rumors because there was no evidence that Apple had a team in place with managerial structure (implying timelines and agendas). Everything changed this past Friday with reports from the Financial Times and The Wall Street Journal (later confirmed by Bloomberg and Reuters). Steve Zadesky, a former Ford engineer who contributed to iPod and iPhone development, has been assigned project lead and reportedly has been given permission to create a 1,000-person team with personnel from different Apple groups. This move is very significant, indicative that this is likely much bigger than simply an advanced CarPlay product or merely battery research.
- Apple has talked to European automobile contract manufacturers. Apple executives reportedly met with Magna Steyr, a contract manufacturer for high-end cars, suggesting Apple may be interested in continuing its successful model of focusing on design and contracting manufacturing to another company. The primary value in the automobile industry doesn't come from the capital intensive stage of assembly, as any car marker, including Tesla, will reluctantly point out. Apple's $178 billion will certainly come in handy in terms of helping partner companies reach scale quickly. By having someone else make the actual car, what at first seems like an impossible task is now that much more realistic.
- Apple has been hiring automotive talent. Recent hires include individuals with overall automobile R&D backgrounds (Johann Jungwirth from Mercedes Benz - who was interestingly given a bogus Mac engineering title) automobile safety backgrounds (Robert Gough from Autoliv), as well as battery technology (Haran Arasaratnam from Ford). Higher-level hires indicate Apple's motivation and desire for a product that goes beyond merely software, with other hires involved in electric engines and automobile interiors. If these hires are taken at face value, then an Apple-designed car is indeed on the table.
- The focus appears to be electric. While the four major news sources (FT, WSJ, Bloomberg, Reuters) all report Apple is considering an electric vehicle, a few say Apple isn't thinking autonomous automobiles, while others say they are. At this early stage, I wouldn't include or exclude anything in terms of autonomous vehicles. We are already seeing vehicles that can park themselves and essentially drive themselves down the highway. Instead, it is safe to assume that Apple is looking at everything, including robotics, metals, and materials research.
The idea of Apple wanting to play in the space is not surprising as automobiles are turning into moving pieces of software. Today's cars feel like "smart" phones in the pre-iPhone era: dashboards that are increasingly more confusing, ineffective communication systems that reduce driver and passenger safety, and cameras and sensors that aren't being utilized. Basically, smart cars are quite dumb. And we haven't even discussed the vehicle's outward appearance, where design is often a byproduct of a manufacturing process that rewards investment efficiency, something Apple doesn't believe in.
It is rather remarkable how the automobile dashboard has had such a difficult time transitioning from a world where software played a very minor role in automobiles to one where software found in our phones, tablets, and soon watches, is easier to use and more utilitarian than software found in an automobile. As any driver can attest to, slapping a few touch screens on the dashboard doesn't work and is the car's equivalent of the pre-iPhone smartphone; clunky, ineffective, and needing to be rethought.
Apple would enter the automobile industry because they think they have a compelling product that capitalizes on taking software, hardware, and services to create a new experience. It is critical to not set limits on what that product may or may not be, as the actual automobile is dependent on advances in manufacturing, energy, retail, and even financing, all of which are open to change. The fact that the automobile genre will likely be around for a very long time only reinforces the idea of Apple wanting to become a long-term player in the space and see where software and hardware takes them. There is only so much that can be done by just shipping software to other automakers. Discounting future Apple products merely because they aren't like Apple's existing product line is not only short-sighted, but also lacking in intellectual honesty.
Apple's Car Project Compared to the "Apple Way"
From the few details we know about the project, there are some very apparent similarities between this car project and the "Apple way", or the process Apple has followed in the past to turn raw ideas into finished products.
As of late last week, I was not convinced Apple was going to do a full-fledged car because there was little evidence of a complete team in place with senior managers and high-level outside hires. Up to then we had only reports of sporadic hires and vague plans. We now know Apple has formed such an autonomous group of employees, some of which were poached from other Apple divisions, and set up in an separate location away from HQ, similar in nature to a start-up. This type of information supports the idea that Apple is not just working on minor products or random software initiatives. I now believe Apple is indeed interested in an Apple-designed car.
At Apple, ideas are grown from years of debate and collaboration. It is hard to write what Apple may or may not do in the automobile industry because Apple doesn't even know the answers yet. We are still looking at a 3-5 year horizon for this project. Ideas need to be discussed, tested, and at times thrown away in order to truly come up with a product worthy of receiving one of Apple's rare "yes" approvals. Having a team separated from everyone else and including various backgrounds and prior experiences makes this process that much more achievable. There is no cross effort to design a car in order to sell more of product A or B or to help boost sales in region A or B. This group's one and only task in to make a great product, with some of Apple's current products serving as merely ingredients, not beneficiaries.
Apple has traditionally entered industries that have been marked off as unattractive and difficult for new entrants. In this regard the automotive industry is a prime target for Apple.
Manufacturing. The capital intensive nature of the business leads to unproductively-long development cycles, while in the U.S., distribution has been hampered by outdated franchise laws designed in an era to prevent automakers from gaining too much power. However, Tesla's early success in electric vehicles stands out as evidence that we are indeed in a new era where technology is reducing barriers to entry for the automobile industry. It is no longer impossible for a start-up to design, manufacture, and sell an automobile.
Recently, however, even Tesla is coming to terms with reality that an immense level of capital is needed to build tens of thousands of electric vehicles. The old way of building cars is still rearing its ugly face. Apple could approach this situation by relying on a third-party to build the vehicle. Apple has the most sophisticated supply chain and manufacturing partners on earth, so adding a car to the mix is not an impossible feat. There are assemblers in Europe that manufacture cars for other companies, similar to Foxconn producing the iPhone. Even Foxconn is planning on making electric vehicles. In addition, senior Apple management, including CFO Luca Maestri, has extensive experience in automobile manufacturing. Simply put, Apple is already ahead of most other technology companies when it comes to knowing how to build cars.
Personalization. Automobiles are personal objects that are shaped by the cultures they provide transportation to, which makes uniformity in terms of design and distribution difficult. While America is rekindling its love for SUVs, other parts of the world crave smaller, more practical people movers. Finding the right balance, if that is even Apple's goal, would be a challenge.
Safety. Automobiles are powerful machines that involve moving people at high speeds which contain an element of bodily injury that previous Apple products have never before included.
Additional Headaches. Retail, shipping, and maintenance are other aspects of the automobile industry that often lead to headaches. To make a car, Apple would need to address all of these issues.
The primary question to ask in terms of these difficulties is if there is anything large enough to represent a valid reason for Apple not to go forward with its automobile ambitions. At the end of the day, most of these difficulties fall by the wayside.
If there is a place for speculation, Apple is focused on rethinking everything about an automobile, from doors, seats, steering wheel, dashboard, brakes, manufacturing, retail and financing. Recent hires beyond just CarPlay expertise support this theory, as well as Apple's design focus, outlined by The New Yorker profile of Jony Ive. While most ideas may die on the drawing board, others may run into problems in manufacturing. The point is the simple question of what is an automobile needs to be asked when thinking of Apple's plans for entering the automobile industry. Why are certain things being done today? Why is this particular feature, knob, or dial present in all cars? Why are cars not able to do this or that? These type of questions are likely being asked right now within Apple's car team, at some undisclosed location away from Apple HQ.
A new experience probably isn't possible in the automobile industry unless the topics of materials, manufacturing, and energy are addressed. More innovation would likely need to be done in parts of the product that a consumer will never see compared to the actual passenger compartments, matching much of Apple's history with previous products. Taking software and using it in terms of a car's safety, energy, and entertainment aspects may end up producing a much better experience for the driver and passengers.
Apple's entry into the phone market didn't include grandiose ideas such as a phone that defied gravity or was able to read minds, instead it was a phone that utilized a new user interface. People often underestimate how a few rather simple ideas, done correctly, can actually come together in such a way as to produce a completely innovative experience. I would think the same will apply to Apple and the automobile. A new user interface that allows the driver to interact with a completely re-thought automobile is Apple's likely focus. Of course, design will exist at nearly every corner and will be the glue that helps turn ideas into reality.
While there continues to be an ongoing debate whether autonomous vehicles will be a reality or not within the next 10-15 years, the much bigger focus should be that the automobile represents a device (albeit a big device) in our lives that in one way or another will be involved in society for a very long time. The auto industry is in a natural position for technology to play a much bigger role in going forward. Why let automakers with little to no technological experience continue to make suboptimal products?
The primary takeaway from all of this car news is that Apple has no intention in playing it safe or resting on its laurels. Even though Apple's current product lineup has plenty of room to grow, Apple isn't looking to coast on iPhone fumes, but rather tackle the next big issue. Much of the developed world has gotten use to what travel means in terms of automobiles. Apple is interested in rethinking travel. It is important to not simply hitch on to the idea of Apple selling a car, but also rethinking certain aspects of the automobile, including software, battery technology and robotics.
Apple's focus on other industries, including the home and health, also need to be rethought. While Apple management has said that they spend most of their time deciding which products to focus on, observers can no longer just consider small pocketable devices, but instead entire industries with a range of product sizes and usages.
The automobile's future is one filled with technology and Apple wants to be part of the game. Using a structure and mission statement created over the past 15 years, Apple is focused on creating a product worthy of an Apple logo. Only then will the real adventure begin as the automobile is still in the beginning stages of its long journey.
Apple's ambition knows no bounds.
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