Apple Watch is Making Luxury Watchmakers Uncomfortable - Above Avalon Premium Weekly Recap

The following post is the sample story used to demonstrate the type of stories sent daily to Above Avalon Premium MembersThe following story was sent on May 25th, 2015.

Apple Watch is Making Luxury Watchmakers Uncomfortable

The luxury watch industry still can't understand why someone would buy an Apple Watch.

Here's Alexander Schmiedt, managing director for watches at Montblanc, 
speaking with Bloomberg: "Our products should have very long life cycles. In modern technologies the life cycle is exactly the opposite. It may be the hottest thing today, and in one year it's already outdated, and in two years you're made fun of for still using it."

Montblanc will be selling a $390
"e-Strap," a stainless steel display designed to be attached to the watch band and worn on the underside of the wrist. Functionality is pretty limited compared to something like Apple Watch.

And here's Johann Rupert, owner of Montblanc: "I love Apple, but just when I've gone and set everything up for an iPhone 5, the iPhone 6 is coming out and the cords change. That is not to say the Apple Watch is not a great product. I predict it will do very well, but I don't think that customers are going to be ecstatic to throw away watches in one to two years when the technology is obsolete."

I thought those two quotes summed up the luxury watch industry's reaction to Apple Watch pretty well. Jean-Claude Biver of TAG Heuer has said something similar, unsure how to compete with something that isn't timeless. It's not that technology is foreign to luxury watchmakers, but I suspect software and the fast-pace of change found in technology are creating headaches. An iPhone 5 doesn't become obsolete in two years on its own, but rather a legitimately better device in the market helps to make it obsolete. The same dynamic is not found in the watch market. 

Such uneasiness towards Apple Watch originates from the changing value proposition found in the luxury watch industry. With Apple Watch, consumers can begin valuing utility on the wrist. A luxury watch's timelessness was something that you were required to value if you wanted high-end jewelry for the wrist.

I suspect we are entering an era where people are still going to want the jewelry aspect found in their old watch, including the craftsmanship, but no longer place the same kind of value on a device's timelessness. For an industry built on timelessness, you can start to see how the Apple Watch spells trouble.  

The other common reaction that I'm seeing related to Apple Watch is that the product increases awareness for other timepieces and wearables, almost like the Apple Watch is a gateway drug for "real" watches. I'm not so sure about that. After using Apple Watch, I don't have a greater appreciation for wearables or traditional luxury watches. If anything, the feeling is less. I just don't look at the Apple Watch as a watch.  

If I craved something that looked more refined or polished, I could just upgrade from the Sport to Watch collection or change watch bands, and that type of reasoning is why I think Apple will actually keep the innovation and updates pretty vibrant for the higher-end Watch models. The Watch and Edition collections will likely account for 80% of Apple Watch profits despite only accounting for 20% of sales.

Consensus already assumes the low-end luxury Watch market (watches selling in the $200-$1000) is in trouble, but very few people will go on record and discuss how the overall watch market, including watches sold at higher prices, is in trouble because of devices that add utility to the wrist. The problem may not necessarily be that their current customers will run out and buy an Apple Watch, but that young professionals end up valuing utility over the traits the luxury watch market have traditionally marketed.

If new money stops flowing to the luxury watch market, the environment will become very difficult.

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The Jony Ive Promotion

Apple announced on Monday that Jony Ive will be promoted to Chief Design Officer, relinquishing his day-to-day managerial duties to Richard Howarth and Alan Dye. Reaction to the news has been mixed, with some thinking this announcement is the beginning of the end for Jony at Apple. I disagree. I look at this news as paving a sustainable path for Jony Ive to continue guiding Apple. In the process, we also now know the future leaders of Apple's design efforts. When we understand how Apple turns ideas into products, it becomes clear that Jony's new role is the closest thing yet to the unofficial role Steve Jobs held at Apple. We are in the midst of Jony Ive's Apple. 

A Well-Planned and Intelligent Promotion

When Scott Forstall was removed from his position as VP of iOS software at the end of 2012, Tim Cook positioned the move as an effort to increase collaboration. In reality, much of the resulting executive shuffling was done with the near-term in mind. Apple was kicking off the Apple Watch project, and iOS needed a rethinking. Along with maintaining his leadership over the Industrial Design team, Jony was given leadership over Human Interface, which is not a trivial amount of additional responsibility and more importantly, time. While everything over the next two years appeared to go relatively smoothly (Apple software critics would disagree with that assertion), the managerial duties were likely taking their toll on Jony. 

In the well-read The New Yorker Jony Ive profile published in February, Ian Parker made it seem like Jony was absolutely exhausted from the Apple Watch development. I just don't think Jony's job responsibilities and workload were sustainable. Here's Parker:

"[Jony] was a few days from starting a three-week vacation, the longest of his career. The past year had been 'the most difficult' he'd experienced since joining Apple, he said later that day, explaining that the weariness I'd sometimes seen wasn't typical. Since our previous meeting, he'd had pneumonia. 'I just brunt myself into not being very well,' he said. He had discouraged the thought that Newson's appointment portended his own eventual departure, although when I spoke to [Laurene] Powell Jobs she wondered if 'there might be a way where there's a slightly different structure that's a little more sustainable and sustaining.'"

Evidence would suggest that Jony's promotion was a long-time in the making and not due to some recent event or sudden decision. Not only is the Apple Watch launch now in the rear-view mirror, but both Howarth and Dye had been positioned in the press going as far back as late 2014. This move is made from a position of strength. Ultimately, promoting Jony to Chief Design Officer is a long-term solution to positioning Jony in a spot where he can do what he does best: make complicated technology more personal. 

Titles Are Overrated

While the Chief Design Officer title may cause some to scratch their head with bewilderment as to what it means or doesn't mean, it is important to not get too caught up trying to match Apple corporate titles with importance and job duties. I've long felt Jony is the most powerful person at Apple, despite him not having the CEO title next to his name. As SVP of Design, I think Jony's current title went a long way in seemingly minimizing his influence at Apple. Jony was merely one of eight other SVPs, a comparison that likely was far from the truth. 

I look at the title of Chief Design Officer as mostly ceremonial, not indicative of any less willingness by Jony to continue working on future Apple products. Tim Cook couldn't be more clear when explaining Jony's new role

"Design is one of the most important ways we communicate with our customers, and our reputation for world-class design differentiates Apple from every other company in the world. As Chief Design Officer, Jony will remain responsible for all of our design, focusing entirely on current design projects, new ideas and future initiatives. On July 1, he will hand off his day-to-day managerial responsibilities of ID and UI to Richard Howarth, our new vice president of Industrial Design, and Alan Dye, our new vice president of User Interface Design." 

Those job duties not only sound awfully similar to the role Jony has been doing for years as SVP of Design, but they sound incredibly ambitious, effectively giving Jony reign across Apple.  

I suspect one issue that many pundits are having when analyzing this news is they are getting too caught up with titles, assuming Chief Design Officer is codeword for "Chairman" or something similar which does indeed have a connotation of transitioning more to a part-time or supervisory role. Similar to how Steve Jobs held the CEO title while Tim Cook performed most of the CEO duties, I think Jony Ive got a new fancy title for no other reason than to show recognition and appreciation for his past accomplishments.

New Leaders Add Clarity

While most were preoccupied with Jony's new job role, Tim Cook added a large amount of known to the sensitive subject of succession planning by announcing two new leaders in Apple design (Richard Howarth, VP of Industrial Design, and Alan Dye, VP of User Interface Design). As Jony's public profile increased over the years, the murmur of "Who will replace Jony?" grew louder and louder. While Wall Street has historically had a weak spot when it comes to valuing Apple design and understanding Jony's importance to the company, the greater level of clarity and certainty when dealing with a company's succession planning, the better. 

There is not much public information about Howarth and Dye other than they have been at Apple for years (Howarth for 20 years). Both were successful in prior Apple projects, earning their dues and subsequent promotions. Upper mobility is not common at Apple, so I tend to think Tim Cook and Jony Ive must have really been impressed with these two gentlemen. 

Apple's industrial design team should be considered more of a family than a collection of co-workers. The 19 industrial designers aren't at Apple for the money or fame. If they were, they would have left years ago. Instead, they believe in and care about solving problems and making great things. They work very well together, judging by the lack of turnover, and they have seen much success turning raw ideas into finished products. Such an environment and background leads me to think these new managerial appointments won't likely usher in a round of corporate politics and changing group dynamics. It certainly is something to watch for, however, with company departures as the clearest evidence of such a situation occurring.

Leading vs. Managing

With Howarth and Dye serving as Jony's two lieutenants in terms of managing day-to-day aspects of Apple design, what would such a dynamic look like and where would Jony fit into the picture? I consider Jony's new role to be much more about leadership while Howarth and Dye handle the more corporate side of things - the actual management of teams. The amount of additional time and attention that Jony can spend on entirely new projects, while leaning on his two right hands to make sure that schedules are being met and projects are receiving all of the resources they need, goes a long way in describing Apple's strategy over the next few years.

I see an environment in which Jony's potential can be unleashed even more now than the world has already seen. Similar to how Steve Jobs was known to head down to Jony's design lab to hang out, I suspect in some ways, Jony wants to do the same - check out of the day-to-day executive grind and lose himself in research and design elements on whatever topic or subject he choses. By being positioned in more of a leadership role than a managerial role, Jony could maybe be more like Jony.  

Future Design Projects and Marc Newson

In his Telegraph article, Stephen Fry briefly mentions what Jony Ive will be up to once his promotion takes place: "Jony will travel more, he told me. Among other things, he will bring his energies to bear - as he has already since their inception - on the Apple Stores that are proliferating around the world. The company's retail spaces have been one of their most extraordinary success."

Take a look at Jony's travel itinerary the past few months, and it is no surprise that he will indeed be traveling more. While Fry positions Apple Retail stores as a likely focus for Jony, the truth is he could end up traveling to various countries, meeting and working with different people or simply researching different aspects of the world. While this may represent a change from what some may be used to at Apple, since when was change automatically a bad thing?

Apple's product road map will likely revolve around two major trends: wearables and personal transport initiatives (not to mention iPhones, iPads, Macs). I look at Jony's new role, along with Marc Newson's recent hire as a London-based member of Apple's design team, as the clearest sign yet that these two gentlemen have some big things planned for the future. Here's Marc Newson in a Telegraph article from 2014:

"[T]he world of automobiles I just find completely heinous...I have old cars but I rarely drive them anywhere. I must confess we do have a Peugeot people-carrier thing that I really hate going in. But car design, is driven by marketing, by people that are not designers. And it's just a completely sort of myopic approach...One of biggest sources of inspiration as a designer is basically looking at things and hating them. I have other designer friends who feel the same way, like Jony Ive." 

I recently began to lay out the rationale for why Apple will enter the automobile industry and I do think this Jony Ive promotion is a way for projects like an Apple electric car to go forward, not to mention rethinking the Apple Store experience to better match this new product roadmap.

Moving Closer to the "Steve Jobs" Role

Not only will Steve Jobs never be replaced, but Apple should never think that someone needs to fill the role that Steve Jobs held. Steve had specific strengths and weaknesses that make any comparison to someone else illogical. Instead, I think the much more appropriate way of thinking about this subject is to ask who would be the best person to make sure that Apple's culture remains alive and well while ideas are allowed to mature from raw form to finished product, virtues that Steve Jobs oversaw.  

In announcing Jony's promotion, Tim Cook talked about how Jony would have less managerial responsibilities. Typically, one would assume a promotion goes the other way around, leading to more oversight over teams. In reality, I suspect Jony's promotion involves overlooking Apple's mission much more closely, with more flexibility than ever before. Jony Ive will still be Jony Ive, but I think this promotion positions him much more closely to the role Steve Jobs had: making sure the product always comes first. 

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Analyzing the iPhone User Base - Above Avalon Premium Recap

The following article was sent to Above Avalon members on May 19th, 2015. 

Analyzing the iPhone User Base 

One data point that I find increasingly important to keep track of is the current iPhone user base. This information isn't just useful when talking about the iPhone upgrade cycle, but it becomes critical when referring to adoption rates for services such as Apple Pay, and soon, Apple Music, and Apple's video streaming service.

Apple is actually somewhat good about disclosing financial information, or at least the right kind of data to reach educated estimates about most pieces of its business. You just need to have all the pieces of the puzzle in hand.

Last month, Tim Cook said on Apple's earnings call that 20% of the "active [iPhone] installed base" had upgraded to the iPhone 6 and 6 Plus. This data point compares to Cook's commentary back in January that approximately 13-14% of the iPhone installed base had upgraded (his exact quote was "mid-teens" or "barely in the teens"). 

Since we know Apple sold 61 million iPhones last quarter, we make an assumption as to what percent of the total were iPhone 6 and 6 Plus. I have long felt that 80% of total iPhone sales is a fair estimate for the newest iPhone model(s) on the market. Therefore, I estimate approximately 48 million iPhone 6 and 6 Plus units were sold January through March.

Running basic arithmetic with that 48 million number and Tim Cook's comments about the installed base, I get an iPhone installed base of approximately 475 million users. Is this an exact number? No. Is this a good estimate of roughly the number of people with an iPhone (all models)? Yes.  

With this estimate in hand, we can start to break out the iPhone base by model. iPhone 6 has been outselling 6 Plus by approximately 2.5x, while both have been outselling the iPhone 5s and 5c by nearly 4-to-1. Taking into account these ratios, I suspect the current iPhone user base breakout looks something like:

iPhone 6: 85 million users
iPhone 6 Plus: 35 million users
Older (5s, 5c, 5, 4s): 355 million users
Total: 475 million users

That 355 million user base of iPhone 5s and older phones represents the key number to look at when determining the prime market for iPhone owners looking to upgrade to a new iPhone this coming fall. But 355 million is still a very big number. Using Fiksu data and adjusting for its U.S. and Eurocentric tendencies, my best estimate of the current iPhone user base is: 

iPhone 6: 85 million users
iPhone 6 Plus: 35 million users
iPhone 5s: 125 million users
iPhone 5c: 50 million users
iPhone 5: 80 million users
iPhone 4s: 60 million users
iPhone 4 and earlier: 40 million users  
Total: 475 million users

There is a lot that can reached by using that data, but I struggle seeing how someone can look at that breakout and not think similarly to Tim Cook when he says there is still a significant number of iPhone users in the market for an iPhone upgrade. Then take into account Apple's growing presence in China, and you can start to see how Apple can realistically sell more than 250 million iPhones in FY2016 (they are on track to sell 230 million in FY2015).

Bonus: One easy way to come up with a quick geographical mix of iPhone sales? If the number of iPhones sold in Greater China now outpaces the U.S., we know the U.S. has represented a consistent 35-40% of total Apple sales. That would suggest iPhone sales mix is something like: Greater China 37%, U.S. 35%, Other 28%.

In addition to the preceding post, Above Avalon members received the following articles this past week (100 percent related to Apple):

  • Apple and Uber Well-Positioned to Lead Automobile Industry
  • Apple and Auto Industry M&A
  • Icahn Invests in Lyft
  • Carl Icahn is Still on Tim Cook's Side
  • Spotify Wants Your Time
  • Apple Television Plans Put On Ice
  • Weak Apple Watch Demand?
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  • Verizon/AOL vs. Apple
  • Clinkle Turned Down Apple's Acquisition Offer?
  • Apple Buys a GPS Company
  • Tony Fadell is Concerned about Wearables Battery Life

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Uber, Not Tesla, Will Be Apple's Competition in the Automobile Industry

We are quickly approaching a pivotal moment in Apple's history as technology and mobile are on a collision course with the automobile. While most would conclude Elon Musk's Tesla and a few of the strongest automakers are the leading contenders of this new automobile era, Apple and Uber are the two companies best positioned to rule the new era of the automobile.

The Auto Industry Is Ripe for Change

Timing is everything. A few years too early and even the best product will fail to catch on with the consumer, while a few years too late and the best product will likely have already shipped. We are quickly moving towards a period where the auto industry is positioned for change. 

Many are still not convinced Apple will enter the automobile industry because of doubt Apple can come up with a product that leapfrogs the best-ranked vehicle on the road today: Tesla's Model S. The problem with that thinking is that "better," when thinking about the future automobile, won't be defined by performance such as battery range, speed or acceleration. Instead, the primary innovation that will hit the auto industry will be shifting dynamics in which power moves from traditional auto manufacturers and car dealerships to technology companies that empower the consumer. Convenience and personalization will outweigh traditional performance metrics.

To rethink the automobile, one has to attack the current industry structure. Apple has had prior success with rethinking the way industries operate. The iPod, despite a revolutionary input method, did not become a mass-market success until Apple convinced the music industry to move to a $0.99 per song download model for long-term survival. The iPhone's biggest innovation may have been shifting the balance of power in the mobile phone industry from the carriers to Apple, something few analysts and pundits thought was possible. At the end of the day, Apple was able to position its products as the catalysts of change. This same type of "breakthrough" moment will occur in the automobile industry. Owning the manufacturing infrastructure capable of producing millions of cars will shift from a source of power to a liability. Instead, the power in the automobile industry will be found by the company owning the mobile ecosystem that empowers the consumer.

While many think Tesla is pushing the envelope in terms of altering the automobile industry, a closer analysis would reveal that Tesla is actually largely residing within the same structure, facing identical limitations to any other automaker, especially in terms of capital requirements and growth. Instead, companies like Uber are not only positioned to wreak havoc in the auto industry, but they are already causing much change. Uber isn't just a ridesharing app, but an aggregated demand phenomenon. Said another way, Uber is using the smartphone to match demand and supply for automobiles efficiently and cheaply. Uber is not alone as Lyft, its closest competitor, has seen some levels of success as well.

Many assume Uber will be the best taxi service in the world, but there are more important underlying trends taking place in the auto market. The automobile's value proposition is changing and few current automakers will be able to respond and remain relevant. Apple's ability to build experiences around style and a thriving ecosystem and Uber's ability to shift power back to the consumer represent the changes that will shake up the auto market the most since the Model T's introduction in the early 1900s.

Using the Model T to Determine the Future

Henry Ford had a very simple goal with the Model T: set the world free. Up to then, personal transportation was for the rich and privileged, which severely limited society's potential. The Model T was cheap, reliable, and utilitarian. These attributes were seen just by looking at the vehicle and its high-quality parts and high ground clearance to navigate a world with very few paved roads. Ford sold the Model T for the equivalent of what is around $5,000-$10,000 in today's dollars (the average price for a new car today is $33,000), a byproduct of pricing the automobile low to stoke demand, thereby making it cheaper to produce through economies of scale.

1917 Ford Model T    Photo courtesy (Boldride).

At the high point in 1923, Ford was selling 2 million Model Ts a year, representing approximately 50% of the vehicles on the road. The automobile was a tool for getting from Point A to Point B. Ford nailed the value proposition, and it seemed that the future was in his hands. However, there was one thing that he did not expect to happen. 

Chevrolet introduced something that ultimately marked the end of Ford's dominance: different car styles. The automobile moved beyond just a utilitarian vehicle as people were buying new automobiles according to how they looked. Over the next 80 years this trend has only intensified. We now have an auto industry hungry for sales, segmenting the market according to not just style, but also performance and price. We went from a world where one model accounted for a majority of the cars on the road to one where buyers can spend months finding cars that best suit them.

Changing Value Proposition

The primary reason technology will alter the the automobile industry's power structure is that the automobile's value proposition will shift. We already see signs of this shift taking shape. The New York Times highlighted how teenagers can't wait until they turn 16 so that can have their own Uber. The way we value the automobile is changing. People who have never owned or driven a car may indeed hold the purest form of vehicles: tools to get us from Point A to Point B. Car ownership has likely corrupted those that have a car in the driveway, leading us to ignore the negatives and instead focus on the "positives" such as having a car at our disposal. Uber is beginning to expose those "positives" as thin attempts at finding purpose behind a large monthly expenditure.

There are outliers to this dynamic, such as high-end performance cars, but they aren't for the masses and don't represent the overall trend that is occurring across the world. 

We are soon entering a period where a car's primary value will resemble that of the Model T, utility. People are once again starting to look at cars as devices that move them from Point A to Point B. However, technology has made it possible to improve on Ford's concept. The smartphone and software will make it possible to position convenience and personalization as the primary value attributes of personal transport.

Convenience

Uber is currently at the forefront of offering convenient personal transport. Using a smartphone (or Watch) to indicate demand for an automobile and then track the approaching vehicle on a map in real-time goes a long way in turning the vehicle into a commodity. Uber begins to question whether car ownership is the most convenient way of getting from Point A to Point B. The frustration with parking, maintenance, and the actual act of driving has its limitations.

This is bad news for automakers as the idea of ridesharing causes consumers to think beyond factors and attributes that automakers have spent decades building and marketing as reasons to buy their product. This shock to the system has similarities to the cell phone market when the iPhone altered what people expect and want out of a smartphone. One can now make the argument that the same thing is happening in the luxury watch market following the launch of Apple Watch. I'm convinced many other industries will follow a similar path as technology and software upend the status quo. 

Personalization

There is one thing that Apple has the potential to excel at with an automobile: using hardware, software and services to personalize the driving experience. The ability to have the driver and passenger compartment adapt to one's lifestyle and personality is something that the world has never seen or even thought about.

Every subsequent technological breakthrough found in an Apple product has included a move towards becoming more personal. That trend will continue with the automobile.

Having a car be able to adapt to whoever is sitting in it, which makes more sense in a world where car ownership is on the decline, will be one of the most revolutionary developments the automobile has ever experienced. We are used to a certain level of customization in automobiles such as different seat positions, but personalization will add much more in the way of software to customization to produce an entirely new experience.  A family with four kids and luggage has different needs than a commuter headed to work. Having a car that can adapt to both of these users in terms of seating, amenities, and not to mention technological needs and luxuries will be much more important than having a car that has fast acceleration or longer driving range.

Succeeding in Land of Disdain

If Uber's success and popularity aren't enough evidence that the world is ready for a new way of personal transport, consider the complete destruction of car culture in the U.S., where most of today's car loyalists still look at the 1950s and 1960s as the pinnacle of car fandom. Today people buy vehicles because they need to. There is now a certain level of disdain in the automobile buying market. 

I have little confidence that the current fleet of automakers will be able to compete in an industry built on a different value proposition. Companies born in a mobile era such as Uber and Lyft are best positioned because they can extract value from a sea of commodity, where all of the cars are the same in and out. Mobile companies wouldn't be limited by car manufacturing which will represent a ball and chain. This is the primary reason why I fear Tesla, a pioneer in electric vehicles, may remain a pioneer because of its manufacturing facility. 

Apple. The company that excels at selling experiences will rely on pages from previous playbooks with the automobile. Design will play a crucial element of any product from Apple with Jony Ive, Marc Newson, and the industrial design team playing a role in every piece that goes into the vehicle. Apple will rely on third-party contract manufacturers to assemble the actual electric vehicle. Mapping and other telemetrics will combine with a revolutionary personalization system to position the car to handle additional autonomous features including accident avoidance. I haven't even mentioned the innovation in terms of materials. In a sea of commodity, Apple knows how to build a pretty cool-looking vessel.

Uber. While a network effect has given Uber an increasingly valuable proposition for drivers (and users), I would expect the company to continue moving towards controlling key technologies that play a role in the Uber experience, such as mapping technology and navigation. The risk for Uber is being locked out of smartphones or operating systems in the future, the same fears held by Amazon and Facebook. This dynamic is made that much more interesting in an era where the entire automobile will controlled by an operating system. Uber's response may include eventually producing the entire automobile, relying on strong cash flow from ride-sharing to contract with a third-party to produce pretty generic commoditized vehicles.  

Why Not Tesla? 

Tesla's approach is largely confined within a legacy industry which represents its biggest challenge. While Tesla clearly has a lead in terms of software compared to other automakers, there are doubts that the company has enough resources to truly move beyond just performance-based metrics and begin to create an overall personal transportation experience. 

Self-Driving Cars and Car Ownership

The automobile's value proposition will change regardless of self-driving cars. While there is strong evidence that truly autonomous cars are still many years off, the much more important aspect is that convenience and personalization (the new value drivers for the automobile industry) can be achieved in stages. A growing number of people already consider Uber as more convenient than owning a car, and this is in a world with no autonomous cars.

If self-driving cars do become a reality, then car ownership trends and the overall auto industry and will undergo such change in short order, it is difficult to truly conceptualize how many existing companies will lose relevancy overnight.  

What About CarPlay?

Many people still think Apple's primary ambitions in the automobile industry are related to an expanded CarPlay where our iPhones will sync with a car's dashboard and infotainment system. On the surface, that plan sounds a lot easier than rethinking the entire car. However, there are several issues that are not being addressed. Putting CarPlay in a car not built by Apple is the equivalent of Apple putting iTunes on a Motorola phone in 2004. There are fundamental issues with not controlling the entire experience as the car manufacturer has a different value proposition than Apple. 

Car manufacturers have not shown any willingness to lose major aspects of their vehicles dashboards and diagnostics to technology companies. Much of this is moot anyways because the overall auto industry structure is not altered one bit by just controlling the dashboard. To truly change the world, which is the only thing Apple would be focused on doing by entering the automobile, they need to embrace convenience and personalization and alter the way value is extracted from the automobile industry. That is only possible by owning the entire automobile including contracting out manufacturing to a third-party and owning the retail distribution.

The Next 10 Years Will Determine the Next 100 Years

The themes we see playing out over the next 10 years in the automobile industry will serve as the foundation for the next 100 years of personal transport. This likely means that Apple has no choice but to enter the automobile industry. The change that the auto market will undergo will have a number of important implications including the way cities are laid out, how we function as society, and how the car is just the beginning of how technology can impact our lives. Simply put, having technology companies control personal transport will be the start of controlling the home and other large portions of our lives. 

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