Buried within Citi analyst Jim Suva’s latest report on Apple Inc. is this throwaway line with massive implications: “Apple Car is on the horizon in 2025.”
2025? In the car business, 2025 is less than one product cycle away. It’s a blip of time in an industry that renews models every 4-7 years. If Apple plans to launch a car, or more likely some sort of self-driving crossover wagon in 2025, it’s well down the road to being market-ready right now.
Just last week, MacRumors.com went all-in on the Apple car, citing the hundreds of Apple employees “working on developing a self-driving, Apple-branded car aimed at consumers.” One massive giveaway, thanks to government: the autonomous self-driving permit issued to Apple by the California DMV (Department of Motor Vehicles).
Of all the potential or rumoured new players in the autonomous/self-driving/electric car space, Apple stands out as perhaps the most formidable and most intriguing. Not because Apple has any particular affinity for cars, but because:
- a) Apple has more money than God;
- b) Apple has incredible expertise in software development AND innovative product design;
- c) Apple has a history of segment-busting product launches;
- d) Apple has aggressively tried to tamp down talk of its EV, which only leaves us to believe the Apple car is a real thing.
The money piece is not to be underappreciated. Don’t forget that the legacy carmakers are burdened by the real and psycholoigal costs of reinventing themselves — of transitioning from 120 years of internal combustion engines to EVs.
They are also weighed down by mammoth financial demands, such as billions in pension liabilities and the capital/political/social/labour/management demands of manufacturing facilities around the world. Apple mostly contracts out all its manufacturing to low-cost producers like Foxconn, insulating it from fixed manufacturing financial demands, pension liabilities and all the rest.
In any case, Apple has the kind of financial resources only dreamed of by General Motors or Daimler, or even Toyota. Any of these traditional automakers would do cartwheels at the AGM if able to report profit margins of 8-10%. Apple? For 2021, Apple’s gross profit margins were up 45.6% from the year earlier, with 2021 sales surging 33% to $365.8 billion (all in U.S. funds).
Of all the current and future EV companies out there – from Ford Motor to Tesla, Lucid, Fisker, Rivian, Nikola, Hyundai and more – Apple is the most intriguing and potentially the most formidable. Analysts like Suva are bullish on Apple for all the obvious reasons, but also because Apple has been seeding expectations of market-shattering new product launches intended to re-charge the Apple brand which lately has grown a bit stale.
The one that’s getting the most immediate buzz is the impending launching of a new virtual reality headset in 2022, one that promises to create a new Apple VR echo system in this emerging product category. Apple, notes Suva and he’s not alone, is looking to move into new, large-market categories beyond AR, which makes the Apple car something close to inevitable.
The technical details? There is no end of speculation. But what we know of the Apple business model tells us a lot about what Apple will do with cars.
First, it won’t manufacture them. Apple will do the software and product design – the consumer interface bits — but a contractor will make the hardware and assembly the car/s. Could be Hyundai Motor, which early in 2021 was in talks with Apple. Or some other supplier, even Foxconn.
Second, the Apple car will run with its own, unique software and consumers will almost certainly be tied into some sort of iTunes-like service package. Apple is all about products that generate consistent revenue, cash flow. If you get an Apple car, you’ll enter the Apple universe and forever be tied to paying Apple for the privilege.
And third, whatever the Apple car looks like and however it works, it will almost certainly stand out for its clean design, ease of operation and built-in obsolescence. Those are the things that allow Apple to charge a premium for its product and services and keep filling its coffers with subscription revenue and new-model sales.
Yes, the Apple car will be expensive. I mean, a new iPhone 13 retails for about $1,000. If a Apple phone is a grand, the Apple car be priced like, well, the iPhone of cars.