The iCar, or ‘How Apple Lost its (Automobile) Wings’, by Guillaume Degroisse, Global Head of Marketing & Content at L'Atelier BNP Paribas.
What’s happening at Apple? As the Paris Motor Show came to a close, US news agency Bloomberg was talking about the possible scaling-back of Project Titan – Apple’s car venture. The Apple project team has been working on a connected car – a self-driving car, that goes without saying. And this comes just as Elon Musk is promising that Tesla cars will in future be autonomous – provided of course that the Tesla system improves, following several accidents that have received wide media coverage.
Let us take a step back and try to see things more clearly. In late 2014, rumours began to circulate in Silicon Valley that Tesla was about to announce a new model targeted more at the general public, and that Apple would follow in the footsteps of Tesla and Google by entering the automobile market. The Tesla story turned out to be true, with delivery of the Model 3 now pencilled in for end-2017. Meanwhile at Apple, nothing was moving… until February 2015 when a number of US media channels, including Business Insider and the Wall Street Journal, revealed that Apple was indeed working on a project to develop a self-driving electric car.
Steve Jobs’ heirs now leading on the iCar
Apple then showed its hand announcing that the project was being led by Steve Zadesky, a veteran of the iPad and iPhone projects. We also learned from Elon Musk that for several months Apple had been recruiting car experts and engineers, some of whom had moved over from Tesla. Elon Musk’s obvious annoyance is understandable and Apple was still continuing to poach people from Tesla right up until April this year, when Chris Porritt, Vice President, Vehicle Engineering at Tesla, and former Aston Martin Lagonda Chief Engineer quit Tesla for Apple. Then everything speeded up during the summer. Bob Mansfield, a member of the inner circle of Steve Jobs heirs until 2013, was called upon to lead the project. He continued the poaching process, going for Blackberry’s Dan Dodge, who is no less a figure than the head of BlackBerry Ltd.’s automotive software division.
The MacLaren rumour
In September came new rumours, this time to the effect that Apple was in negotiations to buy luxury carmaker McLaren. The rumours were officially denied, but they illustrate the expectations aroused by the secretive Titan project and the fact that observers gave full credence to Apple’s predicted entry into the automotive market. Moreover, during the past two years there have been a number of real indications that Apple’s supposed auto venture is credible and, more importantly, feasible.
At Apple’s Cupertino Headquarters, software development has always gone hand in hand with mastery of the hardware on which it runs – MacOsX with Macintosh computers, iTunes with the iPod, and the Appstore and iOs for the iPhone.
It is even less surprising that Apple is widely thought to be developing a car, given that in 2015 the company launched Apple CarPlay – a possible first step to entering the automobile market. Moreover, Apple boasts huge financial reserves, due largely to the cash cow that is the iPhone. When Tesla needed to raise over $100 million for its roadster, Apple had the resources to invest in Musk’s company.
Going it alone on batteries too?
Apple has even poached a seasoned team of engineers from a Massachusetts-based battery specialist A123. The furious A123 bosses unsurprisingly filed a lawsuit against Apple, which was forced to agree a settlement with the battery manufacturer to avoid a court case and further media coverage of what the company was up to.
While there is nothing surprising about Apple hiring battery specialists – battery life has long been an issue with the firm’s MacBooks and iPhones – but when you realise that the A123 engineers were working specifically on car batteries and that A123 supplies the batteries for the Porsche 919, the hybrid that won the Le Mans 24-hour race in 2015 and 2016, you can easily see where there might be an automotive needle buried in this technology haystack.
It is of course unimaginable that Apple would embark on manufacturing a car if it were not an autonomous, i.e. self-driving, vehicle. Google has been working on self-driving cars for years, as has Tesla, and Uber tested its first self-driving vehicle in Pittsburg in September. So, if we were to summarise Apple’s ambitions for the Titan project, we would certainly expect them to involve a self-driving electric car using Apple’s own operating system.
Ali Baba’s cave?
There does remain however one more question to answer: size. Why would a firm established in a business as profitable as Apple’s want to get embroiled in the automobile manufacturing sector – even if the cars are self-driving and ‘connected’ – when margins are at best 30% to 50% of what its technology products can achieve?
There could be two reasons.
Firstly, what interests Apple – and also the other tech giants – about the automotive sector is the wealth of information that cars can provide. They are both a data generator and a potential platform, providing data on the habits of the (non-driving?) ‘driver’ and the passengers. A connected car generates around 25 gigaoctets of data per hour. The car itself collects data on what it ‘sees’ – the people it passes, whether in cars or out on the street, traffic status, queues at a petrol station, and so on. In a recent report, consultancy McKinsey predicted that “the overall revenue pool from car data monetisation at a global scale might add up to $450 billion to $750 billion by 2030”.
Secondly, a self-driving car gives drivers more time which they can then spend on their iPhones or iPads, using bandwidth or making online purchases.
So Big Data and the time auto users will have ‘to spend’ in future could turn out to be Apple’s equivalent of Ali Baba’s cave.
Now, it might be taking a leap too far to conclude that the Cupertino firm’s basic aim in running the secretive Titan project has all along been to spur on auto manufacturers in their development of self-driving cars so that Apple can then deploy its products and collect the data. But this is nevertheless a perfectly reasonable question to ask.