Apple Car: Jean-Louis Gassée is not a believer

“The magical Apple Car is an attractive fantasy.”

From “Apple Car Speculation: The Missing Pieces” in this week’s Monday Note:

Even before the Covid-19 pandemic, automakers had trouble making good money. After a long struggle, Tesla’s operating margin reached 2.3% last quarter. For conventional automakers such as Ford, GM, and VW, 2019 operating profit hovers around 4%. Toyota does much better with 10%… but Apple’s 2019 operating profit was 29.3%.

Why would the Cupertino company enter such a low margin business? It’s nice to believe that Apple could make a car like a Tesla Model 3, only better. Better software, better fit and finish, distinctive style, the best BEV on the planet. But how would such a dream vehicle cost significantly less to make than a Model 3 while selling for more? With its Nevada Gigafactory, Tesla is the undisputed leader when it comes to battery cost — and now it’s shooting for the $100/kWh holy grail. It’s unimaginable that Apple could undercut Tesla’s bill of materials…

The magical Apple Car is an attractive fantasy: Imagine if Apple did for cars what it did for smartphones that existed before the iPhone? What if it could take on an entrenched industry the way it did with the Apple Watch? As Katy Huberty mentions, [see here] Apple has quasi-infinite R&D money it can throw at the problem, and it has superb SCM (Supply Chain Management) that could assemble and build a distribution network for its vehicles… But, if Toyota achieves only 10% in operating margin selling 10M cars a year (with $250B revenue, about 20% more than Apple), how can we seriously believe that Apple would enter the automaking field?

My take: Does Gassée need an introduction? In brief, when Jobs left Apple in 1984, John Sculley picked Gassée to run Macintosh development. Twelve years later, Gassée’s Be operating system lost out to NeXT in the OS bake-off that brought Jobs back to Apple. Anyway, Gassée knows Apple better than most.

16 Comments

  1. John Miller said:
    The article doesn’t mention the Titan project, or what Gassee thinks it about. What about the vehicle sightings? Didn’t they have a separate building in Sunnyvale?

    1
    May 25, 2020
    • “The article doesn’t mention the Titan project, or what Gassee thinks about it.”

      It does seem strange that Gassee doesn’t mention Titan, Sunnyvale or the sightings. The closest he comes:

      “Given the production system’s preeminence, where are the rumors describing Apple’s plans to build a car factory in Marysville, OH, or elsewhere? Have we heard gossip describing contract manufacturing arrangements with a Magna Steyr subsidiary in Canada or Europe?

      “A car manufacturing plant is hard to hide. No leaks means no plans, no imminent or medium term Apple Car project.”

      1
      May 25, 2020
    • Gregg Thurman said:
      I’m in agreement with Gassée.

      Tim Cook has said on many occasions that autonomous vehicles is the mother of all AR projects.

      I think Titan is an alpha testing ground for an Apple AR platform. The Titan facility is large enough to test AR software in the most difficult of AR applications – autonomous vehicles.

      When Apple launches its first AR feature/product it’s engine will be the Titan platform (OS?).

      2
      May 25, 2020
      • John Miller said:
        Actually, Cook said it was the “mother of all AI projects” (not “AR projects.”) This was back in June ’17, just three short years ago.

        Doesn’t seem to make a difference, or does it?

        0
        May 26, 2020
  2. David Emery said:
    What if Apple licensed its car technology to other company/companies to produce? I suspect a lot of the low margins in carmaking is due to materials and labor, neither are factors for licensing revenue.

    Of course, Apple’s previous experience with licensing Macs didn’t end well. (I had a ‘Mac clone’ and it was actually a very nice machine. But I can understand why Steve Jobs wasn’t pleased with the profit margins.)

    1
    May 25, 2020
    • Gregg Thurman said:
      What if Apple licensed its car technology to other company/companies to produce?

      Where’s the ROI in doing this? Automobile margins are razor thin as it is, and this is where license revenue would come from.

      As I see it manufacturing is out because:
      Margins are way to thin.
      People die in vehicles

      Licensing is out because:
      Margins are way to thin.

      Which leaves another, unknown purpose for Titan. My guess remains Titan is an AR platform for future Apple features/products.

      0
      May 26, 2020
  3. Andrew Cannon said:
    Apple will never make a car/truck because people are killed in/by them.

    2
    May 25, 2020
  4. Fred Stein said:
    Car, and Large wall-mount TV: Loved by analysts and rumor mongerers. But…

    1) Both Cars and big TVs require a lot of capex.
    2) Apple focuses on ears, wrist, wallet/payments, streaming/gaming/AR, and health. All have high IP content per consumer $$.

    1
    May 25, 2020
    • David Emery said:
      Then why is Apple investing substantial R&D into automobile technology? It’s not like they’re competing for the old DARPA Grand Challenge prestige. Nor do I see the application of automotive sensor integration into the current set of Apple markets.

      I don’t have an answer! I can see your point about where Apple has brought out products and their ROI. But it seems to me to be “Anti-Apple” to spend a lot of R&D on something they don’t see as a potentially valuable product.

      1
      May 25, 2020
  5. Jerry Doyle said:
    “…. My passion has been to build an enduring company where people were motivated to make great products. Everything else was secondary. Sure, it was great to make a profit, because that was what allowed you to make great products. But the products, not the profits, were the motivation.” (Steve Jobs)

    Jean-Louis Gassée never understood Apple’s culture. His first action over the Macintosh Division was to cancel the Big Mac. Gassée failed later when he overreached in negotiating his sale of “Be” to Gil Amelio. Jobs won, selling NeXT to Amelio.

    Gassée never has understood fully the culture of Apple. Why? Because for Gassée, the goal is: “…. all about making money.” That is not the DNA goal for Apple.

    Apple’s DNA is its deep conviction in the integrated approach, as a matter of “righteousness.” Apple does not pursue that path because it is some “control freak,” but pursues that path because that is the only path Apple believes allows them to make great products. Apple cares about the user and wants to take full responsibility for the consumer’s entire experience. Jean-Louis Gassée never learned this during his truncated Apple career and during his brief personal dealings with Steve Jobs.

    Apple has no hesitancy to create an Apple car even if it turns out leaning towards a low margin business. Apple is all about creating great products and giving consumers an unbelievable personal experience in using Apple products.

    3
    May 25, 2020
  6. Frank Pedron said:
    Making and selling cars is so twentieth century. Autonomous mobility pods on the other hand would revolutionize the personal transportation market.

    Forget about making relatively negligible profits selling vehicles. Sell personal mobility as a service instead just like music, and television. Make public transit a little more personal.

    Hail your “TransPod” using an iPhone, send your destination using an iPhone, navigate to the destination using Maps and pay using an iPhone and Apple Pay all without having to interact with any humanoid.

    That would work for me.

    2
    May 25, 2020
    • Gregg Thurman said:
      Autonomous mobility pods on the other hand would revolutionize the personal transportation market.

      Sounds like an autonomous SEGWAY

      0
      May 26, 2020
      • Frank Pedron said:
        I was thinking more along the lines of a 2, 4 or 6 passenger fully enclosed vehicle with all the amenities.

        Autonomous Segway? Sure, why not?

        0
        May 26, 2020
    • Aaron Belich said:
      And that’s what Tesla, Waymo, Uber and countless others have been chasing after for the better part of a decade now.

      0
      May 26, 2020
  7. John Konopka said:
    Hard to understand this one. Automobiles seem to be a low margin, oversupplied business with lots of complications (different rules in every country) that wouldn’t be attractive to Apple. OTOH, they do seem to have a project ongoing in this area. Maybe Apple is thinking to somehow reinvent transportation, not just make a nicer, more reliable Tesla?

    Also, the car industry is large enough to be interesting to Apple. A million cars a year at $50k each is a $50B business.

    0
    May 26, 2020

Leave a Reply