“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.