Apple developing electric vehicleApple Inc. may already be positioned to evolve into a global automaker in many ways that other Silicon Valley companies aren’t.
The tech company has put a few hundred employees to work on a secretive project to develop an electric automobile, a person familiar with the matter has said. While Apple often tests ideas that don’t get released, the work underscores the company’s long-held desire to play a greater role in the automotive space, which is ripe for more of a merging with users’ digital lives.
“It makes a ton of sense,” Gene Munster, an analyst with Piper Jaffray Cos., said Saturday. “If you would’ve said 10 years ago, ‘Apple is going to be in the car business,’ I think people would’ve said you’re crazy - because it would’ve been crazy - and today it’s a much different company that’s able to tackle these massive addressable markets.”
Apple, with a market capitalization that’s more than $700 billion, needs to continue growing sales in iPhones, its largest revenue generator, while also expanding into new markets, such as automobiles, if it’s to reach a $1 trillion valuation, Munster said. He added that he doesn’t think Apple would bring out a car in the next five years.
Nonetheless, Apple boasts some advantages versus other Silicon Valley companies with car ambitions. Tesla Motors Inc., which delivers less than 10,000 vehicles a quarter, surprised investors last month when Chief Executive Officer Elon Musk said the company wouldn’t be profitable until 2020.
The automotive industry churns through cash at an astonishing pace. Apple, as it turns out, has a cash hoard of almost $180 billion. As Musk said last week, Apple is “just running out of ways to spend money. They spend money like it’s water over there and they still can’t spend enough of it.”
While the old rule of thumb was that it cost about $1 billion to develop a new car, those costs are now being spread over more vehicles as traditional automakers work to use vehicle platforms for more models, said Dave Sullivan, an automotive industry analyst with AutoPacific. That would be one challenge for Apple, as would a lack of experience building cars, though Thilo Koslowski, vice president and automotive practice leader at Gartner, said they could acquire those manufacturing skills.
“It’s well understood because it has been around for 100 years,” he said of building cars. “What isn’t that well understood are the pieces that Apple would potentially bring to the table.”
Apple has built its fortune on creating products that are compellingly designed and that integrate software in such a fashion that immerses users’ lives deeper into the Apple world, further hooking them for future upgrades. And it already has car-suited technology ready to go.
“The car is one of the most important and critical pieces of the puzzle that you need to master if you want to interact with customers wherever they are,” Koslowski said. “It’s pretty important to have a phone that’s connected, and can show you your calendar and do all kinds of other things, but now extending it to this other device that happens to have four wheels.”