Richard Windsor, analyst at Edison Investment Research, believes that Apple will never actually release a car to the public, due to lack of profitability and the inability to strike a deal with a partnering automaker. However, Windsor does believe that the company is really making the Apple Car and also that the hope is at the least to learn and benefit from the venture.
“Selling automobiles would be “catastrophic” for Apple’s valuation, Windsor said, as the margins are nowhere near the 40 percent gross profit margins Apple earns on the iPhones, iPads and other products. Since carmakers sometimes make no money on the vehicles they sell, earning profits instead from the financing they provide to customers, Windsor said that such margins on a car, even one with an Apple badge, look hopelessly unobtainable . . . How can you make 40 percent gross margins on pressed steel, wheels, brake pads and seats when the others who are buying all these things in much greater volume can’t do it? It’s just not feasible.”
Partnering with an established automaker seems like the best answer for Apple. Windsor thinks that Apple is finding that building a car on its own is proving difficult, so the company is attempting to branch out. Recent reports have disclosed that BMW and Daimler are not willing to partner with Apple.
Windsor says that Apple’s other attempt to profit will be from “commercializing the user data generated by people while driving”. The company will attempt to move forward on the hardware and software aspect of vehicles. But, thus far, automakers, as described above, do not want to let Apple have control of the data. Windsor shared:
“This is why we think Apple turned to BMW and Daimler. However, both of these companies have realized how important the data the vehicle generates is and consequently refused to allow Apple to store it in the iCloud.”
At this point, neither scenario is showing to be playing out very well for Apple. Windsor said:
“They don’t have the DNA of a carmaker. We think that Apple’s future in the automotive market is very uncertain as both avenues of earning a return through selling hardware look like dead ends.”
Although Apple has put together a team for its “Project Titan” car venture, and much information points to the company building a car, the company has never confirmed one way or the other. It does seem very clear that a car is being built, but for what purpose is unknown. Windsor believes that, like Apple’s TV project, the car will be built and utilized for “learning” about the auto industry, but won’t ever come to market.
If Apple is building its own car/cars, the company could get a firm grasp on self-driving technologies and also find further ways to integrate its existing “infotainment” products, apps, and cloud-based services. Since partnering with others at the moment seems bleak, Apple creating its own fleet of future vehicles for its own “undisclosed” purposes makes sense. The company really has nothing to lose in doing so.
Apple has a nearly unlimited amount of capital. If making any profit or profits similar to its other products is not key, the company could move forward making a car on its own. This also solves the problem of not having to deal with agreements and “sharing” of data with other automakers. Is this not why Apple is suddenly vamping up its hires, opening shop in Germany, and pushing a resurgence of Project Titan forward?