Glaring flaw in Apple car hype-gasm: The iGiant likes to make money Despite rumblings of secret research projects and hiring sprees, Apple is not going to be building its own cars anytime soon, says one analyst. Edison Investment Research analyst Richard Windsor told The Register that Apple's preferred model of high profit margins wouldn't translate well into the world of auto manufacturing …
This is a stock analyst. He doesn't put his money where his mouth is, he puts other people's money where his mouth is! If he's right he gets a bonus for making money. If he's wrong the other people are out the money he lost but he probably guessed right on something else and still got a bonus.
Apple want to make money, and they have a track record that shows that they know how to do that. Part of Apple's strategy is to investigate potential opportunities, and then to pick the avenues that they predict will work well for them. So, one can assume that Apple pay a lot of very bright people to investigate opportunities. These bright people are then provided with the best information that money can buy, and have the resources to conduct expensive original research themselves.
Will Apple make a conventional car? Probably not. Is this an area that shows signs of being disrupted? Yes (see: Uber, Tesla, car clubs, fuels prices, car automation research). Does Apple have a record of working with outside parties? Yes (iTunes and record labels, iPhones and network operators)
The analyst doesn't know. I don't know. Apple don't know, but they will do due process.
Yes, I'm pretty sure that while Apple is open to the possibility it will manufacture a car itself, it is also open to the possibility of contracting it out to some uber-Foxconn of the automotive world like Delphi, open to partnering with someone (probably not those who will target the same market themselves like BMW or Mercedes, maybe someone who isn't quite in that upscale market themselves like Fiat) as well as open to producing the software for someone else's car.
Everyone knows that self-driving cars is a multi trillion dollar opportunity for those who get it right. When you have the resources Apple does, spending a billion dollars over a half decade figuring out if and how you can participate is worth it. Analysts will complain "Apple does not spend enough on R&D" but when they spend a lot of money hiring auto experts they'll assume they have to participate in the market or the money is wasted. A lot of R&D ends up "wasted" - that's how it is supposed to work. If it isn't you aren't truly doing R&D, you're just doing engineering.
Everyone knows that self-driving cars is a multi trillion dollar opportunity for those who get it right.
Everyone knows that self-driving cars is a multi trillion dollar opportunity for lawyers if they get it wrong
Let's not forget that things can go wrong too, I get nervous when companies like Google go all ladidah about the bright future without taking into account that it can rain, hail and snow in that future too.
Personally, I don't think Apple is looking at building its own car. I *do* think that it may be working on a car dash standard that will allow easy integration, and I suspect it doesn't really want to make that standard public too early (also because it needs quite a dollop of security before that should go near any public interface). I would not be adverse to a standard that allows me, for instance, to hook up (via Bluetooth) an external GPS that can draw from the same resources as a built-in one (i.e. wheel sensors so it can continue to work in tunnels, and muting of the onboard sound system for messages). In-car GPS is really *stupidly* overpriced IMHO.
According to the market rumours, Apple have also been working on making a TV for years now.
Perhaps Apple just puts out these rumours (a) to deliberately mislead analysts, or (b) to support the share price due to the *possibility* that they will come up with something massive?
There is a reason the iOS things hold their value better folks.
We must have a different understanding of value. I don't consider resale price to equal value, I consider lower cost of ownership to be value.
If replaced after the same period of time a $750 iPhone that holds 75% of its value has the same cost as a $375 phone that only holds 50% of its value. You only need the Moto G to hold 17%, assuming it's the $220 16GB version, to make out the same. The best value is probably a Xiaomi Redmi Note 2 which at about $150 only needs a new consumer replaceable battery and it's good for another few years.
If you want to do the full calculation, be sure to include lost opportunity cost on the money tied up in the expensive phone. The $600 saved with the Xiaomi can buy a plane ticket or nearly a half dozen shares of AAPL if you so desire.
>Just when you thought it was safe to go back on the roads
Just because you are hopelessly lost doesn't mean that you have to drive dangerously!
Bizarrely, some roads that cross from England to Scotland have signs saying "Drive on the Left". I wonder if there was ever an incident that prompted these signs for the bleedingly obvious?
WAG - they're aimed at touring Europeans, and they appear in Scotland rather than Dover because lonely scenic roads make it all too easy to fall back on normal drive-on-the-right habits, absent the cue of boggle-eyed on-coming drivers (I know some Germans who came around a corner on a single track road to find a car hurtling towards them - and the Germans instinctively flinched to the right. What saved their bacon was that the Italians coming towards them made the matching mistake)
Similarly in NZ there are signs "LINKS!" on quiet roads near Kahurangi National Park - miles from the airports but popular with German tourists. Seems to work, though probably at the expense of dashing the hopes of some golf-mad Japanese visitors.
"the Germans instinctively flinched to the right [..] the Italians coming towards them made the matching mistake"
So two wrongs have finally made a right ;)
But that is exactly why I will never drive in the UK - I would be deathly scared of injuring someone (or worse) because my reflexes have been conditioned by more than 30 years of driving on the right.
I've made the mistake several times, leaving at 3AM for an early ferry I found myself bowling along on the left through in Belgium until a shocked driver approaching brought me round.
Then after 2 weeks driving in the USA I the day I came back on an overnight flight I found myself driving along on the right and thinking "why is that van on the same side of the road as me?"
Point of the second example is, regardless of how many years conditioning you have, it only takes a couple of weeks to totally reverse it the other way.
Always happens when I'm tired.
Point of the second example is, regardless of how many years conditioning you have, it only takes a couple of weeks to totally reverse it the other way.
I don't have the problem so much with left and right (I'm pretty used to that now), but with manual and automatic. I have to deliberately put my left foot wide aside to avoid it trying to hit a clutch when I slow down, because I will then *really* slow down :). In general it takes about 10 minutes to tune in, and I agree with you, it's worse when you're tired (which is why I avoid driving when tired).
But that is exactly why I will never drive in the UK - I would be deathly scared of injuring someone (or worse) because my reflexes have been conditioned by more than 30 years of driving on the right.
Just avoid too busy roads as well as empty ones and you'll be OK - busy roads because you have to get used to it which takes some bandwidth away from your attention to your surroundings, empty ones because it's better to see other cars to avoid mistakes. Use your mirrors for every sideways manoeuvre and make sure you keep aware of what's happening around you so you can plan rather than be surprised (the military call it situational awareness). It is only scary for the first few days :).
I have several decades of left and right driving under my belt, with steering wheels on either side so it now takes only a few minutes to "tune in". The trick is not thinking about which side of the road you're on, but on which side of the middle you are. The former will get you easily into trouble when you turn into a street (as you are likely pick the wrong side - trust me, I've been there :) ), the latter will make it easier to figure out where you ought to be. Oh, and although roundabouts go the other way as well, priority from the right is just as enthusiastically ignored in lefthand as well as righthand driving countries :).
If you go over, use the Eurotunnel. They guide you in and out on the correct side and you're routed into the proper lane on the motorway. If you use a ferry, the first thing you'll hit is a roundabout and I can guarantee you that you will look to the wrong side and miss any big fat lorry coming from your right. It pays to always look to both sides - if you come from a country with cyclists you will be used to that anyway.
But that is exactly why I will never drive in the UK - I would be deathly scared of injuring someone (or worse) because my reflexes have been conditioned by more than 30 years of driving on the right.
Just drive when it's snowing. A few flakes in the air and traffic in southern England, at least, slows down to a speed where you're far more likely to perish from dehydration and exposure than be injured in a collision.
"Bizarrely, some roads that cross from England to Scotland have signs saying "Drive on the Left". I wonder if there was ever an incident that prompted these signs for the bleedingly obvious?"
Because tourists will rightly see that they're changing country and naturally wonder if they also drive on the left.
China to Hong Kong, for example, switch when you cross the border.
Apple is not going to be building its own...
The 90's called...
Really, of course they won't actually build their own factories.... They will co-op some Asian company to do the heavy lifting. THEN, slap the Apple Tax on...
Anyone know the last time Apple owned their manufacturing plants?
Is auto companies providing a display that gives you the option of using whatever platform you want. Or, better yet, just a display that interfaces with your phone. No extra cost to the buyer, and no huge layout for the manufacturer. Simple! Which is why it won't happen...
Maybe Apple have in mind creating a 'standard' for how a command module that could be fitted into cars to make them capable of self-driving should work. Define the physical interface between the actual command unit and the rest of the car etc. Car manufacturers signing up to said standard could then build perfetly normal cars by todays standards that have the additional ability to have a box of electronics added as an optional extra to give the car self-driving capability. (Obviously there's need to be specifications for the necessary sensors to be built into the cars)
Car manufacturers win because they don't have to go the whole hog to completely self-driving cars in one go, they are able to offer a transitional product which even if the self-driving aspect doesn't work quite as well as is hoped (which they can blame on Apple and other electronics companies) is still functional as a drive-it-your-self, and they can build upon the experience to make better self-driving cars.
Apple wins because it doesnt have to make cars, but can put itself in a position where other companies have to buy a licence to make use of the interface standard. Plus it can make its usual 40% margin on its own in-car units, which probably don't need to be much more than a mildly modified version of a prodyct they already have.
It's what I'd do were I Apple.
"Is auto companies providing a display that gives you the option of using whatever platform you want"
It used to be so. Clearly it didn't make enough money for the car companies though:
https://en.wikipedia.org/wiki/ISO_7736 (single or double)
https://en.wikipedia.org/wiki/ISO_10487
If they're already at the stage that they're booking time at the test track- they obviously have a prototype ready to go? The Tesla guys they persuaded to come on board- aren't the kind of folk who'll sit around twiddling their thumbs. So- if they're building their own car- and its a reasonable assumption that its an electric car at that- they have a primitive prototype ready-to-go already.
I don't see any reason they couldn't license designs for the likes of the Cactus or something- slap an Apple badge on it- and charge whatever the hell they like- betcha there would be customers queuing around the corner for it..........
In my mind they're building a car for Apple Aficionados rather than car aficionados. I love my tech- but I also enjoy driving- and with the exception of cruise control- I like a fully manual that I have control over- rather than it having control over me..........
I can't see myself buying this- the likes of the new infotainment console in a new Volvo- is more my style. You can glue an iPad to a dashboard if you like- but at the end of the day- I'm more curious about whats under the bonnet- than on the dashboard...........
Then you would represent a very small minority of <25year olds
The level of dissinterest in cars for young, educated, well-off, city dwellers is amazing.
.. unless they want to get carted somewhere, of course. My kids are quite happy with something powerful, but none of them are particularly interested in what makes it move, other than "petrol" :).
I hope you're right, that way I can safely ignore whatever crap they choose to inflict on their followers.
If they were to try to get into other manufactures instead of building their own car then that would reduce the brands of cars I'd be willing to buy,
A Ferrari is not "expensive car", it is an eye-wateringly expensive car for the average car buyer.
There may be some who are passionate about Apple products but car enthusiasts struck me as more so. And the latter also seem to more into customization than might be possible in an Apple environment.
No one said anything about an expensive car. The thesis was that cars won't sell at high profit margins.
Ferrari profit margins appear to be around 15%, according to various online sources. Among performance-car brands, Porsche seems to do better - about 18%. Still less than half of the 40% this article claims as Apple's typical or desired margin.
Build a "revolutionary" Kia, charge as if it were a Lamborghini, enjoy the gross margin... Offer financing at a particularly high interest rate to every barista who absolutely must have the newest model.
This is not a jibe at Apple. They are rather amazingly successful doing exactly that (minus financing?) in a very crowded industry that is supposed to be extremely competitive and where margins should be low. There is no reason why they shouldn't be able to pull the same trick again. Except the auto industry might not be as forgiving when Mr. Cook tells someone the brakes didn't work because he was pressing the pedal wrong. The attitudes towards patented rounded corners may turn out quite different, too. But those are different - and not necessarily compelling - arguments.
We've had mobile phones with satnav as well as satnav and we are still having to buy things to stick these to windscreen/dashboard because car manufacturers don't build in somewhere to put them.
And integration with devices for power/audio is still confused. Example of latest Honda CRV - two usb ports in centre console - both can take memory stick/m3 stick one can connect to an ipod. Neither can supply enough power to recharge. If you wanted to play CDs you needed to buy the most expensive option where it comes with satnav.
Apple had a PDA and a game console, actually in the market (Newton and Pippin).
Apple's Apple TV so far isn't remotely a TV, it's an overpriced streaming box, no screen. So what might an Apple Car be?
The Apple Watch isn't much use as a watch. It needs an iPhone and basically daily charging (every other day at best). Either a fitness band (10th of price) or a two Euro watch is better value.
I can't see many car makers wanting to pay an Apple Tax for Apple supplied kit, other than perhaps an iPhone dock.
Just because Apple are developing something doesn't mean that
a) It will ever be released
b) If released, that it will be as successful as iPod, iPad and iPhone. Almost all of Apple's profit is now iPhone. The other products are small percentage. iPad dropping, iPod nearly dead, Apple computers such a niche (compared to iPhone) they dropped "Computer" from their name.
If Apple produce something that's software then the car manufacturers can pay the Apple tax, stick it on cheap generic hardware and stick their own Apple tax into it as an optional extra and everyone is happy. Idiots get a £4k iPad, car makers get to sell £150 of hardware (plus £2k Apple tax) for £4k, and Apple get almost 100% margin on software sales.
would they be the same with the cost of a car when a new model comes out every 2 years and support diminishes at the same rate?
Have you looked into modern car finance?
What you describe will be nicely covered by a 2 year PCP, or a 2 year Personal Contract Hire deal.
Which amounts to almost the same sort of thing as a phone with a 24 month contract, except you have to give the car back at the end of the contract when you pick up your new one.
Loads of the new cars on the road are there because of these deals already.
One, if you build a higher end car you probably can get 40% margins quite easily. What's the margin on a BMW 5 series, or a Mercedes S class? Those are certainly over 40%.
Two, even if you target a bit closer to the mainstream market (let's say $40K-$50K) and make only 20% margins, that's up to $10K profit on each car sold.
As they did with phones, laptops and so on Apple will need to evaluate where they want to position themselves in the market to maximize their income. If they believe they can sell A cars at one price, making B profit on each, or sell X cars at another higher price, making Y profit on each, then is A*B greater than or less than X*Y.
"One, if you build a higher end car you probably can get 40% margins quite easily. What's the margin on a BMW 5 series, or a Mercedes S class? Those are certainly over 40%.
Two, even if you target a bit closer to the mainstream market (let's say $40K-$50K) and make only 20% margins, that's up to $10K profit on each car sold."
A cursory Internet search suggests that margins at the German luxury manufacturers are about 10%. So try plugging those figures back in.
"Are you talking gross margin on the cars, or overall margin after all the overhead is accounted for?"
From another Internet search, Apple's gross profit margin on all activities is around 40%, Daimler's is 20%. It's clear that manufacturing cars has a lot of overhead, and significant R&D costs, more than being an assembler like Apple.
All that's needed is a flexible API - buggered if I can see what Apple (or Google) are intending to bring, that isn't lock-in.
Maybe I'm becoming an old-luddite, but I was quite happy with BT pairing, and my GPS being able to mute, and then shout through the speakers, when it wanted me to make a turn.
I can see maybe it would be nice to let my charging phone in a pocket shove the accompanying picture onto the dashboard.. Working the other way, maybe allow my car to browse/control exposed services - but nothing more than say a smart-watch can. Actually, I think that's exactly what I want - Smart-watch OS, with physical buttons I can hit.
...an audio player. Clearly Creative already owns that market.
And a phone? Who would contemplate going up against Nokia?
(Stock analysts: people who are rarely right, and get to blame the company they are "analyzing" if the company doesn't meet their prognostications. Oy, such a racket!)
"This is because the auto industry is just not that profitable" Those are just silly lies. The auto industry is full of managers that fake accounting as much as the Hollywood ones or worse... They all claim to be poor but it is just about stealing the money and make every product look like a flop while it surely wasn't.... the same Hollywood trick that allows studios managers to steal money from producers, directors and end-users=viewers with movies actually making a very high profit but the studios allowed to cheat and claim that it was a failure.
Think all-round cameras and other sensors, plus software for automated driving. Tesla recently released software that did all that for highway driving, so poach these engineers and build your own system that is not exclusive to a single manufacturer, with an iPad as the in-dash display. There's double-digit profit margins there, and other companies you might not expect are rather active in that field, such as Panasonic:
http://business.panasonic.com/solutions-automotivesolutions-adas
This is existing tech. My car has 360 degree camera, park assist, lane assist, traffic sign recognition, driver sleep alert monitoring, automatic braking, blind spot monitoring, cruise control with auto speed limiter and other stuff I cant' remember. And it's an ordinary average sort of car too, not a fancy Tesla.
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