Apple is Still Serious About an Apple Car

By John Banks

Apple still wants to disrupt the electric vehicle (EV) industry, and it could have some form of EV in production as soon as 2024. This comes from a Reuters scoop, as told to Reuters by an inside source.

No matter how you slice it, Apple getting into the EV space would be a seriously big deal. Nor would they be starting from scratch: Apple has played with the idea for years.

Project Titan, the code name for the Apple car, has been around since 2014 and at one point staffed hundreds of people. Apple’s interest in Project Titan has waxed and waned.

At one point, Apple seemed to give up on Project Titan, scaling it back to the point of irrelevance. Perhaps it was just in streaked mode. And now, according to the Reuters source, it is back in full swing with an aggressive timeline.

Apple has game-changing technology in the works with respect to EV battery design. They are reportedly working with a “monocell” design, which would remove casing materials and allow more juice to be packed into less space, significantly increasing driving range.

Apple is also experimenting with variations on EV battery materials, with a variant known as lithium iron phosphate holding promise for safer output at lower temperatures (and less risk of battery fires).

Apple has a history of doing amazing things with battery technology and compressed chip designs, dating back to the original iPhone.

When the iPhone was first launched in 2007, Apple’s main competitor, the maker of the Blackberry, thought the stated battery life was physically impossible due to technological limits of the day.

When they finally got their hands on an iPhone and pried it open, they discovered the innards of the phone were almost entirely devoted to battery space, with all of the chip functionality jammed into a corner.

From the launch of the iPhone onward, Apple has arguably been the undisputed world leader in complex supply-chain logistics. The iPhone, arguably the most profitable consumer hardware product of all time, is a dazzling feat of coordinated development, with design elements that are sourced and prepared for years in advance.

All of this bodes well for Apple’s efforts in making a car, as does Apple’s cash hoard of roughly $200 billion, its extremely profitable line of existing products, and its installed user base of 900 million iPhone users worldwide.

For the longtime iPhone user, the possibility of a smartphone-integrated experience is also intriguing. Imagine unlocking your car with a glance (via face recognition, the same way you unlock your phone); having the “find my iPhone” also apply to your vehicle; telling Siri to parallel park, or to have the car pull up and meet you at the store entrance; all while having the entire dashboard, audio and climate control system, and overall in-car user experience embody the elegance of “insanely great” Apple design.

The real question is why Apple would want to get into the car business at all, given the historically lousy profit margins and brutally competitive landscape.

On the one hand, Apple has grown so large as a business, it has to find huge new markets to conquer just to move the needle on revenue and profit expansion. From that point of view, cars and health care are two of the only mega-opportunities left.

On the other hand, it is hard to imagine Apple giving up the 20 to 25% profit margins it has enjoyed for years, and bending steel is such a cost-heavy, brutally competitive endeavor that it seems impossible to maintain the kind of juicy margins the tech juggernauts are used to (with the exception of Amazon, which has the internal capability of flipping the margin switch, but prefers to grow like kudzu).

There are at least three ways Apple could go when it comes to EV strategy:

  • It could set out to build its own Apple car from scratch, working with existing suppliers like Foxconn to build Apple-only factories that produce hundreds of thousands of vehicles per year.
  • It could partner with a high-end original equipment manufacturer (OEM) like Mercedes and create an Apple-branded car that sits on a luxury car chassis, with production handled by OEM facilities.
  • It could stick to the higher margin aspects of battery technology and user interface design, offering to meld the Apple experience with a high-end OEM brand. Imagine, say, buying your next Porsche or Range Rover with an Apple Gold package.

It will be interesting to see which path they choose, as all of them have trade-offs.

Apple’s historical tendency to be controlling, and to prefer end-to-end dominance of the user experience, argues for building an Apple car from scratch. But a taste for fat profit margins argues the complete opposite — leaving the steel bending to an OEM, while staying with the high-value-add parts of the equation (the battery technology and driver interface).

Either way, Apple’s reported seriousness in disrupting the EV market is more bad news for Tesla.

Recent sales trends in the European EV market show that traditional automakers can more than compete with Tesla at the “good enough” low end of the buyer spectrum, where affordability matters more than luxury or cachet.

And now Apple will be storming the luxury and cachet end of the EV space — along with plenty of others — either with its own auto brand, or perhaps by enhancing the experience of one or more existing OEMs (think Mercedes, Lexus, Porsche, and so on).

If we had to choose an outcome, our wager would be that Apple chooses the high-margin route while letting someone else make the cars, comparable to Waymo’s emphasis on providing the high-end tech for self-driving fleets while an OEM handles the tonnage.

When doing the math in terms of capital efficiency at scale, this is the way to go: Some businesses will never support fat profit margins at scale, and the automaker business is one of them. Our strong hunch is that Tesla bulls find this out the hard way, in part as Apple’s EV strides cut into buzz and market share.