Apple will have to make cars in order to make money from them.
- It is the Geneva auto show this week and there is suspicion that Apple will launch iOS 7 to be built into dashboard infotainment systems.
- Apple is expected to launch with Ferrari, Mercedes-Benz and Volvo.
- There is some smoke with this fire as Eddie Cue (Apple’s head of Internet Software and Services) sits on Ferrari’s board and Apple did demonstrate this capability in iOS at its developer conference last year.
- This would have the effect of significantly extending Apple’s influence in the premium consumer products segment but it is very unclear how it would make any money from it.
- This is because:
- First: Apple’s business model is based on selling devices with a great user experience at a premium price.
- The premium is driven by nice hardware designs but mostly by consumers paying up to get a great user experience that they can’t get elsewhere.
- Hence if the Apple user experience is available in a device that it does not sell, this business model won’t work.
- Second: Apple does not yet have a great suite of its own
- Digital Life services.
- Instead it is masterful at offering everyone else’s in a fun and easy to use way.
- Hence, an auto version of iOS will be pushing the Digital Life services of other companies.
- Drivers in Silicon Valley will get a decent experience using Apple Maps but Ferraris, Volvos and Mercedes-Benz sell in bigger volumes elsewhere.
- The Middle East for example is a big market for Ferrari and Mercedes-Benz but here Apple Maps and other Apple services are next to useless.
- Hence to really make an impact in devices that it does not make, Apple must dominate the user experience with its suite of Digital Life services.
- Apple has a very long way to go to realise this dream.
- Therefore, while there may be an announcement this week, I suspect that it will fall far short of what many commentators are expecting.
- This also explains Apple’s discussions with Tesla which look to have been about infotainment and not acquisition.
- Apple remains in a tricky spot this year with its core market showing no or very low growth and it competitors snapping ever closer at its heels.
- It is inexpensive but the stock will show no real upside without a new product line to drive revenue growth.
- TVs look like a much better bet than autos.
Blog Comments
Tatilsever
March 4, 2014 at 6:34 am
Well, when Facebook has its first disapointing foray, sort of, into smartphone OS, it made sense to point to Apple-Motorola partnership for a phone with iTunes, which was also lackluster, but was followed up by the iPhone less than 2 years later. Likewise, I wonder if we should expect Apple to follow iOS-in-car with its own car? 🙂
Colin
March 4, 2014 at 1:29 pm
The central premise of this article looks wrong to me. I doubt very much if Apple is going to “launch iOS 7 to be built into dashboard infotainment systems”.
It seems much more likely that CarPlay will be conceptually similar to AirPlay, in which Apple devices play content via the car infotainment system and each can control the other. Standardising integration with many different infotainment systems would be a desirable new feature of Apple devices. Consequently Apple will sell more devices and presumably generate some licensing revenue from car makers.
The comment about Tesla also looks off the mark. Why would conversations between Apple and Tesla about CarPlay involve Apple’s VP of M&A? On the other hand, conversations about a shared interest in advancing battery technology probably would include M&A considerations.