Apple Automotive – Tinker, tailor, soldier, car?

18 months on and making a vehicle still makes no sense.

• Making a vehicle in 2024 makes as little sense as it did in 2016 because Apple’s brand and its valuation are dependent on its profitability more than ever.
• This is because even if it is successful, Apple will never make 40% gross margins on vehicles even if it is able to produce better battery technology than Tesla.
• The idea of making a vehicle was firmly put to bed in 2019 (see here) when Project Titan lost 190 members who were either let go or transferred to other parts of Apple.
• Since then, the focus appears to have been on autonomous driving and 2019 showed a very good improvement in performance over its execrable showing in 2018 (see here).
• The research may have also branched out into battery research which is key to selling electric vehicles as range is one of the biggest factors considered when making a purchase.
• This combined with a lack of news flow in the run-up to the holiday season in 2020 seems to have emboldened the fan base to again float the notion that Apple will build and sell a vehicle.
• I have no doubts that Apple has already built a prototype vehicle for R&D purposes but my position on commercial sales of a vehicle remain unchanged.
• Selling a vehicle will be great for revenues (cars are high price items) but terrible for margins as there is no way that Apple will be able to earn its usual 40% margins on pressed steel, wheels, brake pads etc.
• I have long believed that it was this realisation that led to the restructuring of Project Titan in September 2016 with the intention to focus on the infotainment unit and autonomous driving.
• This was at least credible, as infotainment had the possibility to deliver these sorts of margins if Apple could get the OEMs to implement its devices in their vehicles.
• However, this too did not work out and this activity was also cancelled with everything being focused on autonomous driving and maybe battery technology.
• There is no possible reason that I can think of for Apple to be engaged in autonomous driving or battery technology as it has no route to market.
• It has already failed to get the OEMs to implement its technology outside of CarPlay and so how it would make money from either of these two technologies remains a complete mystery.
• I suspect that the reality here is that Apple is experimenting and tinkering with vehicles as part of its research into what comes after the iPhone and it is this tinkering that is being mistaken or exaggerated into rumours of a product launch.
• Furthermore, I don’t think that Apple will get very far with either autonomous driving or battery technology as both of these are very far from its core competence and there are a host of better positioned and far more focused competitors.
• The net result is that I think that this idea is irrelevant for Apple whose valuation is already significantly overstretched just like almost all of its FAANG peers.
• I have no interest in owning any of them at the present moment.