Marchionne and Others on Apple and Creating a Successful New Car
Apple needs its next big thing. An iCar would do it. But becoming a full-fledged automaker is too big a bite of the apple for the Silicon Valley company—at least that is the opinion of automakers that have been developing, building, and selling cars for a century and know it to be a difficult and complex industry.
“The advice that I’ve given them is if they do have any urges to build a car is to lay down and wait until the feeling passes,” Fiat Chrysler CEO Sergio Marchionne said. “Illnesses like this come and go, and you can recover from them; they are not lethal.”
Details have been leaking out about Apple’s Project Titan, a self-driving electric car project with a team of automotive executives and engineers lured from nearby Tesla as well as traditional automakers. Their expertise includes product development, manufacturing, and sales experience. And there are stories about a secret testing facility in California. There are indications that the workforce and investment behind the project continue to grow, but there are also reports that the team is finding out that entering the car-building business is a herculean task.
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Those already in the car business are inclined to believe Apple CEO Tim Cook when he told Fortune that Apple has teams exploring ideas constantly. “We don’t go into very many categories. We edit very much. We talk about a lot of things and do fewer. We debate many things and do a lot fewer.”
That is not to say Apple does not want a bigger role in modern cars that rely on millions of lines of code and have become an extension of today’s smartphones and other devices. Autonomous driving will only increase the reliance on software.
“They are the kings of software and have a lot of strong people,” said Darin Gesse, marketing manager for Chevrolet’s electric Volt and Bolt. “I wouldn’t put anything past them. Who would have thought Apple would have a watch?”
Advanced technology is extremely important, but the real estate the technology goes into—the vehicle itself—is fundamental, said David Cole, chairman emeritus of the Center for Automotive Research. The danger: “You can spend billions to develop a new vehicle and not be able to develop something unique and desirable enough.” And it is hard to be unique when every major automaker already has electric and semi-autonomous vehicles.
“If I were at Apple, I would sit down with Sergio and say, ‘Let’s make a deal here,’ and we’ll get real estate for our technology,” Cole recommends.
Marchionne’s response: “I don’t know that it makes sense to partner (as co-automakers),” he said. But if Apple recognizes carmaking should not be part of its core business, “it makes sense to partner in terms of what we do for a living and their ambitions in the automotive space.
“I think we have all lived through the excitement of being in the car business,” Marchionne continued, but it is a complex industry with too many players spending too much capital. “I think there’s even a bigger problem about getting somebody who is not in the business to come in here and occupy the space and start all over again. There’s available capacity in the system to try to deal with your requirements, so use somebody to get you there.”
Cole agrees the business is overpopulated and that it would be hard to make a dent unless you bring something totally unique—which is even harder if you are partnered with an existing automaker or trying to play catchup.
Tesla is a successful newcomer, but the business model has not yet been tested with high-volume affordable electric cars, and the Chevy Bolt is expected to beat the Tesla Model 3 to market. CEO Elon Musk has invigorated the industry, but “I don’t understand the business model,” Marchionne said. “I can’t make money building a car like the Tesla.”
Jim Farley, now a senior executive with Ford, introduced the Lexus brand when he was with Toyota. Apple is a strong consumer brand, he said. His question is how do they go to market and how do people respond in the third and fourth year of the product, which will determine the brand’s success and longevity.
Creating a new car is a long and expensive goal. It can take four or five years for an established automaker to create an all-new vehicle, and that is with a century of expertise and an established network of suppliers. A newcomer could face a lot of regulatory scrutiny.
Starting from scratch could cost $10 billion USD to get a car on the road, Cole estimates. “Apple and Google have piles of money,” he said, but having an automotive partner with manufacturing plants eliminates a huge barrier.
“Once we start spending gobs of moneyâlike when we start spending on tooling and things like thatâwe’re committed,” Apple’s Cook has said. Last year Apple spent about $2 billion USD a quarter on research and development, but it could be earmarked for a number of projects.
And if Apple wants to eventually provide autonomous driving, it is competing with car companies and auto suppliers who have been developing the sensors and technology for more than a decade and putting aspects of it on the road.
Lex Kerssemakers, CEO of Volvo Car USA, said the Swedish automaker will have 100 fully autonomous vehicles in the hands of customers in Gothenburg by the end of 2017, and he believes Volvo will be first to do so. He thinks the technology will go mainstream after 2020.
Ford CEO Mark Fields said the automaker plans to triple its engineering investments and semi-autonomous test fleet. In Michigan, Ford was first to use MCity, a simulated city at the University of Michigan, to test self-driving cars in snow, a sensor’s worst enemy.
Daimler Trucks is testing an autonomous Freightliner big rig. On the passenger car side, Drive Pilot in the 2017 Mercedes-Benz E-Class provides hands-free driving, including lane changes, and can park itself remotely.
BMW‘s Vision Next 100 concept provides a glimpse into its vision for autonomous driving 20 years from now. CEO Harald Krueger described companies like Apple and Google as competitors in the future even though BMW has been mentioned as a possible partner.
Nissan is testing a prototype in Japan. General Motors has its SuperCruise system coming to the Cadillac CT6 next year, providing semi-autonomous driving, and later this year will have a fleet of autonomous Volts for employee use at its Warren Technical Center.
Google, which has had high-profile autonomous cars on the road for years, has said it is more interested in supplying the brains of a car and partnering with automakers to provide the rest. It tapped Roush to make its test fleet of podlike cars.
Even Uber is getting more into it with plans to add another research building to its growing campus in Pittsburgh for R & D on advanced technologies for autonomous vehicles. Its advanced technologies center is a partnership with Carnegie Mellon University to focus on autonomous vehicle technology in addition to mapping and safety-related technology.
It all adds up to a lot of competition for Apple, which lacks experience, manufacturing, and distribution capabilities at this time.
“If I were a major Apple stockholder and if they are going into the car business, I think I’d be out of the stock,” Cole said.
But Buick interior designer Aaron Stich is more forward-thinking: “Cars have always been the embodiment of the technology of the age as well as fashion and what’s popular. It makes sense this is happening.”
Steve Wozniak, Apple co-founder, in a Reddit AMA, March 2016
“I think we’re really going to improve life a lot with [self-aware cars], and that’s where Apple likes to be. Basically making products that make a better world for the users. So the car market makes total sense to me for Apple, but the important thing is that I hope if they get off on a product, something they could sell and make a lot of money for but is not ‘insanely great,’ as Steve jobs would say, Apple should drop it and start over. … I think that’s good if Apple says, ‘We’re not making the product that is going to stimulate all of humanity; that’s not our business as Apple. We don’t want to just be another self-driving car.’ “
Apple Car design by Garrett DeBry, digital model by Roman Mistiuk, and digital rendering by Mind Over Eye.