There are a lot of unknowns in the car industry today. How much recession-recovery growth will the Chinese market have? How many of the dozens of automotive startups actually produce a car? Will millennials ever find a car that they want to own?
The biggest question of them all, though, is this one: What is Apple doing? The notoriously secretive company is known to have employed hundreds on a car project called Titan. Over the summer, rumors of dozens of layoffs in that project started appearing. Then, today, news of Apple’s interest in an outright purchase of McLaren Auto, a super-luxury carmaker, appeared, along with an interest in Lit Motors, a San Francisco startup working on a self-balancing, enclosed motorcycle.
On the surface, these pieces of news (assuming that they turn in to actual acquisitions) finally give shape to Apple’s goals in the automotive field. Here are the five hints that Cairn ERA interprets from today’s news:
- Apple is definitely entering the car business as an OEM. The last two years of Project Titan have probably taught Apple that the pain point in going from a scribble on a napkin to a manufactured car is in the design-to-manufacture phase. The early design phase consists of a small group of very talented people who work on a design concept and define what the vehicle will and won’t be. The design-to-manufacture phase involves working closely with dozens of suppliers in designing a vehicle to be mass manufactured. The interest in McLaren is in their design-to-manufacture capabilities. They know how to oversee the enormously complex interaction between multiple levels of suppliers and the OEM. They know this because they are the premier consultancy that provides help with this process in the automotive industry. McLaren is most famous for its super-luxury sports cars, but the vast majority of their 5,000 employees provide consulting services to existing OEM’s on the design-to-manufacture process. This is what Apple is interested in attaining.
- The Apple car won’t be a luxury vehicle. This might seem counterintuitive when the company is acquiring a maker of super-luxury sports cars. However, the real hint here is in the interest in Lit Motors. The Lit Motors vehicle is designed to be an urban vehicle for everybody. We’re assuming that the Apple Car will eventually be bigger than a motorcycle, but it certainly won’t be a sports car. It will fit more appropriately into the niche that BMW’s Cooper brand inhabits now: a personal vehicle of very small size that provides all of their transportation needs. Lit Motors provides an engineering design team that understands the personal transportation needs of the masses, while McLaren provides the design-to-manufacture capabilities to turn that into a production vehicle.
Lit Motors C-1 (Courtesy: Motorcycle Magazine)
- This is all about China. As much as we Westerners like to think Apple is designing for us, the truth is that the real growth market for automobiles is China (and by extension, all of Asia). That means a small vehicle that can be easily parked and can work its way through hectic traffic situations and is affordable to the ever-growing middle class throughout Asia. It also means localized manufacture that will be performed by contractors using the same model that Apple pioneered in the smartphone and PC business. Expect Apple manufacturing plants to pop up in China, India, Brazil and Eastern Europe, all of which will be managed and operated by contract manufacturing partners (such as FoxConn). The single biggest market for the future Apple car will be in China, so expect that whatever design ends up coming out of Cupertino to be optimized for that market.
And yes, the car will be battery-powered and will have autonomous capabilities (most importantly to allow the car to self-park, which is a major paint point for drivers in almost every city in the world). And it will probably have a best-in-class user interface, something which Apple knows how to create. Expect more news to leak out in the coming months that will add more form to the emerging vision of the Apple Car.
McLaren Auto HQ building: Eerily similar to Apple’s new HQ in Cupertino (Source: Forbes)
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