Since early February, evidence has been piling up suggesting that Apple may develop an electric car to launch by 2020. Apple has yet to verify that it’s developing a car, but that has not stopped many from speculating what the Apple car might look like or how Apple might enter the automotive industry. Dan Akerson, the former CEO of General Motors (GM), weighed in on the subject, saying that instead of building cars, Apple should team up with automakers to develop operating and entertainment systems for vehicles.
As Akerson pointed out, the auto industry is dealing with heightened regulatory and safety standards alongside low profit margins in comparison to Apple’s other product lines, creating a grim outlook for any company looking to enter the auto industry. It should be noted, though, that Apple would be entering an auto industry that is significantly different than the one Akerson has known.
For the last 100 years, the light duty vehicle hasn’t evolved much beyond the conventional internal combustion engine (ICE) with four wheels and multiple cup holders. To be sure, the established auto industry has made drastic improvements to this basic concept. But in the next 100 years, vehicles are going to look a whole lot more like smartphones, a category in which Apple has some expertise.
While plug-in electric vehicles (PEVs) represent only a small fraction of the vehicle market now, their numbers are growing quickly and will continue to increase, as electricity is clean and cheap and batteries are getting cheaper and better. Already, automakers are displaying fully electric vehicles for the mass market with 200+ mile ranges, to be sold within the next 3 years. Much of the established auto industry’s expertise and capabilities still center around making cars with ICEs. When that technology becomes obsolete, space will open for new competitors to emerge, such as Tesla and, yes, Apple.
Even more quickly than vehicles are becoming electrified, they’re becoming connected. A white paper published by the Continental Automated Buildings Association (CABA) outlines the advantages of connectivity for motorists, primarily around safety and autonomous driving. Additionally, vehicle connectivity can lower the cost of electricity for PEV owners and help create a more efficient and cleaner grid infrastructure. These developments are detailed in Navigant Research’s new report, Vehicle Grid Integration.
Though Apple would encounter struggles entering the established auto industry, the war chest Apple has should be more than enough to overcome those struggles. Further, there is, arguably, no other non-automotive company better positioned to provide an electric/connected vehicle than Apple. In fact, if Apple isn’t planning to develop a car, it could be missing out on a big opportunity to enter the fastest growing segment of one of the largest global markets.