Is it time for Apple to Enter the Automotive Industry?

Given all the current  interest in Apple’s acquisition of Beats Music I thought I would re-post a blog that I originally wrote in 2011 as to why I thought, at that time, that Apple should buy Tesla Motors.  Three years later it looks as though the automotive and high tech industries think this could indeed happen. This month, a couple of articles appeared on the Supply Chain 24/7 website , article 1, article 2, which adds further fuel to the Apple/Tesla rumours. Anyway, here are my thoughts, which I believe holds true today. (I have updated a couple of sections in the original blog below to bring it up to date)

In early 2011 I posted a blog entry discussing why I thought Apple and Tesla Motors should try and form a partnership to exploit the growing interest in electric vehicles.  The blog was recently picked up by a student at the University of Florida who asked me to provide some more thoughts on this idea.  I also saw a comment posted to my original blog which said that he had conducted a random search in Google for Apple and Tesla and he stumbled across my blog entry. So I guess it goes to show that I am not the only one to think that this could potentially be an interesting partnership, if not a game changer in terms of how the automotive and high tech industry works more closely together on developing new products. In fact the convergence of the automotive and high tech industries over the past 18 months or so is one of the reasons that I came up with the original idea of Apple and Tesla potentially working together.

apple tesla grill

Now since that earlier blog entry, which I posted in February 2011, there have been a number of developments in the electric vehicle market.  In March 2011, Nissan finally launched their Leaf vehicle in the UK, the Chevrolet Volt launched in the US and is due to launch in the UK in 2012. BetterPlace (discussed in an earlier blog post) has been expanding their charging infrastructure and here in the UK another company called Chargemaster launched another privately owned charging infrastructure called Polar back in July.  Sales of Nissan’s Leaf vehicle have been rather slow to say the least, especially with consumers still fighting against range anxiety, ie worrying about what happens if their battery becomes depleted whilst out driving their cars. So I think the industry still has some work to do to boost consumer confidence, produce desirable electric cars and provide a charging infrastructure that can, for the moment at least be rolled out across major cities. I took a look at charging infrastructures in an earlier blog entry. So what can the industry do to increase consumer confidence about purchasing an electric vehicle?, step forward Apple!

tesla 2

I have been following Apple since I was at University and a few years ago I spent many hours completing an assignment about the growth of Apple as part of my MBA course. They have diversified their business on countless occasions and the latest rumour to hit the streets is that they are planning to enter the domestic TV market by making their own TVs.

appletvMany internet enabled TVs have recently been launched, for example Samsung’s D series, with apps that can download your favourite social media content and this of course plays right into Apple’s market as they initially introduced the concept of downloadable apps. Many TVs are now being launched with WiFi connectivity and many see the TV becoming the social media hub of tomorrow’s homes.  Apple wants to be part of this.  But what happens when consumers go out of their home?

Well this year (2011) Apple launched iCloud which effectively allows you to store your music and other multi-media files in the Cloud, so that you can access them on multiple devices. Now what if you could get access to iCloud in your car?, some car manufacturers such as Audi are starting to offer WiFi hotspots in their cars and Audi is even starting to use Google Earth as the basis of their Satnav systems. So I personally think the case for Apple to move into the automotive industry is stronger than ever before so let me just recap some of the reasons why:-

  • Firstly, if Apple was to undertake such a project then it would really be as a joint venture rather than an acquisition of a company such as Tesla. Apple has a valuable brand to protect and if anything went wrong with a potential joint venture that reflected negatively on Apple then they could just walk away. Apple could easily afford to buy Tesla if they wanted to (as I alluded to in my earlier post), but even though Apple has the most efficient supply chain in the world, and they have a number of ways to protect their intellectual property, they do not have any experience of building cars.
  • Both Apple and Tesla have very high brand value in their respective industries, they have also benefitted from having first mover advantage, Apple with the iPod/iPhone/iPad and Tesla with their electric roadster car based on a Lotus Elise.  Both offer unique products and bringing them to market way ahead of the competition. Tesla had an electric car on the market way before Nissan’s Leaf and Chevrolet’s Volt cars
  • Apple products have been popular amongst consumers due to their slick user interface and the simple nature of how their products operate.  Cars on the other hand have relatively complex interiors so imagine what could happen if Apple applied their magic to designing a much simplified car infotainment system.  In fact Tesla’ new car, the Model S, has a 17inch touch screen on the centre console and this is context sensitive to allow the screen to control different aspects of the car’s interior.  For example the lighting, heating and entertainment systems can all be controlled through the touch screen interface.
  • Nissan’s Leaf allows you to remotely monitor the charging of your car’s battery via an iPhone app and also allows you to switch on the car’s heating system remotely before you even get near the car.  Again, this shows how pervasive the iPhone has become, its ability to control anything, via a 3G or WiFi connection.
  • Next to a house, the car is the second most expensive purchase we are likely to make in our lives.  Apple has done well to corner the consumer electronics market and I just think an Apple/Tesla JV would be a match made in heaven so to speak.  Imagine what Tesla would be able to do with the financial clout of Apple behind them.
  • The introduction of WiFi hotspots in some cars has led to some companies such as Toyota looking to introduce social networking capabilities within their car’s infotainment system. Earlier this year Toyota announced a partnership with salesforce.com to embed their ‘chatter’ social networking tool into Toyota’s Entune system.  If WiFi does go mobile extensively in cars you can guarantee that Apple will want a piece of the action.
  • Over the past 12 months BetterPlace has been raising their profile in the charging infrastructure market.  What about if Apple formed a partnership with BetterPlace? After all, consumers will need to charge their cars, many may have an Apple device of some description, for example an iPhone.  What if Apple embedded NFC (Near Field Communications) to allow payments to be made from the iPhone by swiping it across the BetterPlace charging device and an app allowed you to monitor your monthly charge related billing as well as charging levels. (Since writing the original blog, BetterPlace is no longer in business)
  • Alternatively, rather than partnering with Tesla what if Apple decided to license their iOS operating system to electric vehicle manufacturers who could then embed the system into their cars?  (Step forward CarPlay which was announced at CES 2014)  If consumers spend all day using their iMac, iPhones or iPads then to get into a car with an iOS based infotainment system would be second nature for them. Imagine if iOS became the backbone of tomorrow’s electric vehicles, not just from the improved consumer experience, but improved vehicle diagnostics and communications back to dealers or service centres. Apple would essentially get a royalty fee from every license of iOS that was sold with every car.  The photo below shows the 17″ touch screen interface of Tesla’s new Model S car, I think this is just crying out for an iOS upgrade 🙂

If Apple were serious about entering the automotive market, and I am not implying via this blog that they are, then if they were  looking for maximum return, scalability of the business and quick adoption levels then perhaps licensing their iOS environment would be a good move. Apple is famous for two things, firstly, first mover advantage, just look at the market share that they have captured by releasing the iPad 12 months before their nearest competitor. Secondly, no other company manages to instil such confidence in their products, so if the main barrier to electric vehicle adoption by the masses is range anxiety etc then why not let Apple run their magic over the electric vehicle industry.

teslainterior

Shortly after I posted my earlier blog, BMW announced their range of iSeries cars, effectively brand new electric vehicles that will be brought to market over the next few years.  I wonder if BMW’s product management team have knocked on the doors of Apple’s HQ?  BMW’s new range of electric cars were displayed at the Los Angeles motorshow in 2011, the first time they had been seen in North America. (BMW launched their i3 and i8 electric vehicles in early 2014). This video nicely demonstrates why BMW is trying to increase their presence in the EV market !

GM, Ford, BMW and others are you listening!, there is a great opportunity here, if Apple does not partner with Tesla then I wonder who Apple will partner with?  If and when Apple does decide to enter the automotive market then whoever they partner with stands to gain a significant share of the electric vehicle market.2011 was certainly a turning point for both the consumer and the enterprise computing markets and tablet device and cloud computing has significantly impacted both of these sectors. Apple has certainly been in the right place at the right time to capitalize on these trends, the big question is will they look to exploit their extensive skills and knowledge in these areas by entering the automotive sector?

pixarSo a couple of quick questions,

  1. If Apple partnered with a car manufacturer, would you buy their joint car based on the strength of the Apple brand?
  2. If one car had iOS as the basis of its in-car entertainment system and it allowed you to seamlessly connect your other Apple devices and connect to iCloud, would you buy this car over one that didn’t run iOS?

In closing, I think it is somewhat ironic that Steve Jobs rescued Pixar from George Lucas in 1996 and the company then went on to develop two of the most successful animations of all time, Car ! After the company was sold to Disney in 2006, Steve Jobs was given a 7% stake in Disney and a seat on their board. Perhaps the Car film franchise was a subliminal message that one day Steve Jobs wanted to take Apple into the automotive industry !

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