Apple Inc., which is said to be working secretly towards creating an Apple-branded electric vehicle, reportedly is pushing its “car team” of about 200 people to start making battery-powered car as early as 2020.
It typically takes five to seven years for automakers to develop a car. So the timeframe highlights the project’s aggressive targets and could steal customers from auto giants like Tesla Motors Inc. and General Motors Co. Both automakers are expected to launch an electric vehicle in 2017 that can stay on the road for more than 200 miles on a single charge and cost no more than $40,000.
“That’s the inflection point — the proving ground — that brings on the electric age,” Steve LeVine, author of “The Powerhouse,” a book about the automotive battery industry, said on Bloomberg TV Thursday. “Now you have Apple coming in and this is critical mass. Was GM really going to be able to match Tesla? Apple can.”
Apple, which reported the biggest ever quarterly profit for a public company during the past quarter, is sitting on $178 billion with few areas to invest it. The iPhone maker spent $6.04 billion on research and development in the past year, and the pressure is growing on Chief Executive Officer Tim Cook to return cash to shareholders. The CEO is trying to diversify the company by stepping into new categories to make users’ digital lives easier with Apple’s products and services.
“Apple would have some advantages as a new entrant to the auto industry,” including its cash, ability to connect with its own devices and the infancy of the electric-vehicle market, Barclays analysts Ben Reitzes and Brian Johnson wrote in a note to investors. “Finally, Apple’s brand – arguably the most important advantage – is a big attraction for the next generation of car customers.”
Apple’s expected entry into auto market shows it is moving on the same track it’s taken to break into other industries. The company wasn’t the pioneer of a digital-music player or smartphone, and only targeted those markets once it had a product that redefined those categories.
Tesla’s victory in launching a new car company proved wrong the speculation about the traditional barriers of entry into the auto industry. Meanwhile, automakers have worked hard to cope with technical problems faced during car development, which is what Silicon Valley is also struggling to achieve. Take an example of Google Inc. The search engine giant has made heavy investment in developing a self driving car since 2010.
“Apple is good at developing technology but car making is, and will continue to be, a bricks-and-mortar proposition,” Matt DeLorenzo, an analyst at Kelley Blue Book, wrote in an e-mail. “Apple will need a partner, perhaps a Chinese manufacturer, with an infrastructure if it’s going to hit the five-year goal.”
Silicon Valley’s increasing interest in the market may not put a dent in some parts of the automotive industry. Back in January, before Apple’s plan was leaked, Volkswagen AG Chief Executive Officer Martin Winterkorn rejected the growing rivalry.
“We’re not afraid of these new competitors,” said Winterkorn. “The opposite is true: they encourage us to look more intensively into the chances of the digital world.”
