Is Apple really going to build a car?

Apple CarPlay goes well beyond Bluetooth pairing for playing music or making a hands-free call

Maybe you’ve heard this one before. A big, well-known technology company with billions of dollars to spend and a palpable fear of missing out on the “Next Big Thing” decides to venture far from its comfort zone and launches itself--full speed ahead and damn the torpedoes—into a high-risk venture against well-entrenched competitors.

No, the proper noun that fills in the blank this time is not Google, but Apple.

Rumors suggesting that Apple is developing an electric and possibly driverless iCar to rival Google and Tesla are proliferating like jackrabbits on a fertility drug. As evidence, media reports have cited Apple supposedly poaching Tesla employees and Apple also being sued by battery-maker A123 Systems for allegedly stealing car battery experts. The Wall Street Journal on  Feb. 13 cited unidentified sources in reporting that Apple’s top secret electric car efforts exist under the code name “Titan” and that there are “several hundred” Apple employees working on the project. Apple hasn't commented on the report.

We’ve heard some of these musings before. In 2012, speaking at Fast Company’s Innovation Uncensored event former Apple board member and J.Crew CEO Mickey Drexler revealed that before he died Apple co-founder Steve Jobs dreamed of designing an iCar.

OK, but sentimentality aside why would Apple want to do this?  Elon Musk’s Tesla Motors, which is considered to be a big success by everyone who doesn’t care about financial reporting, sold 35,000 cars last year but the company saw its bottom line shrink from a loss of $74.0M to an even larger loss of $294.0M despite an increase in revenues from $2.0B to $3.2B. What’s more, the auto industry runs on a 5% or 6% margin (at best) so it requires bigtime volume to make a go of it.

Admittedly, automobiles seem to be mesmerizing Silicon Valley these days. People’s exhibit number one: Google has created a working prototype of a self-driving car. Using lasers, cameras, radar and GPS to decipher the world around it--all of which sit in a module directly on the roof--a prototype driverless car has been built and will soon undergo formal road testing. The car, according to Google, will comply fully with California DMV rules during testing. Still, Google has stated all along that when the car is ready for market it does not intend to produce the car itself. Rather, it is looking to partner with auto manufacturers to bring self-driving cars to market within the next five years.

Prototype of Google’s self-driving car. Is Apple jealous?

As in playing poker, when one tries to determine Apple’s next play it is necessary to figure out what the guy holding the cards is likely to do. In this case the player is Apple head-honcho Tim Cook, who, since taking the reins from Steve Jobs in August 2011 has guided the company with a slow but steady, conservative hand. There is no indication whatsoever that Cook is a big time gambler, someone who might go all-in into the car business while hoping to draw a winning card ‘on the river’.

The notion that Cook will turn radical and allow Apple to build a vehicle from scratch seems really unlikely given the low margins, high risks and intense capital requirements of the automobile business.  It’s even more unlikely since the head of the most profitable mobile device maker in the world really doesn’t have to take the full plunge to stake out a nice, profitable niche in the automotive sector. Like Google, Apple has thrown its hat into the connected car arena with Apple CarPlay, a system designed to bring iPhone functionality into cars and trucks and compete directly with Google’s Android Auto; both dashboard system are meant to bring touch-screen and voice-activated entertainment and navigation to cars via a user’s smartphone, which will power the car’s main information screen. Connect a smart phone and icons appear on the car’s display for phone calls, maps, music, etc.

Apple has no need to join the list of less-than-successful car makers (above, a De Lorean).

So, even though Apple is a $700 billion personal tech company with tons of cash on hand (an estimated $178 billion), even though Apple works on many future-looking projects that may never see the light of day, and even though this is the season for unbridled optimism (as one baseball pundit put it, the  pop of a baseball into a catcher’s mitt in the spring is the most hope-inspiring sound in the world for fans, especially in Major League Baseball cities with losing teams) I just don’t see Apple jumping in and becoming a carmaker.

Apple will find its ‘paradise by the dashboard light’, but it will come in the form of vehicles interacting with the millions of iPhones out there. And I think staying out of the car business will in the end be an easy decision for Tim Cook. He won’t have to sleep on it and give us an answer in the morning.