The auto industry: dull, unimaginative, predictable. The car market has remained relatively unchanged for decades, and a gluttony of focus group developed cars has helped keep it that way. The industry slowly innovates, making glacial ice-ages look fast.
The result is, at best, is incremental improvement, with Detroit scrambling to find the next niche segment to gain market share. But cracks in plodding automotive market are starting take place. From startups, to radical new fuel alternatives, the auto industry is on the precipice of the largest transformation in its history, and Apple appears ready to usher in its own sea change of ideas.
The largest automotive disrupter in this century has been Tesla Motors. Not since Tucker has there been such a zest for the new, inventive and inspiring. But while luxury-electric has been Tesla’s initial foray into the market, its forthcoming Model 3 promises to be its boldest move yet, building out a line of vehicles within reach of middle class America.
Assuming Apple enters the market, there are three areas where the high tech leader can (and likely will) cause major automotive industry disruption, even for Tesla.
A new sheet metal crease here, a larger wheel size there. Car design is stale, and manufacturers avoid risk at all costs. The result is all too predictable. We see great looking concept cars at auto shows, and end up with the same old sheet metal at the dealership.
At Auto Shows
In the Show Room
Automotive Executives fear of not being able to keep production lines going full tilt due to a failed car launch, is staggering, thus safe design has become the unspoken mantra. When companies do take perceived risks, they end up producing hideous looking vehicles, like the Pontiac Azteca.
The Azteca is one of the best examples of a car company gone rotten. GM received rave reviews of its concept Azteca, housing a slew of innovative ideas, topped with a tailgate tent system. Within minutes of the concept’s unveiling, every manager inside GM wanted a piece of the Azteca action. The Azteca was a car that could bring instant fame and corporate ladder-climbing accolades to dozens of mid-level General Motor managers. And what was the end-product? I would like to find another term, but terd just keeps coming to mind.
Apple could certainly make the same safe design mistakes Detroit rolls out into dealerships every Fall, but that is highly unlikely. Without a gluttony of focus-group developed ideas, Apple will again think different, shaking up the market with great design both inside and out, resembling something much closer to a concept design than another 1995 re-skinned vehicle.
When Apple launched the iPhone it was not only revolutionary, but it solved a major problem with the cell phone industry; no one liked their mobile phones. Nokia owned the market space, but people were always complaining about something that they didn't like about their phones. Blackberry did one thing right (email), but ten things wrong. iPhone was the first mobile phone tens of millions loved, and still do. Can Apple make the same technology leap within the automotive industry like they did in the smartphone industry?
Truth be told, I like my car, very much so. But the technology package is an absolute disaster. And therein lies the conundrum. Car companies understand tech about as well as Justin Bieber appreciates classical music. Cars and the high tech within them are so far apart from one another, an owner like me can love the car and hate the tech, because they are seen not as one. Rather, the car and the tech are two vastly different products jammed into one another. Apple has the opportunity to change the way we interact with our cars, which is to say the way we interact with tech. Apple builds software and hardware, but we rarely look at them as separate entities. Rather, we look at an Apple iPhone or Mac as a seamless product. Apple bringing that magic to a car is likely to be un-replicable for a long, long, time.
3. Production & Price
Tesla Motors launched the Model S in June of 2012. By October 2015, Tesla had only produced 90,000 Model S vehicles, enduring many financial and supplier hurtles. The result has been a slow scale of production, greatly hampering Tesla's growth. Last month Tesla launched its all-new Model X SUV. The three row, seven passenger vehicle boasts some pretty fun and creative technologies. But if you place an order today you will not be getting your car for around 12 months. Apple will not suffer through these same issues in getting their car to market.
Apple's massive cash reserves of over $200 billion eliminate any financial hurtles Tesla or any other car manufacturer must navigate. Apple's proven track record in large scale production, and thus the relatively low costs to produce those high volume products, are tied at the hip and have proven massively successful for both company and consumer.
When Apple launched the iPad the largely held belief was the entry price would start around $999. Apple threw conventional wisdom out the door launching the iPad at $499, sending its competitors into a tail spin for years. With iPad, Apple truly put the cart before the horse. Apple achieved instant large scale iPad sales volume. Apple's risk paid off. Competitors had to cheapen their product designs, costing down components, and were forced to wait for display prices to fall before they could effectively enter the market. No other company was going to able to sell millions of tablets the moment they released them, or take the risk in pricing to do so – but Apple could, and did.
Apple is pouring in a staggering $15 billion into capital expenses this year. Apple Watch, iPhone, Macs, iPads and retail expansion do not come close to eating up this amazing spend. An Apple car, and the costs to begin building out production robotics and facility logistics demand this type of investment. When Apple enters the automotive market the pricing is likely to be based on instant large scale sales volumes. It is a risky approach, but it is a move only Apple can do, and has shown they are more than willing to live with. Apple also has a loyal customer base that can spark support for new products. Expect Apple to have a starting price no greater than $35,000 for their car, with availability only being a small issue upon launch, handling ongoing demand with Apple-esque ease. High volume production, price and sales. No company in the automotive industry will be able to compete with Apple's trio approach.
One more thing...
Apple typically has some intangible “other” feature or idea come to life when launching into a new market. The iPod brought together a seamless vertical music solution. The iPhone delivered an amazing touch display with a real internet browser and Apps. iPad delivered a staggeringly low price point with all-day battery life. Apple's disruptive capacities have been on display for a long, long time, and every few years Apple has a new product that starts something new, or makes a nascent market viable. With Apple car, the wow factor is likely to be a market jolting starting price. But there is a technology feature likely to emerge, that no company in the electric vehicle market will be able to compete with for some time. The feature is likely to be Apple's mileage range per charge.
Tesla’s Model 3 is targeting around 225 miles per charge, with a starting price in the mid-$30k range. Mileage range is a feature that comes from part battery, part weight (thru advanced materials) and part efficiencies. Apple is likely to have a marked advantage in the key area of mileage range per charge, holding industry advantages in at least two, if not all three, of these three areas. Apple besting Tesla and the entire industry in the mileage category will send Apple's electric vehicle competition back three to five years. Throw in seamless technology, a concept car-like design, all topped with market leading mileage, with a staggering price, and Apple will leapfrog Tesla and Detroit with iPhone-like ease.
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