[darawk]

Is this a surprise? Isn't it well known that Apple is working on a car?

I think the big question here is not are they working on a car, but can they deliver a car that represents a significant improvement over what's out there. And that i'm highly skeptical of, unless they deliver full autonomy. But there is just no way Apple is going to beat Google to market with that technology.

So, I agree they're working on a car, but I feel fairly confident that it will be an absolute disaster for them. Though most times that's been said about their products in the past decade or two has been a disaster for the person saying it.

[mturmon]

I guess it's the magnitude of the effort that is not widely appreciated. DF reported on May 4 (http://daringfireball.net/linked/2016/05/04/manjoo-moonshots) that:

"I know The New York Times can’t say that it’s certain that Apple is working on a car, but I can. They are. Of course they’re working on a pay TV service. It would be astonishing if they didn’t have teams hard at work on VR and AR. The difference between Apple and other companies is that Apple will spend tens (or in the case of the car, hundreds) of millions of dollars on a new product and never ship it. They don’t just say no to ideas — they say no to long-in-development projects."

Note, "hundreds" of millions of dollars. Whatever you say about DF spin (and you'd be right!), the facts he leaks are generally accurate.

The analysis in the OP (exhibit 3) would seem to indicate ~$5B on R&D on hitherto-unknown products since 2014. Which is astonishingly large. Because it's based on company reports, this must be common knowledge for serious tech industry analysts.

[CPLX]

> But there is just no way Apple is going to beat Google to market with that technology.

Why?

Apple is possibly the world's most effective company at synthesizing industrial design and software in premium devices sold to consumers. Google is a web/cloud services and advertising company.

The reason presumably is that you can't see what Apple is doing in public, while Google has a car that still can't drive itself in the rain that is occasionally seen wandering around Mountain View. I question the methodology of that analysis.

[untog]

For one because there is no evidence of it. Apple are secretive but at some point you have to take a car out on an actual road to see how it fares. And get government permisison to do so. The fact that Apple has done neither leads me to suspect Google is further ahead.

[szc]

This logic is flawed. If you want to test something secretly you do it in plain sight and use mis-direction. Buy some Tesla vehicles and put your electronics inside -- can you tell who owns the software and hardware inside when looking at the outside? Use a Chevy volt for the really juicy stuff, nobody will even blink. If you need to test a fancy new sensor, buy a white car and slap Google on the side, everyone knows Google is testing this stuff, so meh!

[2muchcoffeeman]

Android was in development and publically known about for years before Apple unveiled the iPhone. Now all new phones are basically large touch sensitive screens.

So who knows?

[Niksko]

Yes, but the regulatory and development hurdles involved in developing an operating system are significantly different to those of developing an autonomous vehicle.

[illumin8]

That's a silly assertion to make. Apple is well known for secrecy, and any prototype vehicles driving on the streets are not likely to be branded with their logo. How do you know they aren't already driving vehicles on the roads?

Also, whether they are currently road testing vehicles or not, that doesn't change the fact that Apple is increasing R&D spending.

[tcannon]

Government permission was quietly granted already. It was just quietly done.

[jeeva]

Source, please?

[steve19]

They seem to frequently fail at software. iTunes is a dog, Mac OS X is getting worse and worse, the Mac App store is horrendous. iCloud is a joke.

They do nice interfaces, and iOS is great. I have no doubt they would produce an amazing luxury car with a beautiful software UI, but I do not see them morphing into a machine learning software powerhouse anytime soon, at least compared to Google. Google Now easily beats Siri and Google Maps beats Apple Maps.

[comex]

Google Maps' advantage has a lot more to do with data than algorithms. Google Now is probably a better example, though I've never used it myself.

[DannyBee]

"Google Maps' advantage has a lot more to do with data than algorithms."

Given literally everyone else collected the data well before google, and maps was still better, this seems wrong.

Google developed better ways to get the data and automate it, not just got better data. For years, literally everyone else had better data.

[SyneRyder]

Apple is not even trying, or is leaving their Maps team terribly under resourced. I've been running some experiments submitting the same edits to Google, Yelp & Apple simultaneously (since Apple uses Yelp data), and timing how long each takes to update. The last time I publicly recorded my results:

Google Maps: 40 minutes

Yelp: 3 days 20 hours

Apple Maps: 13 days

https://twitter.com/syneryder/statuses/668473075365642240

I know Apple's policy is to screen edits carefully to ensure accuracy & avoid vandalism, but it's actually making their maps more inaccurate, because it takes longer for errors to be fixed. Google has also started incentivising frequent editors with rewards (like free 1TB Google Drive subscriptions), which helps encourage people to make the corrections in the first place.

[Doctor_Fegg]

OpenStreetMap: 0 minutes

[dizzy3gg]

Not really. Google collect more, like wifi info :/ and images (street view). Google really did revolutionise mapping.

[regularfry]

Google Maps was better before they did that.

[TulliusCicero]

You can only really do the basics on a test track. If they want to tackle real-world driving they'd have to take it onto real-world streets, and that would probably be impossible to hide.

While obviously Google is historically a web/advertising company, they're showing a lot of strength recently in machine intelligence, like with Google Photos auto-tagging or AlphaGo.

[vlehto]

If you say that Apple has more relevant experience, then why doesn't Audi, BMW, Daimler, Ford, GM, Google, Kia, Mercedes-Benz, Nissan, Renault, Tesla, or Toyota beat them both? All of these have more relevant experience than either Google or Apple, because industrial design is not really what car is about.

[CPLX]

I would say the chances of one of those companies you mentioned being more successful than both Apple and Google are extraordinarily high. Nothing in your statement conflicts with mine.

[kamaal]

>>Google is a web/cloud services and advertising company.

Google is actually an AI company.

[VonGuard]

As with most Apple-related rumors, the truth is probably something a lot less exciting in the end. If Apple is working on a "Car" you can bet it's just s creep of it's current offerings, so, a car that includes iOS and links to your iPhone, has navigation info in the dash provided by Apple Maps, and has iTunes integration in the dashboard.

A self driving car is not just going to magically appear from Apple. It'll take years, and offering a branded in-car experience with someone like Ford or VW would be a lot more Apple's style.

But then, I've been repeatedly wrong about Apple for years. Still, I feel like when they introduce something these days it's evolutionary, not revolutionary.

[agumonkey]

So more like an Apple Watch than an iPhone. They don't have the nice systemic headstart ipod and imacs gave them in electronic devices that made the iPhone possible 'all of a sudden'.

[tcannon]

CarPlay? We have that already.

[petepete]

The next step for CarPlay might be more than just an iPad-sized screen, it could be the entire dashboard and Apple might have a thing to say about the interior design of cars.

I think a company going from zero to massively produced and heavily scrutinised car in one step is too big a jump without acquiring someone along the way or signing up a existing player.

[rixed]

Maybe they are working on a non autonomous car? The car industry is somewhat similar to the phone industry at the time it was dominated by Nokia and telcos: not evolving, slow to integrate new technologies, terrible legacy UIs ... There is a lot of room for improvement outside of autonomy. I can hear the press mocking the development of a"manual " car like it's the 20th century again, and being ridiculed by Apple commercial success once again, as happened for the iPhone and iPad. Indeed. Autonomous cars are extraordinary difficult to produce but they may be even more difficult to sell while a radically new design of a non autonomous car may still be a great success. Customers are in average much less interested by Autonomous cars than engineers, in my experience.

[darawk]

Ya if I had to guess i'd say that's exactly it. But do we really need an Apple car? What is there really for them to offer in that space? Better UX? Is there enough of a delta there to warrant entering the space?

I grant though that this is a sort of 'unknown unknown'. By definition, the great new things are non-obvious. I may have said the same thing about pre-iphone phones. But I don't really see what they could offer me that would make me want to pay an apple-style premium for a car (other than full autonomy, of course).

[gniv]

> What is there really for them to offer in that space?

Electric cars. Yes, there is Tesla, but not much else. And, as Tesla proved, there is significant demand for an electric car done right (ie, powerful, long range, not expensive). Throw in the brand name and a really nice cockpit design, and you have a hit.

[partiallypro]

Automotive is a low margin, high liability industry. I think Google is approaching this correctly in staying out of the hardware (for the most part.) Apple developing a full car that has to meet x & y regulation from every single different country could end up being a big disaster. Tesla isn't even profitable and has a cash burn that makes a winter furnace seem tame. I don't see how Apple can escape that reality too.

I'm sort of surprised that Microsoft & Amazon are sort of just sitting back, watching. I guess neither of them care so long as the back end is running on their cloud.

[BinaryIdiot]

> Automotive is a low margin, high liability industry.

It's a lower margin for the classic companies that use a dealer model to sell cars. Direct sales like Tesla have pretty decent margins. It's unlikely Apple would use a dealer model. That's pretty outdated and will eventually go away (though not without kicking and screaming from the existing dealers).

Don't forget many Android phones have awful margins but the iPhone? HUGE margins. Apple sells premium products. Ultimately it won't matter what the margins are for any of the existing companies when they move into a new industry.

> I'm sort of surprised that Microsoft & Amazon are sort of just sitting back, watching. I guess neither of them care so long as the back end is running on their cloud.

I would be surprised if both companies haven't done some research into this. Microsoft's R&D is pretty famous for working on tons of moonshot ideas, many of which never see the light of day. Amazon seems to move into whatever space they think they can get into. Right now they're kicking ass with their brand new AI initiatives so I think they have their hands full (if I were them I'd shove Alexa into every product I could).

[aetherson]

No, that's a really bad analysis of margins on cars.

Look, the margin on a $700 iPhone is somewhere in the vicinity of 30%. That means that the price that an iPhone user pays for the privilege of having an iPhone per se is about $200, maybe $300 on the outside.

For a car whose manufacturing costs are $30,000, a 30% margin would mean selling at $42,000. The size of addressable market that can afford to spend $12,000 on Apple brand is microscopic compared to the market size of people who can pay $300 on Apple brand. The "luxury" market for cars is inherently much, much, much, much, much smaller than the luxury market for smart phones.

So if Apple does try to attain iPhone-like margins in the car market, they will necessarily address a tiny market. If they don't, they'll still address a much smaller market than the smartphone market, and with smaller margins to boot.

[BinaryIdiot]

> No, that's a really bad analysis of margins on cars.

I'm not seeing how. You post is talking about market size. The parent I replied to was only talking about margin. Two very different things which, as you were pointing out, will have two very different outcomes as far as profitability due to market size but that was never something brought up in the context of the original conversation.

> So if Apple does try to attain iPhone-like margins in the car market, they will necessarily address a tiny market. If they don't, they'll still address a much smaller market than the smartphone market, and with smaller margins to boot.

Smartphones are one of the biggest markets in the world so of course they will be addressing something smaller. Though car market is still pretty huge especially in the corporate selling of vehicles. What if Apple sold fleets to taxi / uber / lyft type companies? Maybe they create their own rival to uber / lyft and you can get picked up in an Apple car.

Seems there is so much speculation here that no one is going to be able to paint an accurate picture of what Apple's entrance into the car market would look like let alone figure out what the margins and revenue would be.

[elchief]

Tesla makes 25% margin on their cars.

[refurb]

I find that shocking. They are using new/expensive technology, high quality parts and low volume production methods and they are making a higher margin than a company like BMW or GM who have the benefit of scale and ability to squeeze suppliers?

Not saying your number is wrong, I'm just really surprised.

[gambiting]

BMW or Mercedes make million different models of their vehicles. Some of them make a lot of money, some of them are probably losing money and always will - M or AMG products are very expensive, but they sell relatively few cars every year - their brands keep those cars to be leaders in their sectors, not because there's a huge amount of money to be made on them(good example of that is the Veyron made by the VW group - VW said that they will never make profit on that car, despite it costing over $1 million USD, because the research to make it was so costly. The only reason it exists and you can buy one is so that VW can say they make the fastest car in the world).

Tesla on the other hand, makes 3 models, they are not trying to cater to every single market, so they can afford the focus and very high profit margins that come with it.

[pbhjpbhj]

>despite it costing over $1 million USD, because the research to make it was so costly //

Does the research only apply to the Veyron? I'd be surprised if they can't use advances there in other lines of cars or get patents that they can profit from when used by other car manufacturers.

It does however speak to good marketing to say "we make this car for the love of making cars" rather than "we use this as a way of targeting R&D that we can then exploit in other vehicle lines".

/cynicism

[gambiting]

Well, that's a good point. I'm pretty sure VW uses technologies invented for the Veyron in their other cars, but I guess it's hard to estimate the cost/profit ratio in this case. In any case, the point I was trying to make was that other car companies don't maintain 25% profit on all of their vehicles like Tesla does, because they have a much more varied portfolio of models.

[dragontamer]

IIRC, Tesla has had only one profitable quarter since 2003, its founding.

Last quarter, they had 1.4 Billion in cash and had a $280 Million shortfall. In ONE quarter.

That's AFTER accounting for the +$350 Million-ish they brought in from the Model 3 pre-orders btw. I don't think they are going to repeat the +350ish thousand preorders at +$1000 cash per anytime soon.

[_ph_]

But they are also growing by about 50% year over year (and more!). In 2015 they sold as many cars as Porsche sold in 2000, this year probably as much as Porsche in 2004. Tesla is spending every dollar they can get hold of into growth. The preorders for the Model 3 equal a possible revenue of 15 Billion alone.

[bidatzi]

Sales went up 50% YoY. Loses went up 83% YoY.

[JBReefer]

They have the Bank of Musk, which is a massive advantage. Apple does have all of that cash on hand, though, so that's less of an advantage if they are truly working on a car.

[marvin]

This doesn't give a completely accurate picture of Tesla's financial situation. Tesla has MASSIVE capital expenditures and will continue to have so for years. They could probably become quite profitable on a quarter-to-quarter basis by stopping all new development and manufacturing investments, but this would kill their possibility of becoming a major auto manufacturer.

The gross margin on Model S is indeed 25%, and the gross margin on Model X is also expected to exceed 25% once volume production is finished ramping up.

[dragontamer]

I disagree.

Tesla only had to go Model S -> Model 3, just as originally planned, and they'd be much more profitable than today. Model X, despite its 25% margins or so, isn't making money due to manufacturing issues. Its too complicated with its Falcon doors, and doesn't really have an impact from a sales or marketing perspective.

Instead, Tesla spends billions ramping up Model X, only for GM Bolt to release before the Tesla Model 3. BMW and other companies are catching up as well.

Even the Nissan Leaf may release a 200+ mile model before Tesla's Model 3, all because of the delays incurred with the Model X divergence.

I really think the Model X divergence was a mistake. If Model 3 launched just a year earlier with more money in the bank, Tesla would be in a much healthier position.

[marvin]

I'm undecided on whether Model X was a mistake even when seen in retrospect. It might be the case. But assuming that it was, Tesla couldn't have known this beforehand. Model S demand turned out to be more than twice as high as Tesla initially expected -- at least six months of the Model X delay was caused by the deliberate decision to increase Model S production rather than carry on with the initial plan to produce Model X right away. Maybe Tesla could have backed water at this point, but I'm not sure that it would have been a good risk-adjusted move, given that Model X represents very good diversification in the premium-vehicle segment. There is low overlap between luxury sedan and luxury SUV buyers.

Model X was initially thought necessary to produce enough revenue through the time at which Li-ion batteries could be produced cheaply enough in large quantities to launch a cheaper, good electric car. That the Model S turned out to be so popular wasn't at all obvious in 2012, when it first entered production.

[whoiskevin]

But still loses money

[bjelkeman-again]

There is a big difference between loosing money because you build and sell individual cars at a loss, and investing in further capacity. They make money on the cars they build and sell, the overall loss comes from investing in the new factories and product lines. This should come as no surprise to anyone familiar with startups.

[mozumder]

You're supposed to include capital expenses and depreciation in margins. Just because they're building factories doesn't mean they have higher margins.

This is why startups underestimate their expenses.

[maccam94]

The new factory isn't part of the current production cars Cost of Goods Sold because it isn't being used yet. See the matching principle. The depreciation of the factory will absolutely factor into the COGS of the cars it produces in the future, but the increase in sales volume should compensate for that.

[ProAm]

I wouldnt be surprised if Apple is working with Tesla for the model 3. They have the money to invest and help, I can see them owning 25% of Tesla for it. But the fact they are hiring away Tesla engineers argues against this point.

[nl]

Tesla is a public company. Apple would have to disclose a buying significant stake, plus it is publicly available information.

[ProAm]

I dont think they have yet, but Im wondering if hiring Tesla engineers is a way to skirt that issue and help to collaborate/co-develop a product. I dont see Apple building it's own car from scratch, especially given Apples quality track record the last 5 years.

[dagw]

Isn't it well known that Apple is working on a car?

Is it? It is well known that they are hiring bunch of engineers with automotive industry backgrounds and are working on something related to cars. However I've also heard from friends in the industry that they're not really hiring people with backgrounds related to building actual car chassis.

I think the jury is still out on whether there will actually be an Apple car (as opposed to an Apple (co-)branded car full of Apple tech).

[vacri]

Apple has made plenty of turkeys in the past couple of decades. It's just that when they succeed, they really hit it out of the park.