Why Apple is abandoning building cars

[Arthur Hanson]

Allocating assets to a low margin business of auto manufacturing, even outsourced, is not Apple's strong suit. Much of the effort will not be wasted for there is little doubt Apple was working on a self driving car and the experience gained in this area is far better used in developing AI and this could be used for several high margin purposes including selling the platform to auto manufacturers. This is a far larger, higher margin area that falls within Apple's skill set where it has a head start in AI/ML and all that goes into it including its relationship to TSM to build the chips required.

 

[hist78]

Making cars is a very tough business, especially in terms of making the profit. Most automakers work tirelessly but only can achieve single digit operating profit margin.

For the past 12 months, GM's operating margin is 7.35%, Honda is 6.78%, Ford is -1.9%, Toyota is 9.87%, and VW is 6.56%.

They are not much better than the grocery stores.

Source: https://companiesmarketcap.com/automakers/automakers-ranked-by-operating-margin/

 

[count]

Making cars is a very tough business, especially in terms of making the profit. Most automakers work tirelessly but only can achieve single digit operating profit margin.

For the past 12 months, GM's operating margin is 7.35%, Honda is 6.78%, Ford is -1.9%, Toyota is 9.87%, and VW is 6.56%.

They are not much better than the grocery stores.

Source: https://companiesmarketcap.com/automakers/automakers-ranked-by-operating-margin/

One could have said the same thing about smartphones prior to the iPhone. Margins were super thin.

With cars I think it's more challenging. Apple would no doubt market itself more like a lifestyle brand like Ferrari, and not like GM. They would be selling $100k+ vehicles.

I think they underestimated the challenge of managing a vehicle program. Apple was looking at an EV as a computer on wheels, and are starting to realize it's much more challenging than that because there are all kinds of regulatory, safety, environmental issues that come with being an automaker, not even to mention the manufacturing challenges. They also probably realized that after 10 years of development they missed the market. Can Apple make a better EV than Tesla? Or even Lucid for that matter? They probably thought so 10 years ago, but maybe they are looking at their progress vs how quickly the market has progressed and decided - we are way to behind to catch up.

 

[hist78]

One could have said the same thing about smartphones prior to the iPhone. Margins were super thin.

With cars I think it's more challenging. Apple would no doubt market itself more like a lifestyle brand like Ferrari, and not like GM. They would be selling $100k+ vehicles.

I think they underestimated the challenge of managing a vehicle program. Apple was looking at an EV as a computer on wheels, and are starting to realize it's much more challenging than that because there are all kinds of regulatory, safety, environmental issues that come with being an automaker, not even to mention the manufacturing challenges. They also probably realized that after 10 years of development they missed the market. Can Apple make a better EV than Tesla? Or even Lucid for that matter? They probably thought so 10 years ago, but maybe they are looking at their progress vs how quickly the market has progressed and decided - we are way to behind to catch up.

It's a tough business and few companies can make big money from it continuously.

 

[KevinK]

Can Apple make a better EV than Tesla? Or even Lucid for that matter? They probably thought so 10 years ago, but maybe they are looking at their progress vs how quickly the market has progressed and decided - we are way to behind to catch up.

Maybe Apple would have been better off buying Lucid, a company that has finally gotten through the hard work of manufacturing a premium car, but needs additional capitalization and software technology to scale ?

 

[Xebec]

I am still a skeptic here - is there real evidence that Apple was actually working on their own car, or even a platform that others could build from?

Car manufacturing is extremely capital intensive and seems so opposite to Apples entire mission.

 

[lefty]

If Apple make cars like they make mice, I don't want one. There would be just one big button that controls everything.

 

[count]

The steering wheel would be replaced by one of those iPod click wheels.

 

[tonyget]

I don't Apple will put big money into AI，nor do I think Apple will succeed in the field of AI.