When a modern company has some extra money, creative executives have refined the art of rolling that money upwards towards themselves often starving other efforts. Even so, while car company R&D budgets are generally healthy, they may not be enough to make a major breakthrough in 21st century car technology. What if that's what Apple is planning to do?
There was a time, years ago when analysts asked Steve Jobs what Apple would do with all its money. That was back when Apple only had about $76 billion in holdings. Steve Jobs said:
We'd like to continue to keep our powder dry, because we do feel that there are one or more strategic opportunities in the future. That's the biggest reason.
Typically analysts and observers have thought in terms of a giant acquisition. That's how traditional companies have thought in the past. Buy up the competition, acquire patents and talent, lay off the low-productivity workers and gobble up market share.
Regrettably, the combination of low margin businesses and the desire of every executive to demonstrate success by virtue of their wealth has left few companies in a position to spend a groundbreaking amount of money on completely shattering their competitive marketplace.
However, that's exactly what Apple may be preparing to do with its "Titan" car project.
Now is the moment in time when Apple can make a major contribution to the electric car. Heretofore, electric cars have either been a hedge against the future or a move to meet U.S. Government total emission regulations by partitioning their product line into some percentage of electric cars. And while Apple may not be able to achieve a fundamental breakthrough in battery technology, the intelligent combination of all technologies could create a car whose whole is more than the sum of its parts.
That's not to say that some companies aren't all in with a great vision. Tesla sees things differently and is making great cars, but they haven't made a lot of money doing it.
And so the Apple strategy has to be:
- A grand vision of what a 21st century car should be like.
- Seriously large amount of R&D to make major breakthroughs.
- A keen connection to the modern technical buyer's mentality in terms of the purchase experience and automotive experience.
- A plan to actually make money rather than lose money with the final product.
Over at Mac360, Will Gomez wrote, insightfully: "What to Expect From Apple Car." Here's a notable excerpt.
Historically, Apple tends to look at product markets through different lenses than those already churning out traditional products in the same industry. The Mac? Much different than DOS PCs or even the Apple II before it. iPod? Different. iPhone and iPad? Different. Watch? Different. All those products set the design standard and moved their respective industry segments forward and the rest of the competition followed.
As for making money, the analysis at Asymco says:
To break into the top 10 brands would imply a production volume of at least 2.5 million units (about the same as Daimler ships today.) At 2.65 million and a price of $55k/vehicle Apple’s revenues from cars would total about $145 billion. This is roughly the sales value of the iPhone business today. Not bad. Maybe that would satisfy a financial analyst.
And so. All the pieces are in place. Apple has the cash to make a breakthrough. They have the experience to disrupt the industry. And Apple knows how to make money in the process.
That Steve Jobs powder is set to explode.
Next page: the tech news debris for the week of September 21. Our Star Trek future.