Hyundai, Kia, Canoo – what does it all mean for Apple?
A half an hour ride from where Tim Cook graduated, in Auburn, Alabama, Kia operates its Georgia based manufacturing plant which is rumoured to be partnering with Apple in creating Apple Car.
A volume auto brand of Hyundai, Kia is said to be among the most reliable car brands out there. And reliability is just what Apple seeks in a partner.
However, rumours are far from confirmed and Hyundai themselves appear to be still uncertain whether to partner with Apple, or not. The same is probably true for Apple, who do not appreciate any leaks to the press and have moved back from a previous statement the car manufacturer gave out.
Still, we can have a look at how the different lose ends of the story may connect.
The Big Picture of the Apple Car market
In his notes from Apple’s earnings call, the most accurate predictor of their revenues, Neil Cybart, highlights this statement on an analyst’s question how the company determines which markets to enter (emphasis mine):
“The framework that we use is very much around asking ourselves if this is a product or service that we would want to use ourselves. And that’s a pretty high bar.
This first part of the statement goes back to a central sentiment Apple management tends to have towards new products in categories they want to enter. It often stems from a love/hate relationship to a certain device or service. Compare it to the way Steve Jobs described the „Zoo“ of mobile music Players when introducing the iPod. Or compare it to the development of the iPhone, which gained energy from the dissatisfaction everyone felt from the phones they used back then:
One could argue that Apple executives share a similar sentiment towards the downsides of today’s cars – even though Eddy Cue sits on Ferrari’s board and Jony Ive is known to be an admirer of Aston Martins and Bentleys.
The second part of the statement is even more interesting:
And we ask ourselves if it’s a big enough market to be in unless it’s an adjacency product, of which we’re looking at it very much from a customer experience point of view.
We have discussed what a sufficiently big market for Apple would be, but I would like to untangle the adjacency notion of the quote above. Certainly Apple has done both the key products in a new category and adjacent accessories or services in the past – just think iPod+iTunes or more recently iPhone and MagSafe. If we applied this to a future transportation market for Apple Car, the question really is what are adjacent products in mobility to the core dominance of the car. What comes to mind is micromobility devices that, paraphrasing Horace Dediu, get along well with other modes of transport whereas cars tend to be exclusive. How would a scooter or bike enhance the customer experience on an Apple Car user?
Third, Apple management talked about integration:
The kind of things that we love to work on are those where there’s a requirement for hardware, software and services to come together because we believe that the magic really occurs at that intersection.”
It’s the major intersection talking point that Tim Cook championed over the last few years. Certainly true about the magic potential, it is also a nice metaphor for transportation to be talking about intersections. You find this in action in my dream about the Car launch event:
Bringing it all together in a manufacturing deal
Quoting Neil directly from one of his member updates:
Apple and Hyundai were apparently in talks back in 2018 with Alexander Hitzinger as the lead person from Apple.
That is noteworthy as it would be more evidence of Apple never altering its long-term goal of having an Apple Car.
Bloomberg recently reported about the people involved in Project Titan today, a group which recently stayed together after years of heavy turnover. Hitziger had a short stint and was certainly involved in reaching out to legacy OEMs. Today others would fill his spot, but also the outreach broadened reportedly to multiple possible manufacturers and suppliers. Making the whole device, what many came to believe Apple plans to do, raises the questions where in the supply chain Apple wants to sit, having the most control. Would they be partnering with one manufacturer who handles the rest of suppliers, or rather sit along multiple key chain links down the supply chain.
The latter may make a bit more sense, and also resemble how they handle iPhone production, because making the Car would require specialties in body construction as well as exterior and interior design. The three will be heavily interlinked, but Apple is known to go to the best sources for each component, very much like they do with the floor tiles in its retail stores. Following my circular sofa theory, this would mean getting the best leather and wood available.
Just like in Steve Jobs Theater in Apple Park, the company would not settle for the generic materials found in Canoo’s interior but rather go for the real deal.
Making Apple Car happen
Finally, let’s look at the meaning of the current timelines and numbers on the table. Potential Apple partner Kia in 2020 made a sizeable but undisclosed Canoo investment. Canoo was also talking to Apple but no details are known. It just supports the theory that there may be a love triangle forming to conceive Apple Car.
A year after the Canoo/Kia deal was announced, there is word that Apple would return the favour and invest $3.5bn in Kia, potentially signing a deal as soon as February 17.
This is slightly more than they spent when buying Beats in 2014 (negotiating with CEO David Hyman who went on to found premium scooter startup Unagi), and three times more than they invested in Chinese ride hailing startup Didi Chuxing in 2017. It would certainly be big news to formally announce a investment this size prematurely to a product launch. But it wouldn’t be uncommon for the Tim Cook era.
One thing is clear: If Apple Car launches in 3–4 years, the design is largely very much set by now and would dictate the search, requirements short list, and negotiations with any manufacturer. The design team would be thinking about Apple Car 2 by now and how the new product line will evolve in the future. With the lead times in auto production that we now, Apple Car is designed already and ready to fully materialize.