What everyone gets wrong about the Apple Car
The coming battle for commuter’s time
In a note to investors, research company Sanford C. Bernstein wrote the prospect of an Apple-produced car had “created a lot of fear” in the industry, and would probably “trigger an R&D race.”
In sizing up Apple’s auto ambitions, competitors would be wise to think critically about what exactly Apple wants, because it may not be what they think. Let’s start with the basics. Apple would enter the market with several competitive advantages.
Cars are still one of America’s biggest status symbols. For many people, what they drive is a statement about who they are. Before any ink is spilled as to whether or not an Apple car measures up on the merits, the company would have instant mind share among consumers looking to make a statement with their purchase.
Second, Apple has extremely-deep pockets. “Apple is sitting on nearly $180 billion of cash, an amount materially in excess of that of the entire global auto industry,” the Bernstein report notes. That is critical, because the capital costs involved in selling cars are extremely high. Just ask Tesla about its $5 billion battery factory in Nevada.
In a sense though, the conventional ways of sizing up an Apple car miss a much bigger looming trend in the industry.
What I am talking about is time. According to a study by Harvard Health Watch, the average American spends 101 minutes per day driving. Another analysis from Texas A&M estimated those who commute by car spend at least 38 hours stuck in traffic annually.
Driving is a vestigial fiefdom of protected time. A huge diversity of interests compete for our attention outside the confines of the car. Firms want us to work, the content industry chases our eyes and ears, and social-media companies want us to log on.
Freeing up 101 minutes in productive time a day is consumerism’s equivalent of opening the American West to settlement. Soon the car will be much less about driving, and more about what people do while wiz-bang-autonomous-vehicle tech shuttles them safely between work and home.
Don’t think Apple hasn't gamed this out. Today, Elon Musk, the CEO of Tesla Motors, says regulatory hurdles are what’s holding autonomous vehicles back. Case in point, the automotive supplier Delphi recently completed a cross-country drive in an autonomous car.
By 2020 autonomous-vehicle technology will be exponentially more mature, and it’s likely regulations will have brought self-driving cars to market.
Apple’s ‘walled garden’
As a result, the car will become a platform for consumption and productivity. What exactly consumers will decide to do with their reclaimed time is an open question, but you better believe companies of all types will be competing to fill the void.
Apple is already a curator and enabler of consumption and productivity. Consider the App Store, iTunes, and iWork productivity suites for example. How might Apple bring its paradigm of engaging consumers into the driver’s seat?
At minimum you should expect Apple’s Car Play tech to show up on steroids. For the uninitiated, Car Play is a set of software standards that allows iOS devices to utilize a car’s integrated display and speakers. Using Car Play, functions such as navigation, media playback, and hands free telephony are all handed over to a driver’s iOS device. Siri is also integrated.
As media consumption becomes a viable option for “drivers,” you might also expect Apple to equip its car with high-resolution displays and always-on connectivity via an iOS device. Thinking more boldly, as cars become platforms for software, Apple could build a dedicated car-based App Store — asserting itself as gatekeeper to a valuable cohort of consumers.
In essence, Apple will be well positioned to extend its “walled garden” approach to apps and services into the context of the car.
Your car is a smartphone
Auto companies that game out how they will compete with Apple based on traditional metrics will play the role of Blackberry and Palm in the run up to the introduction to the iPhone. They will think they are girding themselves to compete with Apple on their home turf, but in reality Apple may create an entirely new market with its own set of assumptions.
If the smartphone wars are any guide, flatfooted manufactures will seek to fill the competitive void with an open-source alternative. In all likelihood, it will be Google’s Android Auto software, which is similar to Car Play.
Google’s ambitions in the auto market are much like Apple’s. Less we forget, Google is considering its own autonomous vehicle.
Bottom line, the decision to enter the auto industry isn't a five-year bet. Apple is unlikely to make a multibillion-dollar investment in a car unless it hopes to be in the market for a long time. And if you start gaming out what driving looks like into the 2030s, a lot of the assumptions about what matters to consumers go up in smoke.
The good news for established car manufactures is that the auto industry is not as easily disrupted as consumer electronics. Drivers use their cars for very different things, and niche markets abound. More broadly, for many consumers affordability is a much bigger concern when buying a car compared to a new smartphone.
But within the niche of affluent commuters, a group that companies in many industries eye longingly, Apple could do very well. My advice to auto companies getting ready to make a stand against Apple — think different.
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