{"id":976,"date":"2021-01-15T13:17:40","date_gmt":"2021-01-15T12:17:40","guid":{"rendered":"https:\/\/a2kadvisory.com\/?p=976"},"modified":"2021-03-01T11:10:09","modified_gmt":"2021-03-01T10:10:09","slug":"heres-how-apple-can-tackle-the-230-billion-luxury-car-market","status":"publish","type":"post","link":"https:\/\/a2kadvisory.com\/fr\/2021\/01\/15\/heres-how-apple-can-tackle-the-230-billion-luxury-car-market\/","title":{"rendered":"Here\u2019s How Apple Can Tackle the $230 Billion Luxury Car Market"},"content":{"rendered":"
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The iPhone maker has an edge when it comes to design, software and maybe even batteries. But those advantages will only take it so far.<\/p>

If Apple Inc. is going to make a success of its car project, it has to target\u00a0the $230 billion luxury automobile market. Doing so may be the only way to keep investors happy.\u00a0But displacing 125-year-old incumbents like Mercedes-Benz won\u2019t be straightforward.<\/p>

The iPhone maker has reignited efforts to build its own\u00a0vehicle<\/a>, Reuters reported last month, though it\u2019s at least five years away from production, Bloomberg News\u00a0revealed on Thursday<\/a>. Since the project started in 2014, Apple has undergone numerous false starts, laying off hundreds of staff in both 2016 and 2019, as costs ballooned and the focus shifted from electric vehicles\u00a0to self-driving technology<\/a>\u00a0and back again. If Chief Executive Officer Tim Cook proceeds, he faces tough choices on how to enter a market with famously meager profitability.<\/p>

For all its recent stock market\u00a0success, Tesla Inc. has demonstrated the pitfalls that come from a lack of automotive experience, repeatedly enduring\u00a0manufacturing snafus<\/a>\u00a0and\u00a0missing production goals<\/a>. So there\u2019s little doubt Apple would contract the manufacturing out to a third party, such as Magna International Inc., as my colleague Chris Bryant\u00a0has written<\/a>.<\/p>

At one point about five years ago, the Canadian company had close to 100 employees working with Apple, helping steer the tech firm through the engineering process. But the work with Magna never graduated to working out how or where to build a car.<\/p>

This time around, Magna is not the only option. Foxconn Technology Group, which makes iPhones under contract for Apple, is also stepping into the automotive industry \u2014\u00a0it established a\u00a0joint venture last year<\/a>\u00a0with Fiat Chrysler Automobiles NV, the Milan-based automotive giant that\u2019s merging with France\u2019s PSA Group. And perhaps more pertinently, established carmakers\u00a0are now very serious candidates.<\/p>

Indeed on Friday, Korea\u2019s Hyundai Motor Co. seemed to confirm a local report it was in discussions with Apple, before\u00a0walking the statement<\/a>\u00a0back.\u00a0Such a tie-up\u00a0could help resolve some of the earlier problems Apple faced with components.<\/p>

In consumer electronics, the Californian company is used to getting first dibs on the best tech. After all, it\u2019s the biggest player around when it comes to generating profit for suppliers. If Apple wants exclusivity on the latest cutting-edge 3-D sensor technology, say, suppliers fall over themselves to contribute to the more than 200 million iPhones the company is expected to sell this year.<\/p>

That\u2019s different when it comes to cars, as Apple\u00a0learned in 2016<\/a>. With little visibility into how many vehicles it expected to ship in its first year, or when that might happen, there was little incentive for a supplier to provide any components exclusively when a customer such as Volkswagen AG would sell some 10 million vehicles that year.<\/p>

It therefore makes sense for Apple to team up with an established player, and five stand out: VW, the Renault-Nissan-Mitsubishi Alliance, Volvo SE and its Chinese parent Geely Automobile Holdings Ltd., General Motors Co. and, of course,\u00a0Hyundai\u2019s\u00a0partnership<\/a>\u00a0with fellow Korean manufacturer\u00a0Kia Motors Corp. All have developed electric vehicle platforms with enough scale to prompt\u00a0suppliers to scramble for contracts.\u00a0Some have expressed a willingness to build vehicles for other brands \u2014\u00a0VW\u2019s already working\u00a0with Ford<\/a>, and GM\u00a0with Honda.<\/p>

Nonetheless, while teaming up keeps your fixed costs low, it poses a challenge when it comes to profitability. A contract manufacturer usually costs about 10% more than making the vehicle yourself, according to Eric Noble, president of automotive consultancy the Car Lab. And profit margins in carmaking are already slimmer than they are for the iPhone. Tesla likely enjoys a gross profit margin of about 30% on the Model 3, Bloomberg News reported in 2018. Apple\u2019s gross margin on the iPhone is almost double that.<\/p>

The single biggest outlay in electric vehicles\u00a0is for the battery, which doesn\u2019t benefit from economies of scale due to the fixed cost of raw materials. In\u00a0the Tesla Model 3<\/a>, the battery is more than a third of the total manufacturing cost, at some $13,000 apiece. If, as Reuters suggests, Apple is able to find a way of reducing that cost with new battery technology,\u00a0carmaking becomes a more attractive proposition. But even a 50% cheaper battery would likely leave a car short of Apple\u2019s iPhone profitability if the price point is similar to Tesla\u2019s.\u00a0<\/p>

Price is the obvious way to bridge the gap. Apple is not going to make a mass market car. It has to be a luxury vehicle\u00a0and likely needs to be priced north of\u00a0$100,000, particularly if it has self-driving capabilities that use sophisticated lidar technology. In theory that would be a\u00a0similar pricing strategy to the iPhone, but in practice it would\u00a0target\u00a0a completely different spending bracket, which wouldn\u2019t be easy. Vacuum-maker Dyson ditched its own vehicle\u00a0efforts after realizing it would need to\u00a0charge 150,000 pounds ($200,000) apiece.<\/a><\/p>

Apple has a better chance of becoming a serious carmaker. It has an edge over incumbents\u00a0when it comes to software and design, and may even have a jump on battery technology, though such advantages wouldn\u2019t last forever. The best way forward\u00a0would be with a price point closer to a Ferrari than a Fiat.<\/p>

The race is on again.<\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t

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Source : bloomberg.com<\/a>\/ Image : cnet.com<\/a><\/p><\/div><\/div><\/div><\/div><\/div>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t<\/div>","protected":false},"excerpt":{"rendered":"

The iPhone maker has an edge when it comes to design, software and maybe even batteries. But those advantages will only take it so far. If Apple Inc. is going to make a success of its car project, it has to target the $230 billion luxury automobile market. Doing so may be the only way to 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Here\u2019s How Apple Can Tackle the $230 Billion Luxury Car Market<\/a><\/blockquote>