Is Apple about to enter the car business? Bloomberg reports the company is working on a plan to produce an electric car by 2020. If the rumors are true, Apple will face major barriers in the auto world.
“The car industry is a particularly difficult one to break into,” says J.P. Gownder of Forrester Research, who is skeptical of the reports. He says it is more likely Apple is trying to figure out technologies that would complement dashboard systems for entertainment and navigation.
Gownder says one of the most significant barriers to entry for Apple would be distribution. The company would either have to establish a dealership network, he says, which can be difficult and time-consuming, or it will have to sell cars directly, which not all states allow.
“The non-auto manufacturers really underestimate what it takes to get product to market and to become profitable,” says Dennis Virag, president of the Automotive Consulting Group. Just establishing a supply chain could take years, he says, adding that a typical car has more than 10,000 parts and more than 2,500 suppliers.
Making money would be another challenge. Virag says one of the keys to profitability is scale. The big car makers can achieve that. Newer entrants, like electric car-maker Tesla have not.
Tesla produces only 35,000 vehicles a year, even though it has been on the road since 2008. It has had trouble opening up dealerships and the company’s founder has said he is not expecting to be profitable until 2020.
So why would Apple even bother, considering all the hurdles?
Thilo Koslowski of Gartner research says the maker of iPhones and iPads knows that competing in the mobile space means being part of the most mobile device we own: our cars.
“The car is becoming a very fundamental piece of the puzzle that you need to own, if you indeed want to create experiences for your customers wherever they are,” says Koslowski.
Apple may face competition from its neighbors. Google has already developed a self-driving car. Uber is funding research into a world without drivers at all. And not to be left out, several major car-makers have opened up research facilities in Silicon Valley.