Could Apple's next big project really be a car?

Rumours of Apple's secret electric car project are surfacing. Can a phone maker really make it in the automotive world?

The rumour mill has once again kicked into action over Apple’s next endeavour, and by all accounts, it looks like the Cupertino firm may well have its sights set on an electric car.

A report from 9to5Mac claims that more than 18 people have been hired with car related specialisms, including David Nelson and Pete Augenbergs from Tesla Motors.

There is speculation that the automotive experts form part of a secret design team, located away from Apple’s main campus and headed up by former Ford executive Steve Zadesky as well as the former chief of Mercedes-Benz’s R&D division Johann Jungwirth. With bottomless pockets, Apple can take its pick of virtually any talent it chooses. Tesla CEO Elon Musk told Bloomberg that the iPhone maker was poaching staff with offers of $250,000 signing bonuses and 60% salary increases.

The hurdles

Apple’s limited portfolio of products seems to be both a blessing and a curse for the company. The gap between the launch of its last big hit – the iPad – and the upcoming Apple Watch was five years and during that time, the pressure from shareholders for the tech giant to come up with something new was intense.

Bearing in mind that the development phase for a vehicle is roughly seven years, Apple won’t have the luxury of time on its side should it decide to push ahead with such an ambitious project. Add to this, the fact that Apple’s entire infrastructure is based on the designing, manufacturing and distribution of small electronic devices, and the challenges begin to seem insurmountable.

There is, of course, the possibility that the MacBook-maker may choose to partner with firms that are better equipped to handle such a monumental project, but as the channel knows, the word ‘partner’ is not really in Apple’s DNA.  

Attempt to strike up a relationship with the Cupertino aristocrats and you are greeted with the following message:

Apple is not currently accepting reseller or service provider applications. Please check the Apple Channel Programs page periodically for new information.

The message hasn't changed in years.

Then there is the issue of Apple’s historically low research and development budget. While this has increased in recent years, it remains a fraction of overall sales and is dwarfed by other tech firms. In fact, according to a recent PWC report, in 2014, the company invested less in R&D than Samsung, Intel, Microsoft, Google, Amazon, IBM and Cisco (not to mention Volkswagen, Toyota, General Motors, Ford and Honda).

Battery technology has long been the Achilles heel of electric cars, with their price, limited shelf-life and weight preventing the concept from becoming truly mainstream. To have a serious shot at competing with the auto companies, Apple will have to loosen its purse strings on R&D, rather than simply relying on gut instinct and fancy designers.

So, on the face of it, the odds are stacked firmly against Apple becoming a disruptive force in the automotive market; it is a fallacy, dreamt up by blue sky nitwits somewhere deep in the heart of Apple HQ. Right? Probably… except for one tiny niggling fact - Apple has a rediculous $178bn of cash in the bank.  To put that into context, Intel is valued at $173bn; - $142bn. In fact, Apple has enough cash sat in the bank to buy 483 of the S&P 500 companies. It could buy Tesla without missing a beat – a scenario which is altogether possible.

So, with the figure $178bn swirling around in your head, ask yourself again; is it possible for Apple to become a disruptive force in the automotive market?

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