Henry Ford didn’t invent the automobile. Rather, he took a machine that was merely the interest of curious hobbyists and made it available to everyday Americans.
Does that sound like another household name – Steve Jobs, perhaps?
The co-founder of Apple Inc. (AAPL) didn’t invent the personal computer. He simply took a machine that appealed to a specific niche and made it mainstream.
And ever since, Apple has proven again and again to be more curator than inventor.
It takes an idea, refines and improves it, and creates a premium product that’s accessible to the average consumer.
Apple didn’t invent the first personal music player, tablet computer, or smartphone. But by using its tried and true recipe, it has succeeded in swallowing up significant shares of various markets, all while amassing a cult following and a massive cash hoard along the way.
Following the launch of the iPhone 6S and iPad Pro this past September, rumors began to swirl that the crew at Cupertino has its sights set on an ambitious new project – an electric car.
The rumors stem in large part from three things: Apple’s hiring of several well-known auto experts, a lawsuit with car battery company A123 Systems over poaching employees, and applications for autonomous vehicle testing in California.
Oh, and CNN also reported that Apple plans to release the “iCar” before the end of the decade.
The Rise of the Electric Vehicle
The electric car is becoming the future of the auto industry, and there are huge profits in store for whoever can create an affordable vehicle that appeals to the masses.
Elon Musk, founder of Tesla Motors Inc. (TSLA) – has been compared to Henry Ford as he attempts to build his electric car empire. Other automakers have risen to meet the challenge, too – Chevrolet’s Volt, Nissan’s Leaf, and the BMW i3 are but a few examples.
The electric car’s adoption hasn’t been without a few speed bumps, however.
Despite significant federal and state tax incentives, concerns about range, price, and falling gas prices have hurt the electric car’s progress.
Tesla’s Model S is an excellent car by any standard, but its nearly $70,000 price tag makes most buyers hesitate. And the newly released Model X carries a hefty price tag, as well. Less expensive electric vehicles (EVs) only have a range of 100 miles at most, so many consumers opt for a hybrid. The market has yet to see a vehicle combine affordability, range, and a premium experience all in one package.
Apple aims to fill that niche. And if it succeeds, it will dominate the auto industry of the future as Henry Ford dominated the early 20th century.
Apple Poised to Dominate
Now, why is Apple poised to dominate this industry? Four reasons…
The company has a longstanding culture of innovation. And with its recently acquired employees, it’s ready to capitalize on the rapidly advancing battery industry and manufacture the ultimate EV battery that will offer both relative affordability and unprecedented range. The iCar will likely boast a wide array of technological advances, perhaps even the rumored autonomous driving capability.
Design folk hero Jony Ive is a well-known car enthusiast and has been rumored to frown upon the “tasteless” auto designs of Detroit. He and his team will be able to apply his signature design principles to create a truly distinctive and premium product.
Apple is one of the most powerful brands in the world. Between its advertising power and horde of groupies, the company instantly garners immense media attention. Plus, its vehicle will likely operate seamlessly within the Apple ecosystem, fully integrating iOS and OSX, adding to its appeal. And as the king of affordable luxury, Apple’s products are priced highly enough to make them premium, but not so high as to make them inaccessible to most Americans.
Perhaps most importantly, Apple will win the EV battle because of its enormous cash reserves. The tech giant could leverage its $203 billion war chest to scale up in even the capital-intensive auto industry. To put its liquidity into perspective, Paul La Monica of CNN Money reports that Apple has the cash to buy every professional sports team in America. It could easily swallow Tesla. And if it applied that cash hoard toward the EV industry, who’s to say it can be stopped?
Years from now, when a retired Tim Cook is interviewed about Apple’s entry into the auto industry, he might echo the sentiments of Mike Markkula as he reflected upon his 1997 investment in a tiny tech startup in Silicon Valley:
“We couldn’t lose.”
Carl T. Delfeld