Is Apple’s Sniffing Around the Auto Industry Cause for Concern?

Photo by Johannes Eisele/AFP/Getty Images
Photo by Johannes Eisele/AFP/Getty Images

Technology giant Apple evidently has more money than it knows what to do with. The company was recently named the most valuable in the world, with a valuation of more than $700 billion. Not bad for a company that has branded itself as the hip alternative to the status quo. With billions coming in through iPhone, iPad, and application sales among other things, Apple is turning its attention to a market that few ever expected: the automotive industry.

The word on the street is that Apple is heading to, well, the street. Details have emerged about a secret project — code-named Titan, per The Wall Street Journal — that has Apple putting a minivan-like vehicle on the road to compete with the likes of Tesla in coming years. The rumor mill was fed with reports of Apple’s project being worked on by “hundreds of employees,” and has been supported by the fact that Apple has been connected to building a vehicle all the way back to the days when Steve Jobs was in charge.

With Project Titan in full-swing (or so we can assume), it’s definitely fair to wonder why Apple thought that this was a project worth taking on. There was apparently interest among the company’s leadership for a while, but is Project Titan simply an indulgence in that regard, or does Apple actually feel that they could carve themselves a niche in the market? Google’s doing it, so why shouldn’t Apple? Not only is Google building a vehicle of its own, but it’s caused quite a stir already among auto insiders, and with Apple jumping into the fray, that stir may become a frenzy.

The Cheat Sheet has tilled this patch of soil a bit before, digging into the details surround the project and the supposed vehicle that could end up hitting the streets as a result. So, while a lot of that has already been dug through, we’ll focus on how this Apple prototype could actually affect the auto industry. Seriously, should automakers be worried about an iCar?

The short answer is yes. The world’s automakers have enjoyed near-monopolistic market conditions for many years, with some exceptions in the luxury and sports car segments. But for the most part, car companies don’t grow on trees. The industry has a very high barrier to entry, requiring immense amounts of capital not only to develop concepts, designs, and engineering, but also to even produce a single vehicle. Especially after the recession, in which companies like GM went bankrupt, the auto industry didn’t look like a promising place to try and earn a buck.

But perhaps the problem is simply that the business model itself has become stale and outdated, and companies like Google and Apple are seeing their chance to get in on the action. And given the current market in which technology and automobiles are on a direct collision course, opportunity is ripe for exploitation. Naturally, Google and Apple are in prime striking position: They both have the capital reserves needed to get a foot in the door, and perhaps most importantly, they employ (or have the ability to employ) the talent required to bridge their industry to the automotive market.

There are ties between the executive teams of these companies to the automotive industry as well. Apple’s senior vice president of Internet services Eddy Cue is a member of the board over at Ferrari, for example.

When you think about it, though, perhaps Apple sojourning into the auto market is the perfect move for a company that is trying to find ways to expand and diversify its business. After all, if there is any company in the world that has perfected the art of releasing the same product on a yearly basis, with but a few aesthetic and mechanical touch-ups, it’s Apple. Just imagine the line at your local Apple Store if Project Titan ever births an actual marketable product!

Even if Apple does bring a product to market, or Google for that matter, they’ll still have a huge challenge in front of them: convincing drivers to choose their vehicles over those made by traditional automakers. Time recently released a mock-up of what Apple’s car could potentially look like, which was originally a Ford concept, and the designer of which is now employed at Apple. Also, we’ve seen what Google might have in store. After taking a quick glance at both, you do have to wonder if consumers would be apt to purchase either one over anything else on the market.

Despite the advantages the automotive incumbents would have over the new kids on the block, there are segments of the population that would spring for an Apple or Google car. And really, the threat isn’t what these vehicles can do in the short term (again, assuming they make it to market), but what they could do to the industry overall, given enough time. Many people are already making the case, with strong evidence, that the days of driving our own vehicles are numbered.

So, how should established auto companies feel about the news that Apple is sniffing around their table? Truthfully, it could be interpreted as either a good or bad development. It can be seen as a positive as companies like Apple and Google will actually be shouldering some of the research and development load, and incurring those costs themselves for the next generation of vehicles. It’s a similar situation with Tesla — instead of taking on the huge prospect of developing a viable, classy, electric luxury car, automakers can let someone else do it, and wait for the technology to disseminate.

On the other hand, there is a clear threat that projects from Google and Apple pose. True, those companies have a tough, uphill climb to actually gain a foothold in the market, but they both have the money — and the talent — to do it.