In February of 2015, Supply Chain Matters called attention to business media reports indicating that Apple had initiated a secret development lab to develop a concept electric car. These reports fueled a hail of social-media based commentary regarding Apple’s potential entry into the automotive sector. However, late last week, both the Associated Press and the New York Times report (Paid subscription or free metered view) that Apple has now shifted the focus of the development effort towards creating the technology for an autonomous driving vehicle.
According to these reports, Apple’s initial efforts in automobile design: “have suffered from management turnover and technical delays.” Instead, the reports indicate that Apple’s new direction, while not foreclosing on the possibility that the firm might consider building its own car, instead focuses on partnering with other established automobile companies.
In our 2015 commentary, we echoed that designing and manufacturing an automobile from scratch is enormously expensive with a single plant costing upwards of well over $1 billion. Auto supply chain teams know all too well that sourcing production in any particular country and transporting autos among global regions can be an expensive proposition without volume and market scale. It’s clearly not the same as manufacturing and shipping volumes of iPhones and iPads or for that fact, ramping-up new product and supply chain labor resources to coincide with a product development lifecycle. Once more, intellectual property (IP) protection becomes a larger consideration because of the nature of the multiple components and new technologies that may be involved. For electric powered vehicles, the design and production cost of the batteries is the single most important material and product margin component.
This latest reported e-focusing, if accurate, would be an indication that Apple and other technology providers such as Google would be better served by focusing on embedded systems that manage and control autonomous driving as well as passenger experiences. A further rather interesting tidbit from the AP report was a statement from Elon Musk, CEO of Tesla Motors indicating that Apple had hired hundreds of engineers, including some from Tesla, to work on the original design project. The latest reported shift in strategy would be a reinforcing sign that Apple would have more reliance on an existing auto maker supply chain and manufacturing resources.