Poor, poor Apple. The richest company in the world (sliding up and down, but always gliding near the top) just wanted to find an automaker that would be their dance partner for their autonomous electric car project. He probably imagined that Hyundai and Nissan would fall on themselves for the mere opportunity of contributing with all their technology and manufacturing experience to a vehicle for which they would not receive any credit in the market.
Well, what a surprise, it hasn’t happened. After Hyundai disputed with (i filtered) a potential association, and then Nissan was rumored for having done the same, Apple has met with a handful of vehicle manufacturers with nothing to show for it. Now there is no choice but to turn to a contract manufacturer, such as Magna Steyr or her familiar friends from Foxconn, according to a new Bloomberg report.
It always seemed like things were going that way. This Apple game that celebrates with carmakers has been played as a miserable season of the bachelor application in which none of the contestants want to be there, yet it still appeared. Apparently, Apple met with Ferrari during this exploratory phase, according to Bloomberg, which is tragically funny. There are no details on what this discussion involved, but whatever the topic, “the talks didn’t move forward.”
Hyundai, Nissan and Ferrari are not impressive startups that have been prepared to be commanded; they are multinational companies that have been making cars longer than Apple made computers. I would say much of Apple’s success over the past two decades may be due to its surprising lack of hubris. Of course, he talks a lot, but for the most part, he stays in his lane, doesn’t introduce anything until he’s really ready, and doesn’t get involved in weird corporate ties and acquisitions that everyone can clearly see are doomed to start. To think that you could essentially subsume a consolidated automotive brand as a contract manufacturer isn’t characteristic of Apple, but it’s exactly the kind of hubris you might expect from a company in its position.
Of course, making cars is hard and expensive, and I understand why Apple wanted to give it a try. As Bloomberg rightly points out, it reflects how the company builds its devices. Tim Cook’s crew designs the product and someone else builds it.
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But there is a difference between asking, for example, Magna Steyr to make the car and asking Hyundai. The latter has his own cars for sale, with his name. You probably won’t be so excited if the result ends in success. A useful analogy of Bloomberg:
A longtime manager of both Apple and Tesla Inc. said it would be like Apple asking rival Samsung Electronics Co. that made the iPhone. Apple wants to challenge the assumptions of how a car works: how the seats are made, how the body looks, the person said. A traditional carmaker is reluctant to help such a potentially harmful competitor, the person said, asking that he not identify himself in private matters.
Yes, Apple has a history of rising industries. It changed the way record companies distribute music and the way they buy it (well, until Spotify appeared). It also changed the way we distribute software. But the changing paradigms of how people find and use content is a very different beast from a top-down reinvention of how cars are made, probably the most complex physical “good” we buy.
It is also much harder to make money with this business. “Automotive industry profit margins are lower than Apple’s current model, ”Bloomberg tells Goldman Sachs analysts in a recent investor note.
By opting for a partnership with a company like Magna, Apple can avoid the inevitable ego conflict that would likely unravel if it chose a consumer-oriented factory partner. There’s still a part of me surprised that a company with so much experience selling things like Apple wouldn’t just save time and admit it sooner.