One of my fondest memories as a child was going to the General Motors Heritage Museum in Detroit, Michigan. One of my favorite cars from the visit was the 1939 Buick Phaeton. I was in love with its streamlined design, which is not a common sight on the road today. From this quick visit, visitors can appreciate how far General Motors (GM) has come from these majestic cars to sleek electric vehicles (EVs) set to launch in 2025.
EVs seem to be all the craze these days with Tesla and its luxurious cars and Apple coming forth about its Project Titan. However, where are we in the EV journey and is Apple’s Project Titan a viable competitor to the current market?
Project Titan: Crying wolf or the ultimate Apple Ecosystem?
From investors to Apple enthusiasts, Project Titan is one of the most talked about EV projects. Started in 2014, Apple announced that an electric vehicle is on track for consumer use by 2024. Apple also boasts an innovative battery technology that could reduce the cost of batteries and increase the vehicle’s range—possibly changing the competitive market of EVs in the future. However, discussions between Apple representatives and major car manufacturers like Nissan have tempered emotions as deals sour.
The sudden rush towards developing what essentially is the ultimate smart vehicle isn’t something that surprises investors. To combat slowing iPhone sales, Apple has ventured into various research and development projects over the years. From developing smart glasses to incorporating health monitoring in its Apple Watches, Apple struggles to find the next hit product. Apple Car (or whatever its name will be) will be the ultimate product for its super fans and the industry at large.
Some on Wall Street also estimate that the Apple Car will be a game changer while experts on the auto industry doubt it’s impact. Via an outsourced production line, analysts like Jim Suva from Citi believe that the Apple Car will be the product that gets Apple from a “$2 trillion market cap to $3 trillion.” Benchmark’s auto analyst Mike Ward suggests Apple might be too ambitious with a car business because running a car business is a lot different than pushing a production line of iPhones.
While Apple currently has the cash ability to invest significant R&D into Project Titan, I believe that an Apple car will be highly improbable. One of Apple’s current strategies has been to outsource the actual car production to current car manufacturers like Nissan and Hyundai-Kia. This strategy will surely save them the capital intensive investment in developing their own production lines while being able to market their technology prowess.
That’s largely my concern.
Recent talks with Nissan showed many of these legacy automakers are concerned that the possibility of “Apple-branded” vehicles effectively downgrades any automaker involved to merely a hardware company. Repeated discussions seem to echo this perception from Nissan’s chief operating officer, Ashwani Gupta, to executives at Japanese carmakers who warn carmakers will become “Apple’s subcontractors and lose their originality.” It will be extremely difficult for Apple to overcome the hurdle of convincing current car manufacturers that their partners’ brand will be credited alongside Apple in the future. As seen in past debacles with patent licensing, Apple has a large history of vertical integrations souring relations.
On the other hand, GM seems to be in a better position to launch a competitive EV to that of Tesla’s Model 3 by 2025. They have already dabbled in the EV arena in the late 1990s and are on track to have EVs for consumer use by 2025. After the Arab Oil Embargo (1973-1974), gas prices once again sky-rocketed, and interest sparked in the research and development of electric vehicles amongst various car manufacturers. In 1997, GM released the EV1 and reached popularity as an electric car.
That being said, Tesla may continue to reign in the EV market well into the future even with competitors like GM because of their superior supplier relations that could mean a higher threat of entry for car manufacturers. Lithium-ion batteries are currently the gold standard in electric vehicles. They have a high power-to-weight ratio, competitive energy efficiency, decent high-temperature performance, and low self-discharge. Lithium-ion batteries came back into focus after Tesla announced that they have signed a five-year deal with Piedmont Lithium to supply their vehicles with high-purity lithium-ion ore. However, batteries are not exactly recyclable.
When Tesla came into the market in 2010, it was ripe for many EV manufacturers as the Energy Department also began heavy investments in developing a nationwide infrastructure for hybrid charging stations. They invested nearly $115 million on this plan with hopes that EVs will lower carbon pollution from the transportation sector by as much as 20%. Furthermore, the current Biden administration is focused on supporting electric vehicles as part of its strategy to address climate change.
There is hope for Project Titan. Apple could possibly disrupt the EV market with their innovative battery technology — however, Apple would be better off as a supplier of batteries and other standardized connected devices as part of new-age EVs than through a full Apple Car. With current administrative support in R&D, Apple can focus on using its capabilities and resources to possibly develop avant-garde, recyclable batteries to be used in EVs going forward. I expect the shift in business strategy to be more hardware driven than software driven in the coming years and a more applicable turnaround for Apple wanting to compete in the EV market.
Disclaimer: All views and opinions are those solely of the author and for purely educational purposes only. Please do your own research before investing.
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