Apple's next product - an Electric Vehicle?
Catalysts and Challenges Apple faces in electric car production
After many unsuccessful years of trying to convince my parents to buy a Tesla, should I be changing my tune and trying to convince my parents to buy an Apple Car? Apple’s Project Titan, started secretly in 2014, kicked off Apple’s entrance into the electric vehicle market. Apple’s kept their work very secret - rumors about Apple’s intent varied from producing a new car to just developing software for existing cars. However last week, Reuters reported that Apple plans to produce a passenger vehicle by 2024. Does Apple have the potential to be a leader in the Electric Vehicle Industry?
Overview of Electric Vehicle Industry
In the early 1900s, there was a growing interest in electric vehicles. They became popular as city cars, but their short range made it difficult for consumers to travel. In 1912, 33,842 electric cars were registered in the United States. People found many advantages to EV over gasoline cars and continued to buy them.
On 31 July 1971, Boeing and Delco Electronics developed an electric manned vehicle to drive on the Moon. It was called the Lunar Roving Vehicle and was deployed during the Apollo 15 mission. This accelerated an interest in electric cars and GM took a prominent role in EV research and production. However, the cars were slower and had a shorter range than gasoline cars giving them the term neighborhood electric vehicles (NEVs).
The production of the metal-oxide-semiconductor has led to the development of modern electric vehicles. Cars can now travel much longer distances at faster speeds. One of the largest EV manufacturers, Tesla, began developing the Tesla Roadster in 2004. Now, almost every major car manufacturer is producing electric vehicles, recognizing the growing demand and environmental benefits.
Earlier this year, Deloitte released a forward looking analysis of electric vehicles. The report categorized EVs in two main categories, battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs). In 2019, there were over 2 million electric vehicle sales and BEVs accounted for 74% of global EV sales, an increase of 6 percent YOY, showing the rise of fully electric vehicles. They take a larger share in China than both the United States and Europe. Yet, BEVs in Europe are rapidly catching up. They grew 93 percent this year, compared to 17 percent in China and -2% in the United States. Keep in mind this year’s sales are also heavily skewed due to COVID-19. Overall, there is a growing trend in the EV market. The US has been hit by COVID worse than some other countries. A few key trends in regional markets are
In Europe, government policy and consumer worries about climate change are driving the EV market.
According to BBC, “The United Kingdom committed to a target of net zero emissions by 2050, and proposed a ban on the sale of all polluting vehicles by 2035.”
China accounts for half of all EV sales. Car sales halted due to the pandemic, but in April fully recovered to pre-COVID levels. There is an optimistic recovery for EVs in future years.
US sales are driven by Tesla. The Tesla Model 3 consists of half EV sales. The US recovery is expected to be slower as manufactures are slower to return to work
Other markets like India don’t have many EVs as they are more expensive than the mass produced, low cost vehicles there. As EVs are produced more, their price may lower and they may penetrate these newer markets.
Overall, EV’s are a growing globally. Deloitte’s forecast estimates a 29% annual growth rate.
What we know and hypothesize about Project Titan
The latest update to Apple’s car endeavors comes with Reuter’s recent article. On December 21 they wrote:
“…a new battery design that could ‘radically’ reduce the cost of batteries and increase the vehicle’s range, according to a third person who has seen Apple’s battery design.”
Does Apple have the technology and capabilities to make an EV?
Apple recently released the iPhone 12 Pro and iPhone 12 Pro Max, both with custom made lidar sensors. Lidar sensors allow the phone to scan distances and objects. With advanced software, the iPhones can create 3D models of the world around them. It uses laser technology to rapidly determine distances of anything it’s pointed at. This lidar technology could be used in self-driving cars to scan the world around it for self-driving capabilities.
The iPhone 12s also have 5G capabilities. 5G allows for faster data transfer which could improve autonomous driving. This may allow models to be more connected with other EVs on the road improving driver safety. There are a plethora of other advantages to 5G capabilities in self driving cars.
Apple is also exploring lithium iron phosphate batteries compared to traditional lithium ion batteries. Lithium iron phosphate are much better at handling voltage discharge at higher temperatures and lower capacities. They also have longer lifecycles from 1,000 - 10,000 cycles compared to lithium ions 500-1000 cycles. Lithium iron phosphate has excellent thermal and chemical stability making it much safer for cars as well.
Apple has hinted to entering the autonomous driving space with its patents and permits. In April 2017, Apple received a permit from the California Department of Motor Vehicles to test self-driving vehicles there. Apple also owns many car related patents including an augmented visual display, window opacity adjustment, and autonomous driving control.
CNN Research also discovered that:
“A LinkedIn search shows that over the past few years, Apple has hired experienced executives, engineers and supply chain managers from Tesla, Google's Waymo, Fiat Chrysler, BMW, Ford, Uber and other auto industry leaders.”
After the announcement, QuantumScape, a lithium battery manufacturer, stock rose 78%. Developers of Lidar sensors, Velodyne Lidar VLDR and Luminar Technologies LAZR both went up around 5%. Tesla and other Chinese EV companies all dropped after the announcement.
Risks for Apple
It took Tesla years to grow to where they are today. They reported their first quarterly profit in 2013, 9 years after they began producing the Roadster. If the leaks are true and Apple is really producing electric vehicle, it’s going to be very expensive. As a multi-trillion dollar corporation, they have deep pockets and can likely fund the project, but it will be a money burner for years before becoming profitable.
This is also a whole new space for Apple. They don’t have any pre-existing infrastructure supporting car manufacturing. It may be cheaper to outsource the production so Apple doesn’t have to figure out all the logistics of setting up factories even before starting. However Apple has a reputation for producing everything themselves. They recently started making their own silicoln chips, breaking a 15 year partnership with Intel. It’ll be interesting to see if Apple outsources any production.
Along with these startup barriers, I expect Apple will have some form of self-driving capability. Tesla’s autonomous driving is making strides year after year and by 2024, I expect it to be even smoother. For Apple’s car to gain significant traction, it will likely also have autonomous driving. However autonomous driving relies significantly on machine learning. The software learns about different patterns and obstructions in the world around it to improve it’s driving capabilities. Tesla has over a million cars on the road. With all those cars, it’s also collecting an enormous amount of data. Apple will have to start this from scratch and may not have a perfect product from Day 1.
How will Apple make their own niche in this market? All of Apple’s products have created this idea and feeling of being a luxury product. Apple customers take pride in owning an Apple product. They’ve made an ecosystem between all of their devices. Their exclusive blue text messages further creates a divide between Apple users and non Apple users. I expect Apple would try to create this feeling when advertising an Apple Car. However, Tesla has used a similar strategy. Tesla owners feel like they own a luxury electric vehicle. The minimalist interior, phone app integration and entertainment/comfort features make Tesla owners take pride in their cars. If Tesla and other EV customers are too loyal to their own cars, Apple’s target market will shrink to only current non EV drivers. There lies another risk as someone deciding to buy a new EV might want to go with Tesla, a more established company than Apple, new in the EV space.
Final Thoughts
The EV market has been growing rapidly and will continue to grow. Apple has previously shown signs of developing a self driving cars in Project Titan through its patents, hires and latest technologies. The recent news further indicates that Apple is entering the space, but many questions remain about to what extent and what advantages an Apple car would have. They still many barriers they have to overcome to become a significant player in the field, but if anyone can do it, it’s Apple. Would you buy an Apple car?