Apple Goes Back to the Future in Pursuit of Tesla

Published at Jan 13, 2016, in Features

Apple Inc (NASDAQ:AAPL) has possibly let its best kept secret slip through its fingers.

The US$550 billion giant is in the process of building its own electric vehicle (EV), to rival competitors such as Tesla, Nissan and Toyota within a burgeoning industry expected to reach 10 million unit sales by 2020.

That’s the view of enigmatic Tesla CEO Elon Musk who firmly believes Apple is developing its own EV as a priority project. “It’s an open secret,” he says.

In an interview with the BBC, Mr. Musk said it was “obvious” that the company [Apple] would try to develop an EV of its own. “It’s pretty hard to hide something if you hire over a thousand engineers to do it” he added.

Not deterred by the oncoming competition, Mr. Musk said that “Tesla will still aspire to make the most compelling electric vehicles”...“while at the same time helping other companies to make electric cars as well.”

Tesla’s likely aim is to become a vertically integrated EV company that supplies parts and services to other car makers and part manufacturers. It may even be the case that Tesla and Apple co-operate on production depending on the range of cars (and target market) the two respective tech-giants are vying for.

Tesla’s ‘Model S’ is an electric sports car that can cost up to US$150,000 depending on chosen battery capacity; it has been one of the bestselling EV’s in recent years.

The blue sky vision for Mr. Musk is that of a world where all cars are electric and autonomous thereby making driving a “hobby rather than a necessity”. Tesla’s latest innovation is ‘Summon’ – an autopilot feature built into its car range that “ultimately, will be able to summon a car from New York if you’re living in LA, and it will drive across the country, charge itself at the various locations and come to you.”

This may sound like science-fiction now, but that’s possibly what Uber would have sounded like in 1908 when Ford’s iconic Model T was first produced.

In a back to the future moment, Mr. Musk also praised the ability of EV’s to add full automation to driving. “In the long term, nobody will buy a car unless it’s autonomous. Owning a car that is not self-driving in the long term will be like owning a horse – you would own it and use it for sentimental reasons but not for daily use.”

That was said about horses in the early 1900s – they’re great for sentimental reasons, but not for daily use.

In the present

At the current time, EVs have penetrated less than 1% of the US auto market although higher take-up has been recorded in parts of Europe such as Scandinavia, the Netherlands and Iceland. The global leader in the take-up of EVs is Norway, seeing EVs claim 14% of all new vehicles sold last year.

That’s still someway off becoming a mainstream product but the trend is clear.

According to Morgan Stanley analyst, Katy Huberty, “The potential total addressable market is enormous. Having a company like Apple, with its immense resources and long history of building popular consumer tech products, throwing its weight behind electric vehicles, could potentially accelerate development and consumer adoption.”

The US is still the far-and-away leader in the amount of actual EVs sold, closely followed by Japan and China.

China expects to see domestic sales of EVs escalate at higher multiples compared to other parts of the world given the higher population, higher levels of economic growth and more spare capacity for consumption within its economy.

Electric cars are growing in popularity as advances in technology have made them more usable, durable and commercially viable for both drivers and car manufacturers. Batteries that take less time to charge while holding more charge have made EVs a compelling alternative to traditional petrol-powered cars.

More EVs means more batteries will be required which is why Tesla has commissioned its audacious 35Ghw gigafactory in Nevada, expected to produce over 500,000 cars annually and raising demand for key battery constituents such as graphite, lithium, cobalt and copper.

EV Wars Commence

Apple have not officially confirmed (or denied) their EV intentions although the company has registered several domain names that allude to EV work going on behind the scenes.

According to WHOIS records, Apple registered the domain names apple.car, apple.cars and apple.auto late last year.

On a more serious note, in August last year Reuters reported that Apple had headhunted senior EV engineers from Tesla, VW, NVidia, Carnegie Mellon University and the Swiss Federal Institute of Technology. According to various estimates Apple is currently building up a team of 1000-2000 people solely dedicated to ‘Project Titan’ – Apple’s code-name for its EV project. Headed by Vice President of Product Design Steve Zadesky, Apple remains tight-lipped about its progress although tech analysts foresee a prototype sometime in 2019.

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