Apple Car: Software and Money
Initially, one asks why Apple, whose average Gross Margin is in the 54% range (40% for hardware, more than 60% for services), would want to enter a hundred-year-old entrenched industry whose gross profit margins are in the 7% range, climbing to the mid teens for premium brands. But a closer examination reveals an exception: Tesla’s Gross Margin recently jumped from 26.5% to 33%.
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We now have a possible explanation for Apple’s enduring effort to make a car against such long software odds. A profitable share of the $3.8T global car industry is well worth the estimated $1B/year it costs to move the Titan project forward. And even if Level 5 automation remains out of reach for the entire auto industry, Apple still might decide to compete using its asset-light, software-heavy business model.
Previously:
Update (2022-10-14): Jean-Louis Gassée (Hacker News):
But there’s another side to the story. As the sages insist, we don’t understand a problem, an idea, a case unless we’re able to see, to plead both sides. So, I’ll attempt to argue that the Apple Car is a bad idea.
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Personally, it’s jarring to think that I’ve joined the chorus of doomsayers who have repeatedly predicted Apple’s failure with the Mac, the iPhone, the iPad…whatever Apple comes up, it’s going to crash and burn. But my honest view is that the Apple Car project could be a bad idea for reasons of price, sales and service infrastructure, and technical challenges.
4 Comments RSS · Twitter
Every time I think about cars on the road beholden to Apple software quality I shudder.
I've been in car development for 20 years (bug tracker for development). The software was used globally and had a retention period of 50 years after end of production. We also had some fun times in 2014 for instance (ignition switch).
So the idea of an Apple car makes me shudder, too.
7% margin is either optimistic or for expensive cars. I would like to see how Tesla makes the margin that Gassée claims. One thing that Tesla did right was just to ship something. If Apple waits until they get to level 5 they can wait 20-30 years for their car.
