I’ve read a number of articles about the prospect of an Apple car but most have still left me with more questions than answers.
My main questions regarding an Apple car are the following:
1. Apple seems reluctant to chase market share at the expense of profit. The automotive industry is very well established and from my understanding operates on razor thin margins. Apple seems to be a master of the supply chain but much of this has to do with the fact that they ship such large numbers of very similar hardware. Apple doesn’t ship the most smartphones in the world but they do ship the most of a single model and this allows them to put incredible pressure on their suppliers. Does anyone expect Apple to be able to move so many cars that they would be able to put more downward pressure on suppliers than the traditional automakers?
2. If the strategy isn’t to dominate the market and thus assert downward pressure on suppliers then I would assume the strategy would be to sell a premium car that carries higher margins. Apple obviously has a well deserved reputation as a premium product within the computing/electronics space but is it a given that this would translate to the automotive market as well? I don’t particularly care for a brand’s prestige but I know this does inform many consumers’ decision making. Apple might be viewed as a premium brand compared to Samsung/Moto/Lenovo/HP/etc, but would most consumers be willing to pay a premium for an Apple car compared to a BMW or Mercedes?
3. Is there any reason that Apple’s prowess in the electronics supply chain may not translate well to the automotive supply chain? These two industries seem very different to me.
4. Apple, like almost everyone else in the tech industry, uses outsourced manufacturing for the majority of their products. While there are similar contract manufacturers in automotive, they are not nearly as large nor their use as wide spread, to my knowledge at least. Foxconn was already one of the biggest electronics manufacturers even before they started building iPhones for Apple, I don’t think a Foxconn equivalent exists in the automotive world. I would imagine this may present problems for someone like Apple that doesn’t plan on actually building their own cars, or do they?
5. There is considerable risk when launching a car model, even for the established players, I would assume the potential risk for a newcomer would be even greater. Newly introduced cars seem to suffer from more serious and more widespread problems than newly launched smartphones/computers do, although those often suffer problems as well. Does the potential exist that problems encountered with a newly introduced Apple car may carry over to negative perceptions about the broader Apple brand? It seems enormously perilous to me to risk your brand reputation on one specific product line that traditionally tends to be both very low margin and suffer from frequent defects.
I’m curious what others may think of my concerns or if anyone knows of articles that have gone into more depth with regards to my concerns.