https://www.macrumors.com/2021/01/07/apple-car-hyundai-negot...

MacRumors has a statement from Hyundai saying, "We understand that Apple is in discussion with a variety of global automakers, including Hyundai Motor. As the discussion is at its early stage, nothing has been decided."

So, Hyundai has confirmed that Apple is talking with them, but they also said that they believe that Apple is talking with other car companies as well. At this stage, it doesn't seem like there's anything special about Hyundai. Rather, the news leaked about Hyundai while it didn't leak about other talks.

I'm skeptical of an Apple entry into cars, but it seems like it would make sense for them to contract out the manufacturing to an established player - as they do with their phones and laptops. It would allow them to create top-notch vehicles from day-1 with superb fit and finish rather than trying to build the plants and workforce to handle it. They might want to bring manufacturing under their own control eventually, but I think Apple would want to be able to offer Apple-quality vehicles to a mass market sooner than they could build that capability themselves.

This isn't a criticism of Tesla, but it took them a long time to get to where they are today. They were founded in 2003 and its first mass-market car (the Model S) rolled out in 2012. Even then, the Model S wasn't really mass-market. The Model 3 launched in 2017. Again, this isn't a criticism of Tesla as much as noting that it takes years (or decades) to launch a car company with large-scale manufacturing capability. Tesla's global capacity in 2020 was only 500,000 vehicles (our of a 92M vehicle industry).

Plus, even today, Teslas tend to receive some criticism for their fit and finish. My friends love theirs and say that it's like how the iPhone was a complete re-imagining of the phone. They also note gaps and things that make it feel less premium. I think Apple would like to avoid that.

If Apple can produce the designs and partner with another company to manufacture the vehicles, it could get to market a lot quicker with a higher quality product than if it tried to start manufacturing from scratch. There's a lot of politics and tariffs around cars and major companies like Hyundai have created manufacturing to make sure to avoid those tariffs. Apple would likely need American, Asian, and European manufacturing if they wanted to do a global launch.

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To switch gears a bit, the part of this story that seems really fishy to me is the idea that Apple has "breakthrough battery technology". That seems unlikely. Battery chemistry advances don't seem like an area where we see "breakthroughs" a lot and it would seem like something that would also appear in their phones if it existed. In fact, a big portion of the economy is run off rechargeable batteries at this point - people demand phones with bigger batteries, Tesla is doing everything it can to make batteries cheaper and better, VW/Hyundai/Kia/GM/Ford/etc. are all trying to get electric cars that work well, power grid storage gets talked about a lot...

To me, it seems like this Apple Car would be more about the experience of an Apple designed product than about breakthrough automotive technology. Elon Musk has said that electric cars aren't that complicated compared to internal-combustion cars and it seems like where Apple would do well would be focusing on the part that people buy their products for: the experience. That is, at least initially.

Initially, the iPhone didn't have any special hardware. While the iPhone might have special cameras or Apple-designed processors today, it was initially all commodity stuff that anyone could buy brought together by Apple's casing and software. Apple might want to design its own suspension or whatnot in the future, but it seems like an initial vehicle (for 2024) would be more about the Apple experience than about automotive tech.

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Personally, the auto industry doesn't seem like a great market. Tesla's market cap is enormous, but as people have noted, it's higher than the ten largest auto makers combined. Whether Tesla is worth its market cap can be debated, but it almost certainly isn't worth its market cap based on the automotive industry alone. If you're a Tesla bull who believes they'll become huge in electric grids, home solar, and a bunch of other industries, great. But when we're talking about Apple, we're talking about a company launching a bid to likely become a niche car company with the possibility of being worth $50B like BMW. It seems like a very big bet for an industry that isn't worth that much. Mazda is a $5B company. Subaru is a $16B company. Even Volkswagen is under $100B. Toyota is worth less than 10% what Apple is worth at $212B - and Toyota is a huge outlier.

It feels weird to enter into an industry mostly unrelated to your core competency when it would move the needle 2-3% - maybe 5-10% if you're really lucky and create the next Volkswagen or Toyota. Why enter that market?

With an iPhone, Apple's competency was in writing software for electronic devices. People loved their iPods, why not a phone that is also an iPod? People loved their iPhones, why not an iPhone HUGE (aka iPad)? It's basically the same device. Watch? Again, same stuff. Cloud services to accompany those devices? You already employ a ton of software engineers, might as well get some premium recurring revenue services. Even if one of these isn't the biggest hit ever, it's using many of the same skills and competencies as the rest of Apple's stuff.

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With the car, it feels like it's a relatively small market without the margins that Apple is used to and far away from their competencies. Then again, maybe Apple thinks that they'll do to the car market what they did to the phone market: eliminate most of the incumbent players and the market will coalesce into two players (Apple/Google for phones or Apple/Tesla? for cars). Maybe they're thinking that they have more core competency around the future of vehicles (sensors, processors, machine learning, etc.) and that the competencies around current cars (suspensions, engines, etc.) will somewhat fall away in the new world.

I mean, a month before Jobs introduced the iPhone, everyone was creating renderings of a device with a iPod click-wheel on one side and a phone dial pad on the other. Maybe Apple has something much nicer in store.