As much as all of us who are fans and owners of Apple’s wonderful line of products want the company to build a television, it’s just not going to happen. Apple could, but there’s no money in televisions so why bother? Is there money in Apple’s so-called car plans?
Run The Numbers
Apple tends to look over the horizon of product development better than most technology companies. The iPod wasn’t first as a portable media player, but it was the best.
Was iPod’s success because it was such a great player, or because it had iTunes and the iTunes Music Store as part of the package?
We may never know and the iPod rapidly is becoming a footnote in technology history. Likewise, Apple wasn’t first with a smartphone or tablet, yet owns the profits and mindshare of both product categories.
That said, we shouldn’t be surprised that the latest news says Apple is building a car; or, building a self-driving car, or, developing software to be used in future cars.
Or, something like that. It may be years before we find out the truth, but the question I ask is simple, “Is there any money in making and selling cars?” By far the most notable and expensive of electric cars with modern software is the Tesla Model S.
Tesla CEO Elon Musk compares his company to Apple and Steve Jobs. Both are bold visionaries with grand plans, so add this to the For What It’s Worth Department, but note that Tesla lost almost $9,000 on every Tesla sold in 2014. That doesn’t sound too Apple-like or Steve Jobsian to me.
Tesla’s stock price seems to be in reality mode recently, following some larger than expected losses in the most recent financial statement, which makes Tesla more like Amazon than Apple. Market cap sits at around 25-billion so Apple could just as easily buy Tesla and not make much of a dent in the company’s coffers.
Besides, plenty of Tesla employees came from Apple so if Apple bought Tesla, they’d just be going back home to work anyway.
So far, there’s no profits in building electric cars, let alone self-driving electric cars, so what’s Apple’s game? Does it plan to be the Microsoft Windows of automobile manufacturing and simply sell the software?
Tesla, obviously a premium brand much like Apple’s product line, sells to the premium car buyer. The company’s revenue last year was barely $3-billion (think $75,000 times 33,000 cars and you get an idea why Tesla lost so much money).
Even if Apple could build and sell 100,000 self-driving, Apple-branded cars for $75,000 each, the total revenue would barely scrape $7.5-billion. Assuming Apple went all Lexus on us, and pushed the average selling price down to $45,000, but managed to sell 250,000 units a year, revenues still don’t make it $12-billion a year.
And nobody on planet earth has ever sold that many high priced cars, let alone electric self-driving automobiles with those kinds of sales numbers. Ever. By contrast, Apple sells far more Macs each year, and makes far more revenue and profits on Macs than anyone selling anything that runs on electricity and parks itself.
Everyone who has ever ridden in or driven a Tesla Model S can imagine what Apple could do with an Apple automobile, but somebody needs to ask, “Why?“