From Ford to GM, from Honda to Toyota, from Audi to Mercedes-Benz, car makers are looking toward a future of cars without car drivers. Samsung wants to build self-driving cars and spent a few billion dollars buying Harman to get started. Apple may want to build self-driving cars but can’t seem to make up its collective mind. Analyst Gene Munster of Apple-will-build-a-TV-this-year fame is very certain that he doesn’t know what Apple will do. He’s learned from his mistakes. Guess who else is not building a self-driving car?
That’s right, all these technology companies may or may not be building a futuristic self-driving moonlight powered electric car, but major car companies are, and, notoriously, one technology company has decided not to wander down that path. Who?
Microsoft. You know, the same company that makes Windows, Office, Surface PCs, and now has a growing cloud business. The same company that has devoted many tens of billions of investment money on acquisitions that mostly disappeared somewhere in Redmond, WA. Microsoft does not want to build a self-driving car for the masses.
Some technology watchers think Microsoft wants to power self-driving cars with software, rather than build one. Even Google, the search engine advertising giant, has decided that manufacturing a self-driving car might be a moonshot for Alphabet Inc., but I suspect the recent reticence in the Waymo division is because someone double-checked the spreadsheet and shot a few holes into the PowerPoint presentation. Wait. My bad. Make that Google Sheet and Google whatever their version of PowerPoint is.
Why have all these major technology companies– the same ones whose acquisitions indicate a desire to rule to world wherever technology goes– become so reticent about self-driving cars?
Where’s The Jack?
How hard can it be design a car, build a factory, and begin selling a new model? Elon Musk and Tesla did it and that company is worth more than GM or Ford. All these major, high-flying technology companies which are sitting on more cash than most developed nations haven’t been able to do what Tesla did, but for one overriding reason.
No, not the money to dump into a failing project. Google and Microsoft have been doing just that for years. Tesla is the example of a technology-cum-automobile company doing plenty correct recently, hence the oversized stock price, but still can’t turn a profit. Somebody has been counting the beans at Tesla’s future competitors, and there’s just no real money in building cars– at least, relative to what Apple, Google, and Microsoft are used to making.
Ford is a good example. The company’s market cap is about $45-billion, and, relatively speaking, the stock is doing well; even the P/E. Revenue in 2016 was north of $150-billion. Profits? Barely $4.5-billion. And that was a good year.
Compare that to Apple. Last year the company topped $215-billion in revenue, but profits came in at just over $45-billion. No, that’s not a typo. Apple’s profits were 10 times higher than Ford. GM had a good year, too, with higher revenue than Ford, and double the profits. One can argue the math, but it’s also likely that the Mac made more profits for Apple than cars did for Ford.
Relatively speaking, there’s no money in building cars and right now they’re mass produced by the millions, yet spend more than 90-percent of their time sitting in the driveway, stuffed into a garage, or parked alongside a street; mostly unused. If the future is self-driving, eco-friendly cars which we can summon on-demand, as needed, those automobile manufacturers are going to become even more competitive, more cutthroat, and perhaps consolidate brands because the sustainable future isn’t looking so sustainable anymore.
I don’t think so. The math just isn’t there.