Apple Inc. (NASDAQ:AAPL) made waves on Monday after it was revealed that the firm was partnering with Hertz Global Holdings Inc (NYSE:HRI) on a self-driving project. The deal emerged right after a tie-up between Alphabet Inc (NASDAQ:GOOG), (NASDAQ:GOOGL) and Avis, and comparisons came easily. Unfortunately for the Cupertino undertaking, the more details are compared, the worse its self-driving car project looks.
Here’s the thing: Apple’s deal simply involves it renting cars from Hertz. There’s no mobility concept involved in the tie-up as we know it. The firm is simply paying for the normal services of a car rental company. That’s a million miles away from the kind of potential that Waymo from Alphabet Inc is showing.
Here’s what’s in the Apple Hertz deal
Apple Inc. (NASDAQ:AAPL) is renting a handful of cars from Hertz Global Holdings Inc to test its self-driving car equipment. As it was reported on Monday afternoon, that’s the full extent of the agreement.
Taken at face value, the deal seems to confirm rumors that the Apple car project is going nowhere fast. Tellingly, the firm abandoned plans to build an actual car last year. Because of massive spending on research and development and other costs, hundreds lost their jobs at the firm’s automobile unit.
The Hertz deal telegraphs just how humble the Apple car seems to have become. Adam Jonas of Morgan Stanley signaled week that a bet on rental firms could be a bet on Apple’s self-driving cars. We don’t know the precise terms of the Apple Hertz agreement, but the loaning of six cars isn’t likely to buffer earnings.
Tim Cook’s company is highly secretive, and investors would be remiss to take everything out of the firm at face value. Because of its secrecy and shrewdness, now is probably not the right time to bet against Apple’s cars. Investors can only deal with public information, however and for the time being that portrays an Apple way behind the competition.
In reality it seems that the Hertz Global Holdings Inc (NYSE:HRI) deal wouldn’t even be talked about were it not for the much more significant agreement Alphabet Inc (NASDAQ:GOOG), (NASDAQ:GOOGL) made with Hertz rival Avis Budget Group Inc., (NASDAQ:CAR). That’s a move that could actually change the face of the driving world.
Alphabet Waymo tie-up shows promise
At first glance the agreement between Alphabet’s Waymo and Avis may seem similarly humble. The deal says that Avis will house and service a small number of Google’s own self driving cars in Phoenix Arizona. There’s a couple of big differences here that a close reading reveals.
First of all, Alphabet actually has self-driving cars. It’s going to pay another firm to take care of them, and possibly rent them out to the public.
Secondly, this is a move that’s scalable for the better. Were Apple to announce tomorrow that it’s actually going to loan a thousand cars from Hertz, some eyebrows will be raised. As a result Wall Street would likely question the decision making at the firm.
On the other hand, any further scaling of the Alphabet Avis tie-up makes it seem as if the Mountain View firm is getting closer and closer to a smart neural network. If that part of the technology is done right, all you need to do is put miles on the clock to train it.
That’s what the Alphabet Inc (NASDAQ:GOOG), (NASDAQ:GOOGL) deal is all about. If the firm is happy with how it proceeds, it may be able to scale its self-driving business through Avis. If things go right it may even be able to bring in revenue in the medium term. Ultimately that’s a growth opportunity, and a clear path toward improving the tech.
Apple, contrarily, seems to just need basic hardware to get its project up and running.
Trying to beat Tesla Inc
There’s only one big Silicon Valley company that offers self-driving to customers right now. Tesla Inc (NASDAQ:TSLA) , through its EVs, is able to sell a limited form of the tech, and reap the advantages of real world usage. Contrastingly Apple and Alphabet are left to test their cars off-the-road in controlled environments, or with small numbers of employee-driven cars on public roads. That may not be ideal for training an AI.
Tesla certainly seems to be the leader in the area, but Wall Street has put a lot of hope in Waymo. Alphabet became what it is today as a result of its AI technology. If it can apply that experience to the problem of autonomous cars, the firm may have huge room to grow.
Most noteworthy is the fact that Tesla Inc (NASDAQ:TSLA) stock fell right after the Alphabet deal was announced on Monday. The firm’s main rivals in the space include Alphabet and ride-sharing firm Uber. For now, both of those are judged to be behind Elon Musk’s firm, at least in terms of consumer ready tech.
The fact that you can buy a highway driving Model S today makes the firm synonymous with self-driving cars. As a result the Autopilot marque may even become the consumer generic term for the tech.
Apple Inc stock falls
There were massive gains on Monday’s stock market for car rental firms. The same can’t be said for Apple, which hasn’t really benefited from the announced deal. Part of that is that the iPhone looms so large over the firm’s overall earnings. Traders don’t really seem to be pricing in future income from the car project.
That may be a good thing for portfolio builders. The Apple car project has been hugely hyped in recent years, but we’ve yet to see anything in the real world. The progress revealed by the Hertz deal, if that’s all there is to it, suggests that Cupertino is very far behind the pack indeed.
The other snippets we’ve heard about the Apple Inc. (NASDAQ:AAPL) system bear the story out. Back in April, Bloomberg says, the firm got permits to test out three SUVs with self-driving tech on public streets.
Technology development is hard to do and harder to predict. The problems in self-driving are tough to solve, and there may be unforeseen roadblocks ahead. Because of its history, no one should count Apple out just yet. But judging by the information we have, the firm is far behind the competition.