Apple Inc. is working on an electric car, and the firm, if rumors printed in the Wall Street Journal are to be believed, will get it on the road in 2019. Shares in Tesla Motors Inc reacted negatively to stories about the car from Cupertino, but it’s clear that Apple can’t kill Tesla Motors with its first release.
Even if Apple does to the car market in 2019 what it did to the mobile phone market in 2007, the firm simply doesn’t have what it takes to get in the way of Tesla Motors. Here’s a look at the reasons why Elon Musk’s firm is secured against an onslaught from Apple, for the time being at least.
Tesla Motors has the raw materials
The Tesla Motors Model S runs on batteries. If Apple is going to put an EV on the road, it’s going to have to use the same basic raw material, and only Tesla Motors has a plan to build batteries at a level that will supply the huge amount of cells that a mass market EV needs.
Lithium likely won’t be that hard to get. If Tesla Motors begins to have mass market success and German car makers get into the EV market in a big way supplies of lithium all over the planet will likely respond to the rise of demand and begin to pump out the metal.
It’s the actual battery factory that matters. It’s possible that Apple will make a deal with Tesla Motors, or some other firm, to supply it with batteries to start off with. It could also take the Gigafactory designs from Tesla Motors and build its own factory in the coming years.
Tesla Motors will price Apple out of the car market
We know how Apple tends to sell things. The firm likes to enter a category with a single model and a handful of options. That’s not how the car market works, and Tesla Motors knows it. The Model S costs, at the very low end $70,000. It’s clear to the firm that that is far too much.
Tesla Motors will release the Model 3, a car that costs $35,000, in 2017. For most people that still won’t be enough. A car that costs $35,000 is a hefty buy for many households. Tesla Motors, or another of the firms making EVs, will have to build something for even less than that in order to reach 80 percent of the market.
If we assume there is a single Apple car rather than a plethora of makes and models, set to arrive at the 2019 launch, it’s likely safe to say that Tesla Motors is safe.
Either Apple competes at the low end of the market and gives up on the high margins promised in the luxury EV world, or the firm focuses on the high margin side of things and ignores changing the world. Tesla Motors will already have experience in both segments by the time Apple gets its car to market.
Apple can’t make an EV
It’s clear that Apple would want to follow in the footsteps of Tesla Motors, and other great car makers, and set up shop in the United States. In order to get a mass market car on the road the firm is going to need to set up a factory that can deliver cars en masse.
It has taken Tesla Motors more than a decade to get its production up to 50,000 per year. Apple would likely be able to get there much quicker. Tesla Motors plans to make and sell around 500,000 cars in 2020. Even with Tim Cook’s taste for logistics and supply chain management Cupertino is going to take years to be able to compete with that.
Here’s what Apple needs to do
In order to compete with Tesla Motors and beat the firm, Apple would have to hit each of thse points when it puts its first car on the road in 2019.
- Make a mass market electric car that can still appeal to those that want a premium feel.
- Find a source of batteries that will drive costs down allow it to make a profit on those cars.
- Set up a factory that can deliver in mass amounts by the end of 2019.
- Get its car, and all its new tech approved by the correct agencies in the US and beyond.
Those aren’t impossible, but they’re hard and they’re not likely to be on Apple’s list. It’s the media that’s building a battle between Tesla Motors and Apple. There is some EV rivalry going on in the background, however.
Here’s what Apple is really doing
Apple is putting together an EV business, it’s not going to try to kill Tesla Motors. Too much time has already passed for that to be possible. By the time Tim Cook and Jony Ive get their first version of the Apple Car on road, likely some time after 2020, Tesla Motors will already either have made it to the mass market or fallen flat on its face.
There’s very little risk that Apple will interfere in Elon Musk’s medium term plans. It’s possible that Apple and Tesla Motors will compete over the next decade or two in the EV market, but any failure will be Tesla Motors’ own. There’s no reason to think that the switch to EVs would change the car market so much that hundreds of brands would die.
Right now there’s a plethora of automobiles that carry different badges, and personal taste, and the use of the car as a way of identifying ones self will provide pressure to keep things that way through the EV revolution.
For the time being Apple is going to keep hurting Tesla Motors by driving up pay for automotive engineers in Silicon Valley. The firm has made a few key hires off of the Tesla Motors team, making the work of all the others at the firm more difficult.
That’s going to keep hurting, but the attention that Apple will grab in the EV space, as rumors and concepts of the firm’s car spread, can do nothing but help Tesla Motors.
Apple isn’t looking to kill Tesla Motors. It’s looking to kill Volkswagen, and Nissan and Dodge. Tim Cook will have to work with Elon Musk in order to make the argument for the big switch to battery power. There’s far too much in his way for a direct assault on Tesla , at least for now.