Understanding Apple’s Car Strategy

on July 31, 2015
Reading Time: 4 minutes

Not long after the original iPhone came out, I had a friend that was close to a major luxury brand auto maker. He also knew Steve Jobs well. He asked Steve if he was interested in talking to this company about finding a way to connect an iPhone to their entertainment system. From what I know of this meeting, I understand that, once Steve talked to this company, a lot of lights went on in his head about how Apple could work with auto makers to integrate Apple’s technology into future cars. Indeed, I suspect the roots of CarPlay can be traced to this meeting between Jobs and this auto company and, since then, Apple has courted and won support from just about every car maker to connect or integrate an iOS based device and their services into their current and future models.

Over the last few months, there has been a lot of chatter in the tech world about the idea that Apple is building a smart or driverless car and they have hired a series of top auto industry execs and engineers that would seem to bolster that rumor. The basic word on the street is Apple has a secret lab and has various car prototypes they are working on with the idea of creating an actual car that would have an Apple logo on it. While this speculation is interesting, count me as one of the serious skeptics on Apple actually making a branded car and selling it as a stand-alone vehicle regardless of how smart it could be. If they really wanted to get into the smart car business, just buy Tesla and work with them to add Apple’s intelligence and services to this vehicle. Clearly, they have the money to do this if it was strategic to their future.

I believe Apple’s plans are much grander than doing their own car. I keep coming back to that meeting. I can imagine that, as he thought through the original deal, he started formulating a big picture concept around a “what if” Apple could do more with car companies. Getting them to support the iPhone was a good first step, but over time, as iOS became an important OS in its own right and could handle music, entertainment, apps, sensors, cameras, etc., why not create the technology to make all cars smart and tie them to Apple apps and services.

I do believe Apple has car prototypes in their labs as some have suggested. But I believe they are there to help them create a radical smart/intelligent connected car architectural design that could be licensed to all car companies or be part of an integrated solution. They would work with car companies to customize future models that would be smarter and perhaps safer than any car on the market today. The operative word here is safer. In talks with car companies, it has become clear that, while they want to create smarter and safer cars, one of the challenges is to have a rich operating system that would allow them to handle all types of cameras, sensors and, perhaps equally important, is an operating system that can be tied to apps and services. For each company to try and create their own OS and convince developers to support it would be a difficult proposition. But what if Apple was able to present to car makers a rich solution behind iOS that connects sensors and cameras along with music, apps and services that helps them create a car that has multiple cameras as well as a 360 degree camera on top so there are never any blind spots. Sensors inside and out could be used to add additional safety features including collision avoidance and the like. Add to that the music and entertainment features that are part of iOS as well as the fact that iOS is a platform app developers could create apps for a car. Apple could create the architecture that sits at the center of all future smart cars.

From a strategic viewpoint, this follows Apple’s approach to the television. They are not making a smart TV but instead will bolster Apple TV by making it smarter, with richer content and create an SDK for developers to innovate around a new connected TV metaphor. I believe the car comes under this idea too. I don’t believe it is smart to make their own car, for dozens of reasons, in the same way it does not make sense for them to create their own TV. On the other hand, they could contribute greatly to all future smart cars and help extend Apple’s reach to another industry that would assure them new customers beyond their core today.

The big question is are the auto companies are willing to partner with Apple in this way? While many won’t for various reasons, I do believe Apple could win some of the luxury and mid-tier car makers who would want an Apple partnership to speed up the development of their own offerings and who understand creating their own OS and getting major developer support could be difficult. I think Apple would only need to have two or three key car companies work with them and integrate whatever they do into a smart car for Apple to have another disruptive product for the market. I suspect that, from a strategic viewpoint, that is the top line goal. But what if the car companies will not work with them and agree to adopt or integrate an Apple smart car architecture into their vehicles? Then, and only then, do I think Apple would default to doing their own branded car and take this bold step to become a car manufacturer.

I am convinced Apple still has some tricks up their sleeves when it comes to disrupting markets and they seem to have their eyes laser focused on the automobiles of the future. It will be fascinating to watch how this develops and if Apple can bring their magic to this important industry.