Apple abandons autonomous EV endeavor
From the GCADA Newsletter
This past Tuesday, Bloomberg Wire Service broke the news that after nearly a decade, Apple Chief Operating Officer Jeff Williams and Vice President Kevin Lynch announced the company was officially abandoning its quest to dip its toe into the world of auto manufacturing by producing an autonomous, electric vehicle.
"Project Titan," as it was referred to, employed as many as 2,000 people. Layoffs are expected, and Bloomberg reports that some employees may be able to apply for positions elsewhere within the company.
Apple's stock was down 1.3 percent on the news, which increased its decline to 6.4 percent on the year. However, the stock was still up 24 percent year to date.
Of course, the announcement begs the question, what does this mean or say about EVs and even Apple?
Some suggest the news is good for Tesla, other EV startups, and legacy brands. Mike Ramsey, an analyst with Gartner Inc., was quoted as saying, "They are probably relieved. Apple getting in the market scared people early on."
It seems more likely that Apple's investors are the most relieved.
"Apple canceling this project is a sign of relief for us," Dan Morgan, a senior portfolio manager at Apple shareholder Synovus Trust, told the Wall Street Journal (WSJ). "When you look at Apple's future initiatives, the car project was always far-fetched for Apple. This just isn't in their wheelhouse."
WSJ reported Apple's initial intent was to bring an autonomous vehicle to market, but as that technology sputtered and billions were spent, and fortunes changed. Whether Apple could have ever manufactured a vehicle itself without a partner seems dubious since Apple is a software company that outsources its hardware manufacturing. Apparently, partnerships with established automakers were discussed internally, and perhaps the acquisition of an existing car company was bantered around. Allegedly, Elon Musk approached Apple Chief Executive Tim Cook some years ago about acquiring Tesla.
Ultimately, with EV startups such as Rivian and Lucid burning through cash at ever-alarming rates, Apple decided not to spend any more of the nearly $192 billion cash on hand reported in its fiscal fourth-quarter report.
Instead, the decision frees up cash so that the company's focus can remain where it should be and, frankly, on what it does best, and that's developing software and devices that have made Apple the juggernaut it's evolved to be. Last month, Cook announced that the company has been working on generative AI and that further announcements will be coming later this year. Siri may experience an upgrade.
The allure of conquering the automotive space dates back to the beginning. As we've chronicled before, the automotive landscape is littered with the abandoned dreams of hundreds of entrepreneurs who thought they could successfully conquer the industry. Even local industrialist Powell Crosley, a fantastic innovator and manufacturer, found the task too daunting. Jeff Shuster, global vice president of automotive research at consultant GlobalData, stated to Bloomberg Wire Service, "Apple's pullback is another example of the tech sector underestimating how difficult it is to disrupt the car sector. Nine times out of 10, most find it a little more challenging, dynamic, and complex than expected."
Does Apple's move somehow, some way, reflect poorly on the future of EVs? We think not. Sure, we wonder if Apple is very impressed with current profit margins, or lack thereof, most are experiencing in this segment. However, one must think the decision is about Apple and how it can best provide maximum ROI.
By the way, Apple's decision to purchase a vehicle hardly removes the company from the automotive space, as software opportunities abound without regard to powertrains. CarPlay is now offered in more than 600 vehicle models to allow drivers access to everything Apple does during their commutes. In addition to money, the move also frees up the intellectual capital of Apple's Project Titan engineers to be redeployed into the generative AI software space.
The move is another example of why Apple is Apple, after all.
