DETROIT, Michigan – By most accounts technology behemoths Google and Apple are preparing to clash with fellow industry disrupter Tesla in a battle to wring out what precious little revenue exists today in the electric vehicle (EV) space. The “Electric Big 3” seem determined to jockey for the “vapor share” found in the narrow confines of today’s EV sector. Although the value proposition seems sketchy right now, each sees long-term value in future market potential, and the secretive and sometimes public debate about who’s in and who might come in has the automotive industry buzzing…
Tesla has a highly-visible yet mostly unproven market position in the electric vehicle segment…but what does that mean? Tesla CEO Elon Musk said recently, “The need for global, sustainable transportation is incredibly high. Even in the face of massively declining oil prices I think it only becomes more urgent that the industry advance its development of electric vehicles. Sooner or later we will go fully electric…and sooner will be good for the world.” While there may be truth in what he says, there are more than a few pesky facts and trends that make Musk’s reality somewhat less achievable in the near future. Never mind that demand for EVs is nowhere on the minds of the average consumer, and the Tesla business model has neither proven that it can effectively build millions of electric cars nor shown itself ready to turn a profit until 2020 at the earliest. Musk’s key prescription for success is to drive down overall battery costs “by means of our Giga factory concept. If that doesn’t work, I should be fired.” But the Giga factory has yet to be brought on line and it remains an unproven dimension in the manufacturing mix. All of this from a supposedly “established” OEM in the automotive industry.
Meanwhile, is the Google car ready for prime time? Keep in mind that the Google team has not actually built a car. While they have developed roof-mounted, software-powered LIDAR technology to enable self-driving capability, this in no way translates to a fully-integrated manufactured vehicle. To be sure, the technology enablement of producing a self-driving vehicle is a series of highly-complex, daunting applications (see Figure 1) but it hardly compares to the vast systems-component integration requirements of the more than 25,000 parts that make up today’s automobile.
Daimler CEO Dieter Zetsche told Automotive News recently that Google’s objective was “probably to better understand how cars are used, rather than to become a manufacturer in its own right.” Zetsche and many industry CEOs acknowledge that Google, Apple and other technology leaders have key “strategic involvement” in the process.
Zetsche further stated, “I believe Google, Apple and other technology companies primary objective is not to build vehicles, but it’s critical to identify where we are complementary, where we are dependent, and to what extent we are competitors.”
Google has perhaps an even more invaluable role providing consumer marketing insights and working alliances as automakers continue to try and attract the elusive millennial car buyers. Steve Olenski of Forbes writes, “Millennials are internet researchers. They use these tools when they go car shopping as internet marketing grows ever more sophisticated – and informative. Smart marketers will invest in it fully to take advantage of the millennial’s passion for Google Reviews and other cyber referrals.”
Apple would cast a long shadow by entering the auto space. With its immense resources, “intelligence-of-things” culture, and global marketing reach, Apple would undeniably make a profound entry should it choose to become an OEM of some sort in the auto industry. But will we see an Apple I-Car later this decade? The Wall Street Journal reported last week that Apple has several hundred employees already working secretly toward creating an Apple-branded electric vehicle. The project, code-named Titan, it being prototyped with a mini-van style of design.
Apple’s unique and highly-coveted retail presence alone would be a game-changer, the very thing Tesla is seeking by “establishing our retail foundation with our own Tesla stores before reaching to existing dealer options,” Elon Musk said recently. However, due to strict state-by-state dealer laws governing new auto sales, it will be extremely difficult for Tesla to leap this hurdle to market. This same distribution/retail hurdle could block Apple’s retail automotive entry…or would it?
Don’t forget the issues of manufacturing, supply chain, and warranty – all daunting barriers to entry. There are those inside the industry that suggest Apple simply couldn’t grasp the enormous scope of engineering and manufacturing such a complex product. Even though they are brimming with smart people, Apple must see the difference between the requirements of manufacturing a vehicle and a smart-phone. “If I were an Apple shareholder, I wouldn’t be very happy. I would be highly suspect of the long-term prospect of getting into a low-margin, heavy-manufacturing business.” said Dan Akerson, retired CEO of General Motors recently. But, would it surprise us if automakers become suppliers of cars as merely a component of the experiences that Apple and Google are selling? It may well be that Apple and Google simply choose to out-source the car and “bolt it on” to their future technology and products.
There’s no way to tell what exactly will happen next, how these roles may turn upside down as new technology continues to drive the look, fit and finish of the vehicle. The automakers have a considerable stake in seeing the EV succeed, and there is no discounting the sheer optimism and vision Musk and companies like Apple and Google bring to the auto space. As Forbes’ Josh Linkner commented, “With Apple’s resources and creativity, let’s move past the debate of if and move on to the discussion of when and where.” The car game just gets more riveting every day.
Phil Biggs is Executive Vice President for the Nashville, TN-based technology company, NeXovation.
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Photo by Steve Jurvetson • https://www.flickr.com/photos/jurvetson/21954222146/in/datetaken/
