Silicon Valley is the future of the car industry

WHEN you think of the car industry, you think of cities with big, heavy industries and the likes of Ford, GM and Toyota. But that’s not where the future lies.

Transportation Sec'y Foxx Discusses Future Transportation Trends With Google CEO

IS THE future of the US car industry in Silicon Valley?

After Tesla and Google, Apple appears to be readying for a plunge into the industry which has long had ties far away in the steel belt of the US upper Midwest.

According to various media reports, the maker of iPhones and iPads has created a special unit baptised “Titan” with hundreds of staff to begin developing an electric car, with 2020 the target date.

Apple remains silent on the project, but the reports were partially backed up by a lawsuit filed against the tech giant. Battery maker 123 Systems has accused Apple of aggressively poaching its staff.

But it puts Apple in line with Tesla, the current champion of the electric car, and Google, the online giant which is focused on the self-driving, also-electric Google Car.

The Big Three US automakers — General Motors, Ford and Chrysler (now a part of Fiat Chrysler Automobiles, FCA) — are taking the threat from the Detroit outsiders seriously.

“Given the company’s (Apple’s) tremendous capabilities, that is no surprise to anyone,” GM spokesman Dan Flores told AFP.

Apple AirPlay demonstrated on a Pioneer AVIC-F60DAB car head-unit

At Chrysler, spokesman Eric Maynes said: “We can’t comment on something we haven’t seen.” Ford too had no comment on Apple’s plans, but the number two automaker recently opened a research centre in Palo Alto, the heart of Silicon Valley, as it looks to the future of self-driving cars.

Bill Visnic, an analyst at industry specialist Edmunds.com, said that given the seven-year average time frame to develop and bring a car to the mass market, the Detroit giants are not under serious pressure yet.

Even with the unexpected success of Tesla, for instance, the company still sold less than 35,000 cars last year in an national market of more than 16 million units. And Tesla’s cars are confined to a very high-end niche market.

“Apple is not an immediate threat to the US auto industry. I don’t think you’ll see the volume there, the number of cars won’t really begin to approach anything like Detroit is making right now at any time soon,” said Visnic.

Alec Gutierrez, a market analyst at Kelley Blue Book, said Apple’s strength is its role as a “disrupter” in industries, and that the “comprehensive ecosystem” of its popular consumer electronics could be extended to an “Apple car”.

MONEY TO SPEND

Apple has the money to put into a new car — some $180 billion in capital built up to invest in new projects.

(FILES) The Apple logo is seen in this September 11, 2012 file photo at the Yerba Buena Center for Arts in San Francisco. Apple became the first company to reach a market value of $700 billion on February 10, 2015 as shares vaulted amid upbeat news on the US tech giant's gains in the smartphone market and soon-to-arrive smartwatch. Shares rose 1.9 percent to close at $122.02, lifting Apple's market value to $710 billion, and making it the first company to hit the $700 billion milestone. Apple chief executive Tim Cook, speaking at the Goldman Sachs Technology & Internet Conference, said Apple was hitting its stride. AFP PHOTO / Kimihiro HOSHINO / FILES

Even so, said Gutierrez, given the costs and competition in the auto industry, “it’s fraught with risk.” “The automotive space is so highly competitive today, and margins in new car sales are extraordinarily thin, which is something Apple is not used to.” “How many companies have totally failed into trying to enter the automotive industry? It’s a tough thing and it’s very expensive,” added Brett Smith, program director at the Center for Automotive Research.

He pointed to Tesla continuing to lose money despite its success in marketing its luxury cars with battery systems superior to any offered by Detroit.

And the major automakers are all working hard on making more and better hybrid and all-electric vehicles.

That sets a high bar for any new entrant, notes Smith.

“Does Apple have better technologies than Mercedes or Ford or GM or Toyota to build a car? I really doubt it.” What Apple could bring to the industry is what Google brings: ways to process and use data.

Launch of electric car company Tesla's arrival in the Australian market. there first dealership will be in St Leonards on the North Shore. Generic shots of the Tesla. A new owner in the car getting a lesson of how it works.

Google is focused not on the physical car itself but on the technology that will allow cars to run themselves. Its self-driving vehicles, in the guise of various car models, have already driven hundreds of thousands of kilometres on California roads in test runs.

Apple already has something to offer the industry, notes Visnic. It could become a key supplier of connectivity technology for cars, putting its operating systems up against Google’s Android, already being installed in many car models.

“For Apple, they have proven to be phenomenally good at user experience,” Smith told AFP.

“The car for them will become another user experience device, and that will differentiate them.”