I love, love, love this sort of quote, though this one is made in a very thoughtful way. Bob Lutz has a lot of experience in this market, is the former Vice Chairman of GM, knows the industry inside and out. But he doesn’t know Apple, hasn’t see the disruption up close and personal.
Two highlights from the interview:
If I were a shareholder, I’d be very upset because they are currently engaged in a very high margin business [referring to consumer electronics]. The automobile business, at best, is a very low margin business. You can’t show me one company in the world that, to date, has made a nickel on electric cars. They’re generally money losers and the only reason that everybody is producing them is because they are necessary to meet European fuel economy regulations and US fuel economy regulations.
There is no reason to assume that Apple will be financial successful in the electric car business.
Spoken from the present, about the past. True, but not recognizing the massive disruption on its way.
When asked why Apple would enter this business, Lutz shook his head ruefully, and said:
Apple has no expertise in batteries. They don’t make batteries. The specialized electro-chemical companies make batteries and Apple is going to buy batteries like everybody else. When it comes to actually making cars, there is no reason to assume that Apple, with no experience, will suddenly do a better job than General Motors, Ford, Volkswagen, Toyota, or Hyundai. I think this is going to be a gigantic money pit.
It’s all been said before, most notably about the iPhone. Palm CEO Ed Collegian famously said this about the iPhone that would soon eat his lunch:
“We’ve learned and struggled for a few years here figuring out how to make a decent phone. PC guys are not going to just figure this out. They’re not going to just walk in.”
Here we go again. My money’s on Apple.
Interesting that he considers consumer electronics to be a high margin business; I thought it was a typical example of low margin commodity business, with one or two companies as the exception 😉
Of course GM shouldn’t be talking to anyone about business acumen. And hit him with a clue stick. Apple manufactures more product by volume and by value than GM does. If anything, he should be asking Apple for manufacturing advice.
Maybe it’s time for something totally new. A new way of thinking about cars and how they could be used, manufactured and so on …
German car manufactures, are really good in this business. I think they’re the best. But, I think Tesla and Apple could be the new BIG PLAYER. The hardest thing is: To solve the problem with the batterylife and charging. Tesla’s idea of free charging with a superfast charger is great. And maybe the manufacturer have to cooperate to solve the problem.
All other “problems” can be solved “easily”.
Sorry for my bad english.
Well, Germany got a big black eye in this area recently thanks to Volkswagon. But then German cars have never had a terribly good reliability record. And a reputation for overly-expensive repairs. But as far as looks and desirability go, yep. Germans top the rest.
Mr. Lutz was saying that Apple’s business is high-margin, not the industry in general. Apple really isn’t in the computer, or even consumer electronics, business. It’s in the aspirational product business. That’s why industry analysts are so frequently wrong about Apple. They’re analyzing the wrong thing.
He’s right about all the hurdles and challenges in the car business, but again, Apple isn’t entering the car business, it, appears to be, making an aspirational product that has wheels and doors and gets people from place to place. Not quite the same thing.
Uh, Apple only manufactures a single. extremely low-volume, product. They pay several companies a lot of money to make the vast majority of their products. It’s a subtle difference, but a big one.
I’m still not convinced Apple is making a car. They have too many car-making partners. But that makes weird warnings like this more entertaining, not less.
The mistake Lutz is making is indeed the same as the iPhone naysayers, particularly Ed and Monkey-boy. They think Apple is entering their businesses, but it really isn’t. Apple is just going to produce a product they already make. that’s not the same thing.
I wasn’t either, but there’s too much smoke to be no fire. If it was only Gene Munster saying it, I might dismiss it. But they have been too many high-profile hires of people with expertise in cars/automotive technology. Apple may not be building a car, but I think it’s safe to say they’re designing/engineering one.
Given the bailouts and exemption from liability it’s been given. No one from GM has any business calling anything else a “Money Pit”.
Lutz isn’t making any mistakes. The auto industry is intricate. He’s stating his opinion as he knows it based on his experience.
Disruption is difficult in the auto industry.
Case study: Tesla has grabbed the headlines but not the bottom line. And, just as they start to move3 in a more mainstream direction, Chevy sits poised to invade their price point with their own vehicle which has an entrenched network of sales, marketing, dealership and service facilities in place worldwide.
” My money’s on Apple.”
Why? Tesla hasn’t been able to make it work profitably with over a decade of excellent vehicles. And there aren’t any more NUMMI’s for Apple to buy at bargain basement prices.
“Apple has no expertise in batteries.”
He may be basically correct on points about the difficulties in the car business, but on batteries he is dead wrong. Apple has had many years working on optimizing battery life. The trick is whether they can translate that into the larger scale of a car.
There’s a huge difference between optimizing energy efficiency in electronics and energy efficiency in an electric motor.
Lutz is also trying to be player in the automotive ‘disruption’ with his company VL Automotive, so any pessimistic comments towards potential competitors are expected. Lutz comes from a complacent GM culture, and like GM, has a limited field of vision.
Apple, however, is a culture of innovators, and visionaries firmly grounded to improving the world for the sake of humans and the environment. Profit margin isn’t their primary objective, making great and useful products is. Saving the world from itself is just a happy by-product from how they accomplish this.
I’d be sweating too if Apple decided to ‘disrupt’ the way I make my livelihood. There’s nothing preventing VL Automotive from making a superior product except for Lutz’s limited filed of vision.
Thus my comment about scaling. Perhaps he is only wrong and not dead wrong, though.
If Apple does this, they need to do what they did with iPhone and change the field. Every once in a while the Jobs intro of the iPhone pops up and each time I watch it, I marvel at what was before and what the iPhone did. The ‘smartphones’ before iPhone were all ugly grafts of a PDA onto a cell phone… Had Apple done one of those but with Apple design it would have failed. Instead, they fundamentally changed the field – you had a small computer in your pocket and although the full promise of that took some years to materialize (arguably the 4, definitely the 3GS), the reimagining of what the thing should be was the key move. Impressive as the evolution was, that evolution was only possible because of that first step.
They can’t enter the car market with just a nicely designed car with sophisticated software. That won’t justify this risk – and they’re smart enough to know that I think. I’d expect to see true innovation in what the car does on the inside – can it be a rolling workspace for example where we’re not all sitting face forward, but can face each other? That will require VERY good self-driving, but it’s conceptually possible.
It’s not even about scale, it’s a completely different sort of engineering.
I share Lutz’s zero confidence in Apple’s ability to “make a car”.
I also don’t think Apple is making a car; I interpret all the car-related stuff as making car-integrated electronics and software.
The car itself? Utterly outside Apple’s expertise and competence, and a brutal, often unprofitable market that’s almost impossible to break into.
Apple’s an excellent fit for a desirable, profitable in-car system that other manufacturers will put in their vehicles.
I think it’s safe to say they’re doing a car-related thing; I don’t think it’s safe to say they’re “doing a car”.
My money’s on integrated systems (ie, an Apple infotainment/control system for carmakers to integrate).
That’s the interpretation that makes sense, fits Apple’s strengths, avoids their weaknesses, and isn’t insane.
Note that Bob Lutz is a distinguished and experienced automotive executive, with a significant career outside of GM.
Someone credited with assisting the development of the 3-series BMW and BMW Motorsport, and then the original [and wildly successful] Ford Explorer, then the Dodge Viper, might have some idea about carmaking beyond “GM sucks”*.
Hell, it was Lutz’s idea to bring the Monaro here as the GTO, God bless him; if anything Lutz kept GM from going bankrupt as soon.
GM was a money pit before Lutz came back, and was doomed to either fail or get a politically-motivated bailout with or without him.
Indeed, one imagines that he knows a money pit when he sees one.
(* And I agree, GM sucks, overall and in general.)
And Tesla has, to my knowledge, never shipped a vehicle on time or in promised quantity.
The Model S is a beautiful, fast car, but I don’t trust Elon Musk’s promises about ship dates and quantity for anything.
The problem with the idea of “an Apple infotainment/control system for carmakers to integrate” is the number of gear-heads they’ve hired. Guys who design transmissions and other drivetrain components. Now, it could just be misdirection or a more holistic vehicle control system that incorporates some kind of active traction control, but I don’t think this is just software.
Well, not so much that they didn’t feel compelled to go out and hire senior chemists and cell engineers. Remember A123? If anything, Apple’s experience just helps them know what they don’t know, which is usually enough.
That just doesn’t follow. A CarPlay 2.0 with much deeper knowledge of what’s going on in the car by itself is enough to justify the hires. The smoke is just like audio feedback. It’ll be repeated back louder until something blows up.
Is it possible they’re doing something else? Sure. Is there any evidence that points to it unambiguously? Not a single bit. Is watching people build insane towers upon speculation fun? YES.
They will most certainly not make an entire car from scratch. They can design the exterior, the interior and the user-facing electronics and build upon an existing or slightly modified base model.
Doing more would certainly kill the targeted time frame (having even just the safety related parts certified would take almost forever) and makes little sense. The other aspect is distribution and maintenance. You can’t drive a car to the Genius Bar, and even Apple can’t open enough car dealerships to get acceptable coverage in this little time. They absolutely have to use existing infrastructure, and why would car makers do that, if they are no part of it?
I am interested in a different point. Is Apple even targeting end user sales? Or do they look at changing mobility? Cars cost big money and stand around uselessly most of the time. Having a shared e-car network would solve many problems, even long-distance travel… Apple Maps could just guide you to the next fully charged vehicle etc.
http://techcrunch.com/2015/02/19/apple-car-new-hires/#.sm3hfk:YUmh
Hiring people with drivetrain, “active safety”, and interior/trim experience not to mention battery tech knowledge really points to a full-gamut car project (or a fairly extensive and expensive misdirection campaign). I have trouble seeing Apple put a lot of time and money into an integrated control system that they sell to someone else. Apple doesn’t license iOS or MacOS for a reason.
Bob Lutz is also a guy who said “Global warming is a crock of sh*t.”
Now why do we care what this guy says? He’s a dinosaur.
What if Karl Benz thought Henry Ford was crazy for thinking he could build automobiles at mass volumes brought down to mass market prices? Henry Ford didn’t invent the automobile, he didn’t invent the assembly line technique that he’s well-known for. He just innovated the idea to the point where he COULD build cars much faster and much cheaper. Sound like anyone else?
What if Apple isn’t just going to innovate the car itself, but the production methods as well? Apple is certainly the most innovative manufacturer producing products today, employing tons of advanced never-before-done-at-scale techniques that allows them to have the level of fit/finish quality AND volume AND profit that Apple is known for. This kind of thinking goes all the way backwards to the design and engineering of the product itself. The conventional wisdom of the auto industry would be thrown on its head.
I’m thinking it would be foolish to think Apple is only looking to solve problems in the car itself. Apple is a rare company that truly looks at the entire picture.
We’ll see. But high margins are different when the product costs a few hundred dollars, or a couple of thousand. But a few tens of thousands, and a 30-40% margin is going to be a hard sell. Maybe they’ll sell enough to make the adventure make money. But most people won’t be able to afford 30% on top of $40-50k. Right now though everybody is placing bets in the dark. Statements like “My money’s on Apple” are silly until we know something more. We don’t even know if it’ll be an autonomous car or not. And if it’s based on the BMW i3, that’s not exactly flying off the shelves, so to speak. Yes, we don’t know this rumor is true… but we don’t know any are true, and we’re already talking about likely success.
For which they have hired people to handle.
I’m not convinced they are doing the whole car, anyway. I suspect they will work with some manufacturer to do the car and main parts of it while they deal with the user interface and experience.
You’re looking in the past like Lutz, plucking numbers out of thin air, and talking about peeepul. No such thing as peeepul.
It’s easy to predict Tesla’s and Apple’s “doom”, as so many do. But what I SEE (as opposed to what I read in spite of myself) are a LOT of Tesla Sedan S’s on the road, and happy owners (I ask a lot of them), and a lot of Apple products and happy owners. That’s all that matters to me.
Lutz says Tesla is losing money. Hmph. That’s most likely wishful thinking. Sure they’re probably still paying back that huge government loan. But they’re selling a lot of cars, and making progress on numerous fronts: installing lots of Supercharging stations, building their battery gigafactory, Model X is on its way, etc.
I think an Apple Car will most likely be analogous to the iPhone: pooh-poohed by many just before its advent and well after its appearance. The huge thing about the iPhone, and most likely the Apple Car, is that it was designed very well—not just its looks, but its overall functioning with respect to itself and its importance within the burgeoning Apple Ecosystem. There’s every reason to expect that this design genius and integration will continue with the Apple Car—especially with the Apple Car, if for no other reason than because of the sheer magnitude of this new effort, and the reason which Musk proselityzes: We need to do something NOW to stem the pollution.
Lutz reminds me of Balmer: fat and arrogant and stupid (couldn’t see the new products before their eyes).
Hopefully, Apple’s shareholders won’t be similarly stupid and impede this important new project.
Denial. Predicting the future by extrapolating the past. Silly.
Drawing your line at a “decade” is silly and arbitrary.
So what? None of that’s important compared with customer satisfaction. I’ve heard many from Sedan S owners.
All of this has happened before. All of this will happen again.
“Apple has no expertise in batteries. They don’t make batteries.”
Um, about that… Apple employs battery engineers. Apple has employed battery engineers. Multiple generations of iPhone, iPad, iPod, and notebook have been built around Apple-designed lithium batteries.
And on top of that existing base experience, Apple currently has open positions for dozens more battery engineers.
If any obstacle is unsurmountable for Apple in pursuing a car, it’s not likely to be the battery. Heck, with millions of battery-equipped iOS devices in the wild uploading metrology data and coming in for repair, they’ve probably got a better starting point than any of the conventional automakers did or do.
Knowing Apple… the whole car would probably be a walking (or rolling) battery.
Look under the seats.. Battery!
Open the cup holders… Battery!
Open up the beams… Battery!
Open the steering wheel… Battery! – with some air bags.
And we can expect a 10 hour driving time…. and of course non removable batteries. 🙂
I said over a decade. They’ve been in business for 12 years, so it’s not an arbitrary way to say they’ve never had a profitable year.
Agreed. Apple’s experience with batteries date back to 1989 when they shipped the original lead-acid powered Mac Portable, and the first Powerbooks a year later. Tesla began their experience with the Roadster by basically repurposing laptop cells. Somehow I think Apple has more battery experience than “Maximum” Bob Lutz is giving them credit for.