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Electric cars: Why Apple should bet on the luxury industry

Electric cars: Why Apple should bet on the luxury industry

The project was thought to have been cancelled or postponed, but Apple is said to have resumed efforts to build its own vehicle last month, according to Reuters. If the company intends to market its electric car under its own brand in three years, the development of this automobile project, which will begin in 2014, will not be without difficulty, according to Bloomberg.


An electric car from Apple, with a lot of promises on the design, on the batteries too. This is why the creator of the Iphone must target the world luxury car market, which represents 230 billion dollars. This way, the company will also be better able to get investor approval. On the other hand, who says luxury automobile says Tesla, Mercedes, Ferrari etc… And the competition will be all the tougher as the automobile market has nothing to do with the electronic market.

The call of alliances to construction


Tesla is the best example that can illustrate the mistakes of a lack of experience in the automotive industry, with repeated manufacturing problems and missed production targets.


In order to fill this same lack of experience, Apple will inevitably have to collaborate with third parties who will more easily accompany it in this process of expansion into the automotive sector, whether in terms of manufacturing or development. The company has already called upon Magna, about 5 years ago. Unfortunately, there has been no concrete result.


This time, the company could consider extending its collaboration with Foxconn Technology Group, which already manufactures iPhones under contract for Apple and which has recently entered the automotive industry. Last year, for example, it set up a joint venture with Fiat Chrysler Automobiles. What more could you ask for?


Another third party that could well enter the game: Hyundai whose rumours evoke a certain rapprochement with Apple. A relevant collaboration that could solve some of the problems that Apple may have encountered previously in the supply of components.


But the brand’s notoriety will not entirely replace the lack of experience. Indeed, it should be remembered that a supplier was hardly inclined to supply components exclusively, despite the fact that one of its customers such as Volkswagen was selling some 10 million vehicles in 2016.


For this reason too, cooperation with groups with a reputation and experience in the industry is indispensable. Among the most successful alliances: the Renault-Nissan-Mitsubishi alliance, Volvo and its Chinese parent company Geely Automobile Holdings, General Motors and, of course, Hyundai’s partnership with the Korean manufacturer Kia.


Each of these players has already created electric vehicle platforms whose importance is such that suppliers are fighting for contracts. Some have also expressed a certain willingness to build vehicles for other brands — VW is already working with Ford, and GM with Honda.

A coherent policy to maintain price stability


Note that there are bound to be disadvantages to teaming up with another group. However, it seems that Apple doesn’t really have a choice if it wants its project to finally see the light of day. A contract manufacturer generally costs about 10% more than if you made the vehicle yourself, according to Eric Noble, president of the automotive consulting firm Car Lab.


Especially since profit margins in the automotive sector are much lower than for Apple phones for example. In 2018, Tesla probably had a gross profit margin of around 30% on the Model 3, according to Bloomberg News. Apple’s gross margin on the iPhone is almost double that of Tesla.


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As far as pricing strategy is concerned, given that the target market is the luxury market, and that the vehicle will be equipped with autotraction capabilities using sophisticated lidar technology, it should be over $100,000. This is indispensable if Apple wants to be profitable on manufacturing.


According to Reuters, Apple could offer added value if it succeeds in developing a new battery technology, which is the biggest investment in the manufacture of a vehicle since the part does not benefit from economies of scale due to the fixed cost of raw materials.


Apple therefore has every chance of entering the race for the automobile industry since the company has great technological capacities which can differentiate it from its future competitors. But let’s not forget that the project since 2014 has encountered many obstacles and that several evolutionary factors have to be taken into account each time.


Business to follow.




Featured Photo : © Press

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