Why Apple Inc. (NASDAQ:AAPL) Could Copy Google (GOOG) In The Car Business


Apple Inc. (NASDAQ:AAPL) as usual is parsimonious with details about its car project, only giving hints through its talent and technology acquisitions. However, almost everyone now believes that Apple Car is a work in progress, except that its exact details are unknown. Will Apple design and produce cars all by itself or will it license the design to an experienced automaker to do the production?

It is becoming all the more clear that Apple Inc. (NASDAQ:AAPL) may dodge manufacturing cars directly. The company might partner with an automaker to take up its car design and then build it. Analysts and industry experts have, in the recent past, questioned Apple’s car ambitions, almost calling Project Titan a huge money pit.

Making and selling cars is not the same thing as making and vending smartphones. The car business requires huge capital investment and profit margins are lower compared to the smartphone business. Regulations are also so tough in the auto industry that newcomers might find it tough to navigate easily. Then there is also the issue of investor concern about venturing into the usually tricky car manufacturing business.

Because of the various challenges in the auto industry, Google Inc (NASDAQ:GOOG) is determined to skirt them by licensing its autonomous car design to traditional automakers. Apple could take the same approach, and it makes plenty of sense.

Keeping a safe distance from auto risks

By licensing out its Apple Car design, Apple will be able to avoid the huge capital demand in the auto industry. Additionally, the company will not have to worry about the regulatory and safety issues as the buck will stop with the manufacturers. Additionally, Apple is so used to higher margins from iPhone and iPad sales that the slim margins in the car business might not warrant much sacrifice in form of direct investment.

Promoting CarPlay system

If Apple Inc. (NASDAQ:AAPL) chooses to sell its Apple Car design to interested manufacturers, the company could end up signing more than one manufacturing partner. In that case, Apple will be in for more benefits than when it tries to do manufacturing by itself and faces competition from experienced players. Licensing out the Apple Car design could also help Apple to popularize its CarPlay platform against Google’s Android Auto.

Familiar strategy

Looking back, Apple Inc. (NASDAQ:AAPL) is already familiar with licensing out designs and there is no reason it can’t do it with Apple Car.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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