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Comment by SkyMarshal | Hacker News Reader

>Apple is just about the only company with a similar ethos and enough money and patience to be a viable competitor and have a competitive brand known for quality.

Mostly agree, though I suspect a few of the major car companies like Volkswagon/Audi and Toyota/Lexus are capable of this as well.

But yes, Apple has the cash reserves to not just manufacture electric cars, but to build out the necessary infrastructure network as well:

- charging stations blanketing the country

- battery replacement stations for faster "charging" on the fly

- local maintenance stations

- etc..

Apple could centralize sales to Apple's website, and transform "dealer networks" into "maintenance networks". Sales can be handled in a centralized manner, but maintenance still requires locality.

All that requires large upfront CapEx, but Apple is one of the few that has more than enough cash reserves for that.

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Tesla and Apple have figured out that could is a better stock multiplier than does.

Isn't that how the entire stock market works? Valuations based on net present value of future projected earnings. You just need a story about future earnings that enough of the market will buy into. Both Apple and Tesla have enough track record to credibly tell such a story.

Net present value of future projected earnings, adjusted for risk.

That last part seems to be missing.

Likely because the smart money knows that retail investors + indices = momentum trading on sectors. As there's no ability for anyone to call BS in the way they used to be able to.

Or to put it another way: if I'm Toyota, I have a demonstrated ability to build cars profitably. If I'm someone who says I can build as many cars as Toyota, how many pitfalls are there between what I say I can do and actually doing it?

Admittedly, corporate conservatism and risk avoidance in leadership is absolutely a thing, but it feels like we're rewarding claims of execution over actual execution.

If you are Toyota, you've only demonstrated you could build cars profitably for the consumer market you were already in. If consumer preferences, trends, etc have changed, and no product is yet available to fulfill those new preferences, there is actually risk that what you are good at building profitably isn't what people want anymore. There is risk in that too.

Well to nitpick a little, in the case of Toyota at least, and given the success of the Prius, it seem Toyota has proven they can identify and succeed in (or even create) new consumer markets.

Thats true. Gotta give them credit. This could be a good proof point for derisking the Toyota case. However, Apple is pretty secretive and they often surprise us. There is a lot of design space deviation possible in a complex product like a car. Until we know what that product delta is, we cant really assess Toyota’s ability to pivot quickly enough. Apple wouldnt invest if the delta on what they can offer is small. So should be interesting.

There is. But are you saying that:

"the risk that Toyota, with demonstrated volume manufacturing prowess, is unable to pivot into a new class of vehicles"

is greater than

"the risk that a new manufacturer, with no track record of volume automotive manufacturing, can create a product and manufacture it in volume"?

That was my original contention and where I feel the market is mispricing risk.

Yes. Because there is theory and case studies to back how often a company like Toyota will fail to pivot

That's arguing only critically examining one side.

How many theories and case studies are there documenting how a company failed to execute something it's never done before, and has no competency at?

too many to know about and count. Way more than the side I am highlighting. But this isn't just "a company", it is Apple. I know everyone doesn't believe in them, even if you ground yourself in their track record of execution.

I would also challenge the notion of "no competency at all". This isn't like a great chess player thinking they can use that skill to become a great football player. This is more like one of the best baseball players becoming a great football player [1]. Things are different but there exists a lot more similarities than you think. And if you are one of the greatest of all time (which is true for both Bo Jackson and Apple) there is a non-zero chance you can pull it off.

[1] https://en.wikipedia.org/wiki/Bo_Jackson

> it is Apple [...] track record of execution

Granted! My personal guess is this turns out much like Google Fiber: a capital- and regulation-heavy endeavor that Apple (and their investors, used to tech margins) aren't culturally or financially willing to commit to for a long enough haul.

But an effort which eventually pays off by frightening existing players into cutting better partnership deals with Apple.

From a quick peek, Apple runs ~25% pre-tax margins. For reference, Ferrari has ~20%, as the highest in the industry. And ~10% or less seems standard.

So in the end, if Apple is more successful than Ferrari at selling vehicles profitably, they'll still be making less money than they're used to on the investment.

That doesn't seem like something investors are going to be willing to let Apple endlessly torch cash in pursuit of, competing against firms with decades of experience, when the alternative is returning it directly to them via dividends, buybacks, etc.

And that's not even getting into the optics of labor-relations with manufacturing that Apple would have to very publicly expose, vs their more hidden technology supply chain.

The more I think about this, the more it seems like the only viable "Apple car" is a limited-volume halo project, built on top of an existing manufacturer's platform -- which would mirror their approach to technology, in many ways.

I agree in the comparison with running communication wires from a capital intensive / regulation standpoint. I also agree that Google probably has similar chops as Apple for pulling something like this off. So the fact that Google essentially failed does speak to the point of Apple's success not being a sure thing.

A couple of things I would say to this, however:

1. Wired connection to home internet wasn't really in a period of disruption when Google entered the Fiber market. Google didn't really have an angle into the market. I think this was more typical Google arrogance driving this than strategic thinking. In this case, I would actually believe the purpose was to influence other players rather than capture meaningful market share with a unique product offering. It's quite an invisible product.

2. Apple doesn't run the business looking for revenue and margins. Apple looks for opportunities to build a substantially different product that fits Apple's values (privacy, safety, security, design, ease of use, etc). Everything about the car as a product experience, including its distribution is in massive transition right now. On a small level we see this with Tesla on the dealership vs direct to consumer model. On a larger scale we see this with ownership model altogether (ride hailing apps vs. the car in your driveway). The car is about to get rebuilt with microprocessors at the core, including machine learning, literally driving the whole experience.

Anyway, this is just a way of saying, we shouldn't take a financial snapshot of the car market today and try to fit Apple's model for success into it. The only reason they are getting into it is because everything about cars is going to change dramatically over the next 10 years.

We'll see. I'm a huge fan of the futurist motto that actual progress, as opposed to expected progress, is driven by difference-from-current. (Maybe from Kurzweil?)

E.g. (1) we don't have flying cars because they're not different enough from street cars to justify their cost, and (2) we do have incredible wireless cell phones because they're fundamentally different than landlines.

"Massive transition" etc. just doesn't ring true.

After transitioning, the car experience won't be fundamentally that different than the current car + ride share experience.

If anything, the future of automobiles seems more likely to lead to lower ownership rates, more commoditization, compressed margins, and a worse market to win.

Apple still has to answer to shareholders, and Tim Cook doesn't have Jobs-levels of trust to trade on.

>and transform "dealer networks" into "maintenance networks".

People tend to overlook just how many service centers are available for the big three (about 10K), not even counting independent garages. Tesla has..500. How many will Apple have? If the Tesla service horror stories are anything to go by, I can only imagine what it would be like for an iCar once production ramps up.

Apple has the cash to do all kinds of things. Why shouldn't Apple get into transoceanic shipping? Mining? Canned food?

All of these things are outside of Apple's core focus and they are unlikely to possess an advantage over other players. Sort of like automobiles.

The world is starting to feel like 1999 all over again. People's visions are getting further and further removed from reality.

Apple's core focus is Design of consumer electronic appliances. Making complicated technology simple, intuitive, and trouble-free, and hiding the complexities behind the scenes. Technically, an Electric Car fits that description too.

The challenge is that the complexities of an EV are similar, but greater in scale than for consumer electronic devices - more parts, more complex supply chains, more extensive support network (charging stations, maintenance providers).

Whether Apple can scale up to handle those increased complexities, and whether they calculate it's financially worth it for them, I doubt anyone outside Apple can really know at this time.

If Steve Jobs was still alive, I would agree with you.

Steve Jobs = Elon Musk in a different market.

Without someone in control who can make major decisions quickly, capital will not be enough for Apple.

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