Friday, June 13, 2008

Apple: The Only Company Capable Of Revolutionizing The Car Industry

What resources does Apple have?

The other day, I started researching to see what others had to say about Apple's $20 billion in cash on hand* <-- an awesome corporate feat.
* Cash is also increasing at roughly $1 billion per fiscal quarter
[UPDATE] 3/15/09 Apple's CASH ON HAND is now 30 BILLION

Most have said that Apple should reinstate a stockholder's dividend, some have said to buy Adobe; while others have made the case to buy Sun Microsystems. Apple makes +/- $60 million a year in interest from this cash stock on an annual APR of 3%*

* I suspect Apple receives more than this, a lot more, but this would be conservative

After checking the likes of Chrysler, GM, Ford, Exxon/Mobil, and even WalMart and Coca Cola on Yahoo! Finance for cash holdings and debt; Apple was the only company with NO DEBT <--- in fact it looks quite weird to see a zero figure on any stock analysis.

Location, Location, Location!

Apple is headquartered in California <--- most automotive innovation is currently going on in California; especially concerning electric, electric hybrid, and alternative energy research and development. Aptera, Venture Vehicles, Tesla Motors are each located in California*.

* There are dozens of other companies, located in other states and around the world ... however these 3 companies appear to have the largest buzz, most realistic production model, and most comprehensive financial backing.

California is the only state bold enough to impose huge gasoline taxes and encourage alternative vehicles through incentives. The state of California has one of the only economies in the world with a "large environmentalist millionaire" population.

California is also headquarters to Google - a company who is very interested in solar arrays to power its facilities and currently has one of the largest (if not the largest) corporate carpooling mechanisms in the world.

* I suspect Google would be very interested in a joint venture if not seed capital.

I picked three companies (Tesla, Aptera, Venture) after my year long research in alternative vehicles ... I specifically avoided the likes of GM (and the Chevy Volt), Toyota (and the Prius), Honda (with the Civic Hybrid), Mercedes (Smart Car), and Think Motors. These cars feel like band aids more than problem healing solutions. The Prius gets 50-55MPG at best. The Smart Car and Think are jokes and rated accordingly by Consumer Reports. I have been specifically looking towards alternatives that get 100+ miles to the gallon.

An important part of the car already?

I was surprised a few years back when I opened up "the computer" on a Chrysler PT Cruiser to discover a PowerPC G4 Chip at the heart. Apple's recent acquisition of PA Semi - a PowerPC chip designer and chip architecture firm is interesting in this regard. The "computer" in a car controls airflow, fuel injection, battery management - and does pretty much everything but turn the steering wheel.

The iPhone 3G's addition of GPS is also important. I sold my GPS unit, a Garmin C350, in order to be able to afford my iPhone 1.0 - I've sorely missed it even though I've been able to manage pretty well with the Google Maps application. The addition of GPS to the iPhone finally makes it my complete dream phone <-- as there will be no need for any other electronic device. The iPhone 3G can now serve as my email checker, emergency Apple laptop replacement, cellphone, digital camera, iPod, and GPS.

Currently, I have a DLO Transpod that charges my iPhone and sends the audio to my stereo - perfect not only for listening to music, but getting turn by turn directions.

Apple already has several partnerships in place with the automotive industry regarding iPod integration and I have seen firsthand the awesome potential of bluetooth iPhone/cellphone integration with a Prius already.

The iPhone has the potential to also be an in-car TV (via Slingbox integration), an in-car DVD player, and a trip planner.

The Apple-Tera?

I would propose that Apple revolutionize the car industry by utilizing their extensive plastics research*, their awesome design prowess, and their innovative approach to simplicity and user interface.

* Steve Jobs use to brag about plastics & composites research during keynotes in the CRT iMac years.

I'm aware that Apple is a computer and technology company - not an automobile manufacturer. But ... Apple wasn't an audio equipment manufacturer, not a music retailer, and not a cellphone company either.

Aptera, to me, has the most innovative design with the most unique approach to automobiles. They have a production model ready to go now that will be able to make a 1200 mile trip on one 10 gallon tank of gas.

Venture Vehicles approach is a stretch although just as interesting an approach ... but would require a dramatic shift in driving as their vehicles corner on turns with the entire cabin dipping left and right.

* Venture Vehicles e50 2nd generation concept

Tesla Motors approach is unique only from the standpoint that it uses a battery array of 30,000 AA batteries - very similar to what you would buy in the store rather than any sort of special battery.

I believe that Apple could afford to risk $5 billion and start a automobile manufacture company or simply buy Aptera for $2 Billion and spend $3 billion in research and development and production facilities.

If the whole project failed ... Apple would be out 1/4 of its cash reserves some interest ... something that could be easily replaced by a sale of assets or just 1 year of sustained or rising profits. I'm sure Apple could get a pretty penny for the liquidation of the whole automotive division. Again, what's to lose?

Apple Apple Everywhere

Think about this ... it's a given that most every Mac User would buy one ... it's probably a given that most people who own an iPhone or iPod would be interested. Microsoft may have the SYNC ... but Apple could have the whole car!

* Ford's integration of Microsoft SYNC works mediocre at best in my observation.

As with the iPhone ... Apple would advertise it with terrific television and print ads, but most likely wouldn't need to ... the iPhone had an unprecedented amount of free advertising ... this venture would certainly enjoy the same (and probably more).

Apple is the only company capable of revolutionizing the car industry.*

* I do not believe Apple is willing to go any further than iPod integration on a licensing scale. I doubt they would ever do something like Microsoft's SYNC and I certainly don't think they would let another manufacturer make an automobile for them.

Here's a YouTube video of the Aptera:

Tune in Monday for a continuation of this series about the automobile industry; including covering myths about alternative fuels,proven ways you can save gas, and what you can do easily to be more energy conscious.

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Anonymous said...

Very interesting. I chose design assistance instead though. I think that because a PowerPC chip in car's control system is a bit of a stretched association as well.

I work for BMW and their plans are to create a hybrid in the next few years. It would take 5 or more years for Apple to even come to market with such a car and the competition would already be ahead of them.

Anonymous said...

I agree, if anybody could revolutionize the auto industry, it would be Apple. However, as good as it would be for the auto industry, it wouldn't, in my mind, be very good for Apple.

The dangers are that Apple could be worn a little too thin; it would distract them from their core business of computers, phones and music players.

For me, its too big of a gamble and I would just like to see them shore up their current infrastructure, like they are planning to do with Snow Leopard.

Just concentrate on what they are good at: making the best computers, mobiles, music players, OS and other software.

FYT said...

Thanks pooter ... I did the math wrong ... but it is $60 million

I had written down a figure for something else in my notes about how much Aptera made in interest off of their venture capital and private funding - something I will be covering in another part of this series.

Anonymous said...

I'm really excited about this article. I think this could be a really good series if you can spark some comments or do actual interviews with people in the industry or with connections to the industry. I think you are really on to something here.

I have been looking to find a used Honda Insight mostly out of curiousity; in extreme mileage competitions people have been able to get in excess of 100 mph out of slightly modified vehicles. As I’m sure you know, this pastime is referred to as “hypermiling.”

I think there is a different approach that could be taken and I want you to look at this website:

Let me know what you think; I think there is a crazy interesting story that can be pulled out of this in addition to the other benefits.

FYT said...

In case anybody is wondering ... I moved the comments because for some reason blogger deleted them when I edited the story for "math".

pooter said...

Look, the math is easy. 5 % of 20 billion is obviously 1 billion (1 x 20=20. 5 % x 20 = 100%).
So I stand by my figure that 3% of $20 billion is $600 million. You can do the math by multiplying 20 billion x .03.
Anyway, that is a lot of potential interest income, particulary considering that 3% is very conservative.

FYT said...

Apple's 10k statements are hard to read but they report "less than $300 million of quarterly revenue totals is derived from business investments and partnerships producing venture based returns"

That means that in all 4 quarters they earn less than $300 million - so maybe I need to change my wording or percentage - but the I'm positive that Apple earns money from partnerships with Samsung and Quanta as well.

Thanks for the math corrections.

Anonymous said...

Wold be fab if apple got involved in the green car industry. I am at the moment considering buying a full electric powered Pheonix SUV. It has a range of 150 miles and top speed of 95mph.

You can check out the site at:

Apple has already influenced the way we live today

Anonymous said...

There is a company out of memphis, Tn who is leveraging the iphone technology to bring the auto industry the first fully automated sales tool. That's right your iphone is the salesman.The company is called I'mALooker. They are in dealerships now and rumor is they are talking to some OEM's also.I don't know if Apple is involved or not?