Manufacturing Not Apple’s Core Business

Apple is the most valuable company in the world, with a market capitalization exceeding $700 billion. It’s also sitting on $178 billion in cash.

By comparison, General Motors, Ford and Fiat Chrysler are worth about $124 billion combined.

So if Apple is weighing a plunge into making electric and – and self-driving – cars as widely reported, traditional automotive manufacturers face a potentially mighty competitor.

Buzz about Apple’s intentions got industry observers excited at the recent Geneva Auto Show, but global automakers remain unperturbed.

Daimler AG CEO Dieter Zetsche told The Wall Street Journal he welcomed the “tremendous opportunity from the convergence of West Coast technology and the auto industry with its huge technology depth. We are not afraid; we are confident about our own strength.”

While everyone recognizes Apple’s power in the marketplace, manufacturing is not its strong suit.

In fact, it manufactures almost nothing. Its new Smartwatch will be made in China under contract. If it moves ahead with an iCar, it’s likely it will create the design and technology but farm out manufacturing. That scenario is envisioned by Dave Cole, chairman emeritus of the Center for Automotive Research.

“You can live without technology but you can’t live without manufacturing,” Cole says.

“Basically the automotive business is very, very different from the technology business. “You could put billions away very quickly” by plunging into the car business against entrenched manufacturing giants that can boast technical agility of their own, he adds. “You can get un-rich fast.” 

Cole also warns against a quick shift to driverless, or semiautonomous, cars. “We think they may save lives, but what if there’s a circuit failure or blowout in a chain of cars running at 80 mph (138 km/h)? It’s a difficult business. You’ve got to be careful if tech is going to grow.”

Collision repair shops and vehicle insurers already are voicing concerns about the potential impact on their businesses when autonomous driving begins eliminating crashes and fender-benders.

A recent McKinsey & Co. report forecasts driverless cars could eliminate 90% of highway accidents and save $190 billion in damages and health care annually by 2030.

Google already has developed an electric driverless car and targets 2020 for production startup, while automakers worldwide have their own projects heading in that direction. Are Microsoft and Samsung far behind?

Silicon Valley may find the answer, but how will self-driving cars fit into the sea of ordinary vehicles out there? With a lifespan of 15 years or more, many of today’s models still will be on the road in 2030.

WardsAuto data counts nearly 250 million cars and trucks on U.S. highways and a staggering 1.2 billion worldwide.

Maybe Apple will come up with a failsafe solution, but so far its other products have had their share of glitches.