By now you have probably heard the Wall Street Journal has reported that Apple has “hundreds” of people working on building a car. I have absolutely no idea if this is true. No clue. But it got me to thinking. How does the Journal know? Well, they spoke to more than one person “familiar with the matter”, a fine old journalistic gem. They appear to have multiple (two? three?) sources. The journalists in question have a mixed track record on Apple predictions, which is not an insult, as no one has a perfect record. They also have a fair number of data points:
- A code-name, “Titan”
- A form factor, “a design that resembles a minivan”
- They have spoken with an Austrian contract manufacturer
- And a secondary motivation that makes a lot of sense – its a great way to retain talent by giving them a super big, exciting project to work on.
I can think of all kinds of reasons why this is true, and plenty more why it is not (e.g. it forestalls for several years discussion of what they are working on after the watch). So I do not know what to think. But I found that I kept thinking about this as I would have if I were still an analyst. There is a vein of speculation that Apple announced the Apple Watch several months in advance of its availability, in part, because they wanted to get ahead of leaks coming from their own supply chain. If building a watch risks leaks, imagine the leaks from a much larger project like building a car. I could almost see them entirely hiding the supply chain for the watch, but I think hiding the production of a car would be impossible once it got to a certain size or level of commitment.
Imagine the scenario. The major contractors would be sworn to silence with triple confidentiality contracts. Those companies could have hundreds of people working on it internally without anyone else at the company knowing. If Apple could get AT&T do to that, imagine how much more pliable an auto manufacturer would be in their willingness to keep secret. Nonetheless, building a car is immensely expensive (something the Journal points out twice in their article). Prior to manufacturing, Apple would need to invest billions into tooling and machinery. The general contractors could conceivably be silent, but there would still be a lot of money sloshing through the ecosystem. At some level of the supply chain, some small company would inevitably have to announce to their shareholders that they are going to double or triple capex next year “for an unnamed customer” This would probably be in some non-electronics sector, so conceivably all the Apple watchers might miss it. How many people reading this blog could even name a major European industrial tools supplier? I cannot, but I imagine eventually someone would figure it out.
In theory, we might be able to pick it up from Apple’s numbers. But their operations are so huge now, it might be hard to pick out. That being said, Horace Deidu at Asymco does a great job of analyzing Apple’s capex numbers, to the point that he is probably one of the best predictors of Apple’s unit shipments.
The other difficulty in looking at Apple’s numbers is that they are among the best of leveraging their suppliers to do their R&D for them. Apple runs some very lean teams in key areas because they know their suppliers will do a lot of the manual labor for them. So a car may not appear in Apple’s opex numbers until after it starts shipping.
As an aside, I know that several large semiconductor manufacturers have been doing a lot of research around auto electronics. A couple of key, big Apple suppliers have been investing heavily in auto electronics over the past two years. In theory, they could have gotten an invitation from Apple to start those projects. However, it is equally plausible that they would be there anyway. Auto electronics are an area ripe for an attack from the consumer electronics supply chain. In regards to Apple specifically, I do not know of anyone in the Asian supply chain who has seen or heard anything about a car.
A few people have already started digging through Tesla’s history as a benchmark. The problem with that is Tesla started almost wholly from scratch. They had to build up a company first. Apple already has massive infrastructure in place. It can also fund its work internally, so need to tell outside investors about it.
My best guess is that we would start to hear leaks from the supply chain one to to two years ahead of launch. Order times on industrial machinery are long enough that there would be some advance notice. So if Apple deliberately leaked the story to stay ahead of such leaks (a big IF), it would be entirely possible that we are now two years away from having an Apple car. Personally, I think it is further out than that, and to tell the truth, I am not entirely convinced this is a truly serious project. But I do know that next time I am in Asia, I am going to ask everyone about it (and get a lot of questions myself).