Good News! The Apple Electric Car is Dead
You really have to hand it to Apple. This is a company that cares about profitability and refuses to lose money just to make a statement.
Image: Apple
By completely exiting the EV market at a time where all other automakers (not named Tesla) are pulling back and re-assessing their EV positions, Apple underscores just how ridiculously costly and unsustainable the EV business has become. Imagine Apple, a worldwide leader in computer and smartphone development, giving up on their version of an “iPhone on wheels.” If anyone could pull this off, it would be Apple. So, why did they pull the plug instead?
The market challenges for EVs are simply too abundant and impossible to ignore any longer. EVs are still too expensive for most consumers, the charging infrastructure is unreliable and non-existent in most of the country, and EVs will not operate OR charge in freezing temperatures, rendering them useless for a lot of winter driving. For those folks looking for affordable, reliable transportation, EVs are becoming a much harder sell once they learn of the true cost and experience of owning one.
Apple discovers that it is not a car company
Apple has been working on the development of an electric car since 2014. Code-named Project Titan, the EV was originally intended to be self-driving and packed with user interface features for which the company is famous. Apple’s mastery of proprietary software and app development would dovetail nicely into an Apple EV, giving drivers a mobility experience only Apple could deliver. At least that’s what everyone thought at first.
Then harsh realities began to set in. Self-driving technology became insufficient for safe operation while sharing city streets with human drivers, due to software and supporting infrastructure that did not work as expected. EV technology itself is based on the use of lithium-ion battery compounds, a forty-plus year old discovery which has evolved but is still best used for rechargeable compact devices like smartphones and laptop computers, not a 6,000 lb. moving vehicle. Apple invested a reported $10 billion into Project Titan, only to find that they are no closer to a viable self-driving system than anyone else.
It’s not clear whether Apple could engineer its way around these inherent cost and tech shortcomings, but after ten years of development, the implication of shutting down a program that kept 2,000 employees employed is this: Apple does not see a path to profitability for the Apple EV. No profit? No EV.
The priority of profit
Apple enjoys the status of being the most profitable company in the world. The company’s annual profit routinely exceeds 25 percent of overall revenue, and the loyalty of its customers surpasses that of the top global brands.
Apple’s historical market strategy was to let other companies establish new product categories, then use its uniquely Apple design, engineering, and manufacturing logistics capabilities to dominate the market by offering a hardware/software ecosystem unlike anything else. Apple sells its products at a premium over their competitors, stacking up profitability along the way. The company is brilliant at creating luxury products within low-margin electronics markets.
Unfortunately, this strategy cannot work in the EV business space today because the market for luxury-segment EVs is saturated and represents a much smaller percentage of the EV market than what the industry expected. The remaining market demand for EVs appears to be leveling off, as anyone who wanted an EV already has one and the next wave of potential buyers is much more hesitant to take a chance on EV ownership.
In the U.S., EV sales are projected to rise only 9 percent this year, after growing at a compounded annual rate of 65 percent over the past three years. That means every EV automaker (not named Tesla) will be fighting to get the attention of less than ten percent of new car buyers in the U.S. market.
Assuming that 50 percent of the new EV buyers will likely purchase a Tesla, all other EV automakers really only have access to about 5 percent of the new car market in total. That calculates out to around 800,000 new EV units that will be purchased in 2024. Considering the ongoing price wars, the hemorrhaging of billions of dollars, and inventory build-ups faced by auto dealerships, it becomes clear that this is not a viable business opportunity for a profit-minded company like Apple.
Eventually, reality has to matter
It is highly unusual for a deep-pocket tech giant like Apple to abandon a development program as ambitious as Project Titan, but facts are impossible to refute. The EV in its current form is unsustainable as a conventional product for mass consumption even with enormous subsidies. Producing an Apple version of an EV was an interesting idea before reality stepped in.
Considering that seven of the top ten smartphones sold in the U.S. in 2023 were iPhones, the death of the Apple EV becomes even more significant. If Apple could not leverage its intense brand loyalty to successfully launch a product ten years in the making, the product must truly be unsaleable and, most definitely, unprofitable.
Apple did not become the most profitable company in the world by following the herd, particularly when the herd is heading off a cliff. “Think Different,” indeed.