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Is Apple building an iCar?

Over the weekend, the internet experienced a super nova of hot takes on Apple's forthcoming car. Time told us what it "could" look like. Business Insider explained why Apple's car will be great for Tesla. Wired explained that it's not as ridiculous as you think, even though it's far from clear that you do think it's ridiculous.

Between the aggregation, the speculation, and the punditry, those who haven't been glued to the tech press for days may be confused. Here's a brief guide to what is known about Apple and the auto industry, and why it has so many people talking.

1) Why is everyone talking about an Apple Car?

Apple CEO Tim Cook (Justin Sullivan/Getty)

Patient Zero for the Apple Car craze is a story released Friday evening by Daisuke Wakabayashi and Mike Ramsey of the Wall Street Journal. They reported that Apple "has several hundred employees working secretly toward creating an Apple-branded electric vehicle, according to people familiar with the matter." This was very quickly followed by a report from Tim Bradshaw and Andy Sharman of the Financial Times who say that Apple "is recruiting experts in automotive technology and vehicle design to work at a new top-secret research lab, said several people familiar with the company."

The FT also slightly contradicted the Journal's reporting, saying that "dozens" of Apple employees (rather than hundreds) "are researching automotive products at a confidential Silicon Valley location outside the company's Cupertino campus."

Reuters followed with a story from Edward Taylor and Alexei Oreskovic who reported that Apple is trying "to learn how to make a self-driving electric car" and sourced this information to "a senior auto industry source familiar with the discussions."

2) Is Apple building a car?

A Ford plant in Valencia, Spain (David Ramos/Getty)

Maybe! But even though it would be fun to assume the answer is yes and start the speculation rolling, the reporting that's happened thus far really leaves it very unclear.

For starters, hundreds of people isn't nearly enough to start a car company. Tesla, a high-profile but distinctly niche automaker, has 10,000 workers. The Volkswagen Group has over half a million. A group of hundreds could be the foundation of what ultimately becomes a stylish, technology intensive automobile manufacturing operation but it's a long ways from getting there. Maybe it's a serious exploration that won't go anywhere.

The subsequent reporting from the FT and Reuters may feel like it's confirming the WSJ report about an electric car, but in many ways it's not.

While hundreds is too few to run an auto production operation, it's certainly a lot of people. By contrast, the FT's team of "dozens" could easily be doing R&D on auto accessories rather than building a car. All the Reuters story really says, meanwhile, is that Apple executives talked to at least one senior auto company executive (probably from one of the German automakers, based on the Frankfurt/San Francisco byline) about self-driving cars.

That's intriguing, if true, but hardly definitive confirmation of anything.

3) Speculation is fun! What's the Apple car going to be like?

Ford 021C concept car, designed by Marc Newson now at Apple (Ford)

Here's how I'd be thinking about the landscape if I were the CEO of a cash-rich and highly profitable technology company with few products and some interest in the car industry. Right now, the automotive world is being unsettled by three trends that at the moment have not converged:

  • Electric cars
  • Autonomous vehicles
  • Smartphone hailing

But these trends actually should work together seamlessly in the long run. Rather than owning cars, people will get around town in electric powered autonomous vehicles that they hail from their smartphones. A company with a boatload of money, engineering, software, and design expertise could underwrite a shoot-the-moon project to create the future of daily transportation.

  • Electric cars: Current EV technology has a demonstrated capacity to deliver an excellent driving experience. But batteries capable of long-range driving (like the ones Tesla uses) are extremely expensive, and even with one long road trips remain annoying and inconvenient. But the vast majority of car trips are short — to work or the grocery store or the kids' school. If you hired a different car for each trip, EVs with relatively small batteries could suffice for the vast majority of travel.
  • Smartphone hailing: Mobile car hiring apps ("ridesharing") have been a big success at solving one big problem with the traditional taxi industry — it is a much more convenient way to connect drivers with riders. They've also improved payment systems. And by introducing additional competition into the often cartelized taxi industry, they've lowered prices. Buy paying someone else to drive you is still very expensive compared to driving yourself. Uber and Lyft have a great toehold in the modest-sized taxi market, but are still drops in the bucket of the overall driving around market.
  • Autonomous vehicles: A wide range of companies, including incumbent automakers and Google, have been developing various degrees of autonomous driving. This is technology with potentially far-reaching promise. But most car companies are focusing their efforts on incremental technologies like automatic parking, collision avoidance, and lane control that while intriguing aren't yet an obvious source of huge sales or profits.

Combine all three technologies in one package and you have a game-changer. The low fuel costs of an EV plus the zero driver costs of an autonomous vehicle, could make ubiquitous taxis the dominant form of urban transportation in America. Apple could do all that and make the car look really cool. Why not?

4) Is anyone actually building that robot electric taxi utopia?

Google's Eric Schmitt with Transporation Secretary Anthony Foxx (Justin Sullivan/Getty)

Not at all. There are some hazy indications that Google, which has invested a lot in autonomous cars without generating a commercial product, may launch a ride hailing service some day. Uber opened a research facility in Pittsburgh to play with autonomous cars, but has no product. Tesla, Nissan, Chevrolet, BMW, and others have all-electric cars and also some gestures in the direction of autonomy, but nothing like an electric car for hire service.

Nobody's done it, of course, because it's hard. But doing really hard combined hardware/software engineering tasks is exactly what Apple's good at. Making the world's first handheld multimedia player that was also a PDA and also a telephone was really hard too. From a journalist's viewpoint, it would be so exciting to see Apple put its amazing resources behind this kind of transformative project that it's easy to want to believe it's true.

On the other hand, it would be fairly out of character for Apple to undertake this kind of moonshot project. What's more, while Apple has what's now a long track record of making excellent devices, the company has struggled with network services — the Apple Maps launch was deeply problematic, Siri made a poor initial impression on most users, many of the most forward-thinking iCloud features haven't worked reliably. Apple's never even had much success making an email service. A car is a gadget, but the elements of emerging car technology that are interesting to Silicon Valley — autonomy and remote hailing — are mostly on the network side of things.

5) All this baseless speculation is making me sleepy. How about a music break?

There is some rigorous, fact-based material below I promise. For now, though, consider Elastica's "Car Song":

This innuendo-laden tune about a woman who appears to enjoy having sex in or on top of automobiles underscores the promise and the peril of the car market for a branding-heavy company like Apple. Cars are quintessential functional devices that people rely on to get to work. But they are also signifiers of coolness and other aspects of identity. On the one hand, the centrality of identity issues to the car industry makes it hard for newcomers to break in. On the other hand, Apple is really good at brand identity stuff.

6) What is Apple doing with cars currently?

Apple's CarPlay (Apple)

Apple is actually in the middle of rolling out a not-at-all secret car initiative called CarPlay at the moment. The idea of CarPlay is that you will essentially dock your iPhone into your car, letting its processor and mobile data connection take over your car's display and other relevant functions. With a CarPlay car, you could use Siri and Apple Maps to verbally ask your car for directions or to find nearby restaurants. You could play music or make phone calls.

The basic capabilities of CarPlay are basically familiar to most people who own newish cars, which generally feature many of the same kinds of navigation functions (though without the promise of voice control). The issue is that cars are made by car companies, and car companies are not software companies. Therefore, the software and user interface elements of modern car systems tend to be a bit substandard.

CarPlay lets car companies focus on building cars, while letting people who would rely on iPhones while on foot use the phone in the same way as a command center for the car's software elements.

CarPlay has not yet set the consumer world on fire, largely because it's only available on a few models of new cars and most people aren't driving a brand new car. But reviews of it are pretty good and availability should increase over time. It's possible that many of Apple's car-related hires and discussions are about extending CarPlay's availability and services rather than any new Apple-branded car.

7) What's the case against Apple making a car?

The blend of computers and cars has a pretty fundamental problem. Computer chips improve very rapidly, but people expect cars to last a long time. A car from 2005 may not be very flashy, but it should work fine and be something that a person is very comfortable owning. A cell phone from 2005, by contrast, is going to be laughably outdated today.

Something along the lines of CarPlay is a rather elegant solution to this problem. If the car's main computer element is in your smartphone then the silicon gets upgraded as frequently as you upgrade phones — every one to three years for most people. Meanwhile, the engine and the seats and the steering wheel and all the rest can keep on plugging along forever.

By contrast, having a computer company start making cars just runs headlong into the problem. If the software features are going to be the key selling point, then the car is going to have an unusually short shelf-life. If the software features aren't going to be the key selling point, then what's the point in buying a car from a computer company?

And of course making a car would be really difficult. Apple has shied away from doing things it pretty obviously could do — making a television set, for example, or a smart thermostat — on the grounds that it doesn't want to lose focus. A huge car initiative that might totally fail would be an enormous distraction from perfecting and expanding the company's current cash cow franchises.

8) What's the case for Apple making a car?

We saw two big things in Apple's most recent earnings report. It's earning unprecedented profits and it's earning the vast bulk of that money from the iPhone. Due to the relentless nature of capitalism, Apple executives have to spend at least some of their time pondering how to expand. And we know that Apple is a very focused, very disciplined company. They're not going to build on their success by launching dozens of new products a year. So what can they do over the next decade that would be really big?

Two great things about the auto industry, from this perspective, are that car ownership is extremely common among the world's non-poor people and that cars are expensive enough that if people like your car you can sell it at a healthy profit margin.

Besides smartphones, most of the things that are nearly ubiquitous (unlike, say, tablets) and high margin (unlike, say, staple foods) are broadly in the category of apparel. Everyone wears shoes, for example. Apple is clearly playing in the fashion world with its forthcoming Apple Watch. But beyond that, it's not clear where a technology company would go. Nobody has any reason to think people are looking to see computer chips integrated into their pants. Cars, by contrast, really are moving in a more computerized direction.

9) So what's next?

The forthcoming Apple Watch (Apple)

For the immediate future — nothing.

The Apple Watch was supposed to be released in "early 2015" which is now rumored to mean, roughly, April. A lot of scrutiny is going to be on that launch, and a lot of strategic thinking is going to have to go into whatever steps follow on the launch. Apple is also going to be launching a music streaming service sometime this year. And of course there is the usual cycle of phone, Mac, and iPad updates to attend to. Meanwhile, Apple representatives are working with carmakers to get CarPlay into more and more vehicles and strengthen the value of the company's golden iPhone franchise. This year's Consumer Electronics Show was full of buzz about CarPlay and Google's competing platform and it's very likely that whatever Apple is doing car-wise is focused on this.

That's plenty to chew on, regardless of whether Apple's car efforts are composed of dozens of people or hundreds. It is entirely possible that Apple will — or is already — putting serious money behind car R&D, but that executives will ultimately decide the project isn't leading to a product they want to sell.

Steve Jobs once said that Apple's success comes from "saying no to 1,000 things to make sure we don't get on the wrong track or try to do too much." That's a big contrast to a company like Samsung that makes everything from smartphones to televisions to ocean-going ships. Or even to Google, which seems to be launching or acquiring a half dozen startups at a time. Exploring building a car and actually building a car are very different things.