For all of Apple’s reputation as an innovator, where the company excels, at least in the 21st century, is disrupting the profit share of industry after industry. As to market leaders, only the iPod and iTunes have garnered both market share and profit share leads among competitors. Every other product has low marketshare but dominates profit share.
Think about the list of major products and the impact Apple has had on each industry. The Mac owns more than half the PC industry’s profits. The iPhone and iPad account for over 90-percent of the smartphone and tablet industry’s profits. In just a few months, and only with the iPhone 6 models, Apple Pay already is the leader in mobile payment processing in the U.S. Apple’s App Stores take home the lion’s share of application profits. What retail store chain has more profits than Apple’s stores (already the leader in sales and profits per square foot)?
Time will tell whether the upcoming Apple Watch will have a similar impact on the luxury watch industry, but the numbers are not in favor of traditional Swiss designs or their decidedly not-smartwatch industry. John Gruber runs a few numbers and whatever profits the industry makes could easily be impacted within three or four years by a modestly successful Apple Watch.
That brings me to Apple Car.
If the rumors prove to be somewhat correct, Apple might be willing to risk some of the farm– and it’s a huge farm– on the automobile industry; which hasn’t had much disruption anywhere– except in robotics, bankruptcies, and mergers– in over 100 years. Today’s automobiles are constructed and work much like their ancient relatives; assembly line of hard parts slowly assembled into a working vehicle– except for all the built-in electronics, sensors, software, and the user interface. That’s where Apple excels.
The auto industry does not have an Apple-inspired disruptor, either. It’s not Tesla. The high profile electric car company has yet to translate the public relations success, the car’s performance, and customer loyalty into enough sales to generate a profit. In fact, last year, Tesla lost nearly $9,000 for every car it shipped. That isn’t exactly a disruption, and it’s certainly not how Apple works.
What Apple has going for it today is also not exactly like Apple of the past. iPod, iTunes, Apple Stores, and iPhones were all dramatic undertakings with great financial risks. Apple bet the farm often and won, which increased the size of the farm. A new automobile factory could suck a few billion dollars from Apple’s burgeoning coffers, and CFO Luca Maestri wouldn’t blink twice.
Apple would need to build a car that out-Tesla’s Tesla; probably a self-driving vehicle bristling with the latest software and creature comforts, priced to sell substantial numbers which would take a commanding chunk of the industry’s nominal profits. Anything less would be perceived as a failure and any failure would send Apple’s high flying stock into a tailspin.
Apple Watch is a calculated risk which targets the premium end of the traditional watch industry ($400 and above). Apple also leverages iPhone, Notification Center, Siri, sensors, style and fashion, and Apple Pay to make the device as utilitarian as it is beautiful. What does Apple leverage for Apple Car? Apple’s CarPlay already brings iPhone and iPad connectivity to an Apple user interface.
If Apple did not have plans to enter the electric vehicle industry wouldn’t the company leak something to that effect to Walt Mossberg or David Pogue or other noteworthy and well connected Apple insiders, including John Gruber or Jim Dalrymple, otherwise risk a skyrocketing stock price increase which would only be deflated later?
Regardless, if Apple builds a Tesla-like self-driving electric car, I’d buy one. And I don’t even have a place to park it.