BMW and Daimler have broken off talks about forming a partnership with Apple to develop an electric car, according to news reports published last week.
Discussions reportedly stalled over issues that included which company would take the lead on the project and which would have ownership of the data. Apple apparently sought to develop a vehicle that would be integrated closely with its cloud-based software, while the carmakers had concerns over customer data protection.
Apple had sought German technology and specialists for its electric and autonomous car project, and its ongoing efforts to find key strategic partners have been conducted out of its Berlin office.
It also reportedly hired Chris Porritt, Tesla Motors’ former VP of vehicle engineering. He will oversee Project Titan, Apple’s top-secret electric car initiative, which is made up of about 20 engineers, designers and other automotive tech specialists. The company last year hired Doug Betts, who had been global head of product and service quality at Fiat Chrysler.
The talks with BMW reportedly stalled last year, and those with Mercedes-Benz parent Daimler fell apart this year.
Clash of the Titans
“Apple is essentially right now looking at manufacturing partners for its electric vehicles,” or EVs, said Praveen Chandrasekar, mobility research manager at Frost & Sullivan.
“BMW was the first OEM that Apple started talking to initially because of its dedicated i brand EVs and using their expertise for the vehicle manufacturing, but the rumor is that BMW and Daimler backed out, citing Apple’s control as an issue,” he told TechNewsWorld.
Apple could find itself at odds with other firms as it has been “quietly been working on the battery side and technology side by poaching folks from A123 batteries, Tesla and Nvidia,” Chandrasekar added.
While talks with BMW and Daimler have stalled, Apple reportedly has found a potential key partner in Magna.
“The only box left to tick is the manufacturing partner, and that might most probably be Magna given that they already do contract manufacturing for OEMs,” Chandrasekar added.
New Titanic Partnership
A partnership with Magna could be crucial, as the company is among the largest car parts manufacturers in North America. It could be the key missing piece for Apple.
“The biggest issue in the auto industry for newcomers isn’t engineering or design — its manufacturing,” said Colin Bird, senior analyst IHS Automotive.
This is why “Apple isn’t going to make a car, just as they don’t really manufacture the iPhone,” noted Kevin See, senior analyst at Lux Research.
Magna doesn’t sell or market any cars; instead it operates vehicle assembly lines for other automobile manufacturers, and that could be crucial for Apple as it moves forward in that arena.
Apple needs a partner to tackle that heavy lifting, just as it does with other products, See told TechNewsWorld.
“Manufacturing a car is harder and a lot more difficult than making an MP3 player,” he said. “There is the scale of the unit, and Apple has no experience with the components of a car, from the drive train to the engine.”
Magna is one of the few companies set up to handle that level of heavy lifting in the automotive space.
“It’s not as easy to contract build a vehicle at scale, and usually involves an OEM,” IHS Automotive’s Bird told TechNewsWorld.
“Penske Automotive and Cerberus tried this route in the past to no avail,” he added.
“Magna has wanted to become more involved with contract manufacturing for some time now, though we don’t have any details about their potential interest or involvement in this project,” Bird noted.
Magna has done contract building for BMW, producing the Mini Countryman and the Mini Paceman, and it has worked with Daimler to produce the Mercedes-Benz G-Class.
“It’s been in the complete vehicle production business for more than 50 years, but its scale has been limited, mainly because OEM roots are in vertical integration,” said Bird.
“New players have experimented with moving away from this model, but it hasn’t taken off yet,” he noted. “Electric vehicles offer the greatest potential for a rethink in this industry to date.”
Even with the right partnerships in place, Apple still could face an uphill battle to enter the automotive space successfully.
“You need look no further than the electric vehicle market already. There are untold startups that weren’t able to make it, and even now it is highly debated if even Tesla can make it,” said Lux Research’s See.
“Just because they are Apple doesn’t mean they’ll have a presumptive lead, and while Apple has proven to be a fast follower that can become an innovator that revolutionizes an industry, it is hard to see how they could differentiate in this space,” he noted.
“Apple is now behind in batteries and autonomous features,” See added, “and while they may be trying to catch up, they’re doing so as everyone is moving forward — so it is trying to catch a moving target.