Tech giant may be motoring towards Apple Car

Maybe it wasn't just the lack of grub that got to Jeremy Clarkson, and perhaps the thought of having to turn into a tech hack in the future pushed him over the edge.

Given the interminable media coverage surrounding the Apple Watch's arrival, media organisations will need to appoint full-time Apple iCar correspondents for the next five years if reports of an Apple auto are true.

The tech giant has reportedly poached a large number of senior car engineers to work on a project called Titan. Is the Apple Car in the offing?

Don’t start saving up the deposit just yet. The firm has history when it comes to starting revolutionary projects before shelving them. And the leap from touchscreen to tarmac is going to be bigger than anything Apple has attempted before.

For established players building a relatively “bog standard” combustion-engined low-tech car takes four to five years from the design board to the car park.

That’s provided you have the suppliers in place, the safety and legal standards in order, and the hundreds of thousands of kilometres of road testing in extreme climates complete.

It’s worth remembering that the average car is an amalgam of over 30,000 different parts from an array of suppliers, expected to work in unity every day for 10 years or more in extreme ranges of climates, surviving prangs, potholes and the odd spillage. That’s a world away from even the most rugged smartphone.

Then there’s production, something that’s not contracted out in the car industry – unlike the tech sector – and where unions and regulatory authorities play a much greater role than Apple has previously encountered.

Finally there is the little matter of sales. Here Apple would encounter the traditional tasks of handling and valuing trade-ins (an integral part of any automotive transaction), assisting in organising finance packages and servicing over several years of warranty.

The T-shirt clad hipsters staffing Apple Genius bars are unlikely to double as mechanics.

Yet that's not to dismiss the potential of Apple to rewrite the rules of the motoring world. As Marc Andreessen said: "Software is eating the world."

The modern car is increasingly a large lump of mobile hardware. According to a report last year from Boston Consulting Group: “A typical premium-class car has as many as 100 microprocessors and operates on more than 100 million lines of software code –more than it takes to fly a fighter jet.”

There are two major challenges facing the motoring world. One is in finding an alternative to the combustion engine up front. The other is in removing the inherent risk that comes with letting capricious humans – who pass one short test as a teenager – control a mass of metal that can hit speeds of 250km/h or more.

The powertrain challenge is the focus of the traditional car giants with vast R&D budgets. (Last year VW Group spent $11.5 billion on R&D, more than any of the tech giants).

The driverless car challenge is one being faced by the likes of Bosch, Delphi and Continental. These are the little-known auto industry giants whose parts adorn most new cars. And in this arena the likes of Apple and Google would fit right in.

Thanks to the likes of Bosch and its team of over 34,000 engineers, a lot of the groundwork for driverless cars has already been done. Features like adaptive cruise control, road-sign reading cameras and lane-keeping assistance are already fitted as options on many new cars, from small city cars to the luxury set.

It may take another decade – and major legislative changes – but the driverless car will be on the road.

Captive audience

When the driver is just another passenger then everyone inside the car becomes a captive audience eager to be entertained. And that’s a ripe market for apps. Games of “I spy” don’t enthral today’s youth.

Family drives already involve pleadings from the back seat to stay behind the nearest bus in order to pilfer free wifi.

Apple is a natural fit for this app-eager environment. Anything it can do to free the driver from the distractions of control and move the focus of the entire car to apps and entertainment makes sense. It could partner with the premium brands and become a key supplier, one the public knows and for which car firms could theoretically charge a premium to incorporate.

There is another option for Apple if it wants to enter the auto industry proper: buy Tesla. This has been bandied about for the last 12 months, most recently by Apple shareholders.

Convincing case

Analyst and investor

Jason Calacanis

recently put forward a convincing case. For a start Tesla’s market cap is $24 billion. Apple has $178 billion in cash. It could probably buy Tesla with the profits from its latest iPhone6 launch.

In terms of product Tesla already makes a great electric car that sells into the premium market where Apple is strong.

Tesla has a nascent sales network in place, one that is already disrupting the traditional dealer approach. Alongside an expanding model portfolio it's also building the world's largest and most advanced battery factory in Nevada. These lithium-ion batteries will feed not only the electric car market but the energy storage sector as well.

And of equally significant relevance to Apple shareholders is the fact Tesla is led by a visionary in Elon Musk. He is also chairman of Solarcity, which has a natural link to the potential recharging of batteries from Tesla's plant. Adding Musk to Apple would stoke its share price further.

The idea of an iCar seems fanciful in the timeframe being bandied about but the car industry is ripe for disruption and there is room for Apple in the mix.

Tech features and connectivity will be deal-breakers in car sales of the near future. How a car handles around the test track or its throttle response won't matter a jot: "drivers" – if they retain that rubric – will be more interested in ensuring the Netflix doesn't buffer.

It's a future that may excite Tim Cook but one that understandably upsets petrolheads like Jeremy Clarkson. Enough perhaps to put him off his food.