Will Apple drive into a new market?

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First, there was the Apple I, followed by the Apple II, computer. They were followed by the Mac, and eventually Apple branched out. They moved into music downloading with the iPod, into phones with the fittingly-named iPhone, and tablets with the iPad. Clearly, this corporation is able to utilize their expertise in different industries. There is however one particular industry that Apple is believed to be entering, where some are not sure if they should or actually will. This is the automobile industry.

There are a variety of reasons people have that suggest Apple should not enter the automobile industry. First, according to a CNBC News article, being successful in this industry would require “a radical restructuring of both Apple’s design-oriented asset-light business model and the car industry’s decades-old franchised dealer system and tightly-controlled manufacturing.” There are also significant differences between the automobile industry and what Apple usually gets for a profit margin. According to CNBC, Apple had a 29% profit margin, where Ford could only manage a 2.3% profit margin. The point here is that going into the automobile industry would give them less profit and less value.

Another reason is that Apple does a lot of outsourcing for its products. This is very different from the trend in the automobile industry, where companies are more often than not making their own cars. And the Apple Car bandwagon itself, is about vehicles that are electric and self-driving, according to CNBC. Unfortunately, this is something that is not happening in the world today. CNBC reports that there are more than 88 million cars sold globally, and only 400,000 were electric, while none were self-driving.

Also, Apple may not really need to make a car to get into that market. According to CNBC, this is because of its CarPlay business. Using this, Apple can “deliver its content to cars already.” This can also lead to Apple “reengineering other instrumentation and control systems or even designing cars’ interiors that they write,” according to CNBC. They also say that this is the more profitable part of the industry, which would be the most attractive to Apple. The final potential obstacle is that a projected 20% growth in the automobile industry is mostly dependent on areas of the world where there is struggling, according to CNBC. They have noted that this is compared to a projected 50% growth in smartphone shipments.

However, there are moves which Apple has made to suggest that they are going to make cars. For starters, they hired Mujeeb Ljaz, who has patents for “integrating large-scale batteries with automobiles,” as reported by CNBC. In addition, they have hired the former Research and Development Chief of Mercedes-Benz, Johann Jungwirth. Another thing to consider has to do with the automobile industry itself. CNBC has reported that car systems have not changed in decades, which leaves the industry vulnerable to disruption.

Another thing is that the auto industry may represent an untapped market for what Apple already does. Advertisers also want to reach people in their car, so according to CNBC, both Apple and Google have been working with car companies. In fact, they also state that Google has a self-driving program in the works, but is probably not making their own cars. This will create pressure on Apple to move in to the automobile industry. And while the profit margins might seem like a problem, according to CNBC, Apple can negate this issue with their higher-quality technology and materials.

Finally, we cannot assume that people will want the same thing(s) in the future as they do now. As stated earlier, the automobile industry is vulnerable to disruption, which means that a new technology can lead to the overtaking of incumbents. With Apple’s innovation, they could be the company that disrupts the industry.

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