…or something like it, at least.
Big time fumble for Tim, I have to say.
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Only if you think cars are a good industry to be in. Apple has a net profit margin of around 25%. GM is at 6%, F at 2%, Toyota at 11%, Nissan at 3%.
DB2
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I’ve never understood this. Would you rather have a higher percent of profit or a higher dollar volume of profit? I’d rather have MORE PROFIT, period.
If Apple is only going to pursue business that has a higher percent of profit, they’re going to be involved in precious few industries going forward.
I’ve already give the example of WalMart expanding into the notoriously low profit grocery sector, only to dominate it in a scant few years (and, by the way, look how they’re doing now against, say, Target and Kohl’s, FWIW, The “grocery” is giving them weekly repeat traffic, while “on line” is killing stand-alone retailers.)
If I wanted to expand the list of examples I could point to Amazon expanding into Whole Foods. Uber into Uber Eats. Tesla into Insurance. Microsoft into gaming. Netflix (and earlier HBO) into original production.
Speaking of which Apple, enjoying pretty good margins on its newly revamped lines of computers and music players following Steve Jobs’ return, decided to go into … retail, opening stores in shopping malls (with high expenses) to get closer to customers. The Board at Apple thought this was such a bad idea it limited Steve’s experiment to just 4 locations, delaying the roll out by almost two years.
Sometimes it isn’t margin PERCENTAGE, it’s the ability to enter and dominate an industry - in much the way Tesla has done in automobiles. Apple could’a would’a should’a, but “no vision” doomed them to squander billions with nothing to show for it. Worse, they won’t even own the dashboard in other cars in a few years, bypassing a lucrative and high dollar market with worldwide implications.
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AI Overview
Xiaomi’s first electric vehicle (EV), the SU7, has had some technical issues, including:
- Front trunk flooding
Some owners have reported that the front trunk, or “frunk”, could flood with rainwater. Xiaomi says the trunk has a sealing strip and drainage plugs to prevent this.
- Over-the-air (OTA) update errors
Some owners have reported errors with the OTA update process. Xiaomi says these errors can occur when non-original parts are used, and that the system flags errors when these parts are replaced.
- Manufacturing experience
Xiaomi is a consumer electronics company that’s new to manufacturing automobiles. The manufacturing process for cars is more complicated than consumer electronics.
Other issues with the SU7 include:
- Customers who paid a deposit were unable to back out
- Some compared the SU7’s silhouette to the Porsche Taycan, which costs at least three times more
Xiaomi is a Chinese electronics company that launched the SU7 in December 2023. The company says it plans to deliver 100,000 SU7 EVs to customers in its first year
Apple car was a bad idea from the start. Apple’s real product is the Human User Interface monetized via a plethora of consumer electronics products. Cars are not consumer electronics.
The Captain
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Right now, today, the electronics in a car account for about 40% of the purchase price. That number is sure to grow, and it is a market that Apple seems unlikely to penetrate past AirPlay, which is not a path to glory in one of the largest consumer segments in countries around the world.
If/when fully automated driving takes hold I suspect Apple will be locked out of it in toto, and perhaps forever.
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And that would lead you down the road to conglomerates, not a particularly good idea. There needs to me some strategic fit; groceries are another consumer line for Walmart. I doubt that Walmart should get into the auto manufacturing business.
DB2
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Of course not, and Microsoft probably shouldn’t get into the grocery business. But if you’re looking at where high value electrical components with human interface is at a premium, you’re probably gonna end up with automobiles. Not refrigerators, washing machines, hair dryers, but cars, self-driving or not.
I guess some people would have said that about a computer company getting into the music player business. Or Microsoft launching a game console. Or SONY doing anything but TVs. And yet they did, and prospered doing it.
Curious that Apple thought enough of it to pursue it for years, spent billions of dollars trying all sorts of exotic futuristic things, when what sells best seems to be sedans with electricity.
Profits in auto sector are very hard and take a very long time.
In the US the list of auto companies going to the graveyard is very long.
Tesla is an exception. It had a confluence of factors that worked including Elon sleeping on the factory floor for years and tons of innovations in manufacturing and processes.
Apple’s decision was right.
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The narrative among automakers, especially Ford and VW, have been they want to increase ATP and GP, per car. They openly say they don’t care about volume.
Steve
If it’s such an easy call why dif Apple spend ten years, tens of billions of dollars, and employ thousands and thousands of engineers in pursuit of it? And how does Xiomi launch an entry - and apparently a significant one, in such short order?
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We do not know the winners or losers yet. There will be far more losers than winners in the space.
Xiaomi is using off the shelf parts that did not exist or were not as robust when Apple was developing its product.
Apple wants to be a neutral partner to many EV companies. Later on the money is being an internet connection in an EV for the passengers to surf the web.
Good thing you asked but the tone is not one of you do not know. You did not know.
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Apple was developing its product until February of 2024. Xiomi debuted its car in March of 2024. Pretty sure the “off the shelf parts” were available a month earlier.
Apple does not charge auto companies to use CarPlay. Apple does not charge users to use CarPlay. This seems an odd way to “make money.” Additionally, there is no way for Apple to charge passengers to surf the web. That would be a connectivity issue, useful for the likes of Verizon, Sprint, or AT&T.
To reiterate: Apple makes no money on CarPlay. It makes no money licensing Apple software for dashboard or other vehicle electronics. It has no hope of doing so, or of being a neutral third party to automakers and licensing software to them. The auto industry will continue to increase the use of electronics, and Apple will not participate in this sector. Xiomi will, however.
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I have never been charged by Google. Think that over carefully.
Yes February 2024 but prior work was with less useful hardware for launching an automobile product. It was successful for learning the building blocks to offer automotive web services and more.
AI Overview
Apple’s advertising business generates billions of dollars in revenue:
- 2022: Apple’s global advertising business generated $4.7 billion in revenue.
- 2021: Apple generated $3.05 billion in advertising revenue in the United States.
- 2024: Apple’s advertising revenue in the United States is expected to more than double.
- 2026: Investment bank Evercore ISI estimates Apple will have a $30 billion ad business.
Apple’s ad revenue comes from several sources, including:
- App Store: Sponsored listings in the App Store search
- Default search engine: Apple pays Google 36% of revenue generated through searches
- Other areas of users’ iPhones and iPads: Including the main Today tab of the App Store and third-party app download pages
Apple’s ads rely on first-party data, which is data that Apple collects directly from people. However, Apple also has Application Tracking Transparency (ATT), which allows consumers to decide whether apps can track them.
It took 17 years for Tesla to become profitable (for a full year). Not sure that qualifies as an exception.
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If you are counting backwards perhaps it is an exception.
Tesla’s market cap is over $1 Trillion. It is an exception.