At first glance, the efforts Apple Inc., Google, and other tech giants are making in the world of cars don’t seem particularly appealing.
The manufacture of automobiles required factories, equipment, and an army of people to design and assemble the large pieces of steel, plastic, and glass. All that but guarantees slimmer profits. The world’s top 10 carmakers had an operating margin of just 5.2 percent in 2020, a fraction of the 34 percent achieved by tech industry leaders, according to data compiled by Bloomberg show.
But for Apple and other giants that are diving into self-driving technology or have grand plans for their own cars, this push isn’t just about entering a new market—it’s about defending valuable turf. is in.
“Why are tech companies pushing into autonomous driving? Because they can, and because they have to,” said Chris Gerdes, co-director of the Center for Automotive Research at Stanford University. “There are business models that people are not aware of.”
A market projected to reach $2 trillion by 2030 is hard to ignore. By then, more than 58 million vehicles are expected to be self-driving globally. And Big Tech has the means to disrupt this century-old industry, from artificial intelligence and massive data to chipmaking and engineering.
Essentially, what is at stake is even more valuable than profitability: the last unclaimed corner of consumers’ attention during their waking hours.
The amount of time people spend in cars, especially in the US, is important. According to the latest available data from the American Automobile Association, Americans were behind the wheel for 307.8 hours in 2016, or about six hours a week.
It’s a good part of someone’s life that isn’t spent using apps on the iPhone, searching Google, or mindlessly scrolling through Instagram. Any company that is able to free up that time in a meaningful way will have a pretty good chance of capturing it.
It’s impossible to miss the world’s drastic change toward intelligent cars better for the environment. If governments don’t announce plans to go carbon neutral in some cases by the end of this decade, there is plenty of research showing that cars with combustion engines are going the way of the dinosaurs.
BloombergNEF’s annual Electric Vehicle Outlook, published earlier this month, sees global oil demand from all road transport to peak in just six years, assuming no new policy measures have been introduced. By 2025, EVs will hit 16 percent of global passenger vehicle sales, rising to 33 percent in 2030 and 68 percent in 2040. Eventually, autonomous vehicles will completely reshape the automotive and goods markets.
Against that backdrop, it’s not surprising that after years of turning away from self-driving cars, tech companies are ramping up their activities and investments in earnest.
Autonomous cars are only as good as what they learn from the human driver – so the people who teach these systems need to be excellent drivers themselves.
Bloomberg reports that over the past several months, Apple has prioritized plans for an “Apple Car,” as previously focused on building an autonomous driving system. This has fueled intense speculation about which automaker and supplier the company behind the iPhone might partner to make its vision a reality. While Apple recently lost several top managers on the project, its large car conglomerate still has hundreds of engineers.
There’s also Waymo, which is in talks to raise up to $4 billion to accelerate its efforts. Founded in 2009, the business that was previously Google’s self-driving car project was the first to offer fully autonomous rides on public roads. It became an independent company under Google parent Alphabet Inc. in 2017, launched an autonomous ride-hailing service in Phoenix in 2018 and began testing self-driving trucks in New Mexico and Texas last year.
Microsoft Corp., too, is supporting a number of autonomous initiatives, partnering with Volkswagen AG on self-driving car software, possibly with a view to making Office-on-the-Go.
Meanwhile, Amazon.com Inc. has overtaken electric truck maker Rivian Automotive Inc. and last year bought driverless startup Zoox Inc. It may want to include autonomous rides as part of its Prime membership program.
“Each of these companies, including Facebook, wants to be a part of or even control and dominate every part of citizens’ lives,” said Professor Rajkumar Rajkumar, who leads the Robotics Institute at Carnegie Mellon University. “From their business standpoint, if you don’t, someone else can and probably will, and eventually your current sphere of influence will fade away.”
Although Apple has dominated phones, tablets and smartwatches and has put up a good fight over computers for the past few decades, it has lagged behind in the artificial intelligence, voice and smart-speaker spaces, now led by Google and Amazon. .
The company will benefit from the release of a successful new product. While it has found success with the Watch released in 2015 and services like Apple TV, Apple Arcade and Apple Music, which are now a major new source of revenue, nothing has come close to the success of the iPhone, which redefined Has become the industry’s most lucrative product and Apple’s most attractive product since its 2007 release.
At Google, executives have made long-term investments in autonomous cars, as well as moonshots in biotech and drones, as risks that firms with venture capital and less deep pockets don’t, or won’t take. Waymo has discussed potential business models around taxi services and long-haul logistics.
Motor vehicle officers are gearing up for battle in the attack. Ford Motor Co., General Motors Co. and Toyota Motor Corp. As industry giants have pushed their own rival efforts into self-driving. The Japanese automaker is building an entire city around autonomous driving at the base of Mount Fuji, while South Korea’s Hyundai Motor Co. is investing $7.4 billion to build EVs and develop unmanned flying taxis in the US. is.
In China, it’s the biggest tech companies throwing their hats in the ring. Huawei Technologies Co. from Baidu Inc. The U.S. giants have pledged to invest nearly $19 billion in electric and self-driving vehicle ventures this year alone. Smartphone giant Xiaomi Corp. And even Apple’s Taiwanese manufacturing partner Foxconn has joined the fray, forming tie-ups and unveiling plans to build its own car.
It’s understandable for automakers to defend their turf, but Takehito Sumikawa, a partner at McKinsey & Co.’s Tokyo office who advises on future mobility, says it’s a great opportunity for tech providers to enter the autonomous driving space “Natural Extension”. “They’re betting they can do a better job disrupting the industry.”
Existing businesses like Amazon, Apple and Google already require them to become proficient in AI, handle massive amounts of data, and design complex systems. Essentially, they have made advance investments in the core technologies needed to design and build driverless cars, and they now have a plethora of engineers eager to solve more complex problems, not to mention an appetite for disruption. for.
But perhaps one of the clearest examples of a tech company’s ability to turn its stomping ground is Amazon. The web retailer will benefit immensely from the low cost of delivering packages to homes using self-driving cars.
Amazon also has a habit of turning its own devices into businesses that can be sold to a wider range of customers, just as it did with cloud computing, which was originally designed to support the company’s online retail operations. was built for. Amazon Web Services is now a $45.4 billion enterprise, after transforming it into a computing and data-storage platform used by Netflix Inc., the US government, and others.
While the coronavirus pandemic has temporarily dampened consumers’ appetite for new cars, demand has picked up back. Semiconductor shortages mean that many traditional players can’t move production lines fast enough. According to IBIS World, this year alone the global automotive market is projected to grow by 9.7 percent to $2.7 trillion.
It is also a huge market for companies like Apple and Google, Rajkumar said. “CFOs and CEOs get really drunk, because first movers are likely to have a huge lead. Each of these companies wants to be the hunter, not the victim.”