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Discussion in 'TSLA Investor Discussions' started by 9837264723849, Sep 21, 2015.
Features Of The Apple Car - The Onion - America's Finest News Source
Fantastic, more manufacturers means more innovations and price reductions. we are still at the beginning of the future of autos.
The Onion article is great. I wonder if the "Cup holder" bullet point is a shot at Tesla? That's probably too inside of a joke so it's probably there because all cars have them and it really doesn't fit in. This is the best bullet point:
Windshield cracks easily, though car typically still works fine afterward
I think my favorite is "Compatible with most major roads"
So let's do some math:
600 People @ $200K / year = $120,000,000
Triple workforce for 3 years = $360,000,000 * 3 = $1,080,000,000
So for an investment of less than $1.5 billion Apple will have designed their own vehicle from scratch vs having to pony up maybe $350/share to purchase Tesla or roughly $45.5 billion. ($350/share is what I would estimate the take over premium would need to be to complete the purchase). So $1.5 billion looks like a bargain compared to what it would take to purchase Tesla. But they still need a car factory and batteries....
Damn you beat me to it:
"Cup holder" lol!
I think that feature will sell the car
I can't believe Apple would copy such a feature from Tesla.
I'm not saying that it would cost $45B, but development to the point of where Tesla is will surely include more than the cost of salaries. (assuming your $200k was based on an estimated average salary)
1. The 1,800 staff count can only be for the planning, design, engineering, component and supplier sourcing planning/negotiations/testing etc. Apple would still need to hire and train people to ACTUALLY build or assemble and test the cars, including quality control etc.
2. Apple would need to develop marketing, advertising, distribution, shipping and servicing strategies, and action/ implementation plans and those 1800 staff would also need to work on that!
3. Apple ( or if they use a contract manufacturer) would need start NOW on an actual factory for Mass manufacturing of at least 1 million cars. Because they will need scale economies. Tesla's current factory is apparently valued at a minimum of $10 billion and only has a capacity of 1/2 million cars. Even if it's BMW in Germany, or Hon Hai buying or building a car assembly factory for Apple in China , or wherever, Apple or their outsourced partner would need to start that no later than 2016 on the infrastructure and people for that effort. The 1800 staff does NOT include any headcount for that.
If Apple plans to assemble on their own, then Apple would need to hire and train many more thousands of staff for the factory manufacturing and assembly.
Even if it's a BMW JV they, BMW, would need to start well ahead of 2019 and BMW would need to negotiate some sort of deal with the notoriously difficult German unions who will no doubt want to know what will happen to those current BMW factory workers whose jobs may be at risk from BMW making cars for Apple that will no doubt cut into BMW sales.
4. Apple ( or a battery supplier ) would need to start the build out ( including land acquisition ) of a gigafactory to feed the factory for at least 1 million cars a year. Even if it's Panasonic, it can't start in 2019 !!!!! If Apple is going that on their own, well the headcount of many thousands of people needed for that are not included in the 1800. Apple can't just cut a deal with Panasonic to supply batteries for their cars in 2017 and expect Pansonic or whoever to start that in 2017 and have a supply of batteries for even half a million cars set to feed Apple.....there is simply no one out there NOW with that kind of battery supply capacity to feed Apple in 2019 even. And it can't start in 2017 !!!!
5. Apple would need to start now or in the next 6-12 months maximum, of building a infrastructure of fast charging stations . It will take several years to match Tesla from land acquisition to construction. No headcount is included in the 1800 staff for that ...I am sure !!!
6. Apple cannot sell or service cars in their current Apple stores, so that too ( a showroom and service network ) would need to start in the next 6-12 months and the headcount for that is not included in the 1800 staffing . Unless they are going to outsource that to the BMW dealers who don't know anything about all electric cars, let alone one from Apple ! I can't see a current BMW dealer agreeing to that !!!
7. If Apple plans to use BMW or some sort of Hon Hai type company to outsource production ex USA then there is the BIG issue of margins !!! After shipping a car from Asia or Germany ( when Tesla will not incur those kinds of costs ), Apple would need to figure out how to be price competitive with Tesla ....who is manufacturing on their own , with many of the parts made in house ....including batteries !!!! A fully integrated competitor with a head start with both battery and car manufacturing and service all integrated as a part of their strategy and business model.
So, unless Apple starts now to build a car manufacturing and assembly factory and a build a gigafactory for batteries with minimal shipping to the USA costs ( vs outsourcing overseas) , Apple simply will have to absorb the mark up of supplier margins over production costs by the outsourced company for batteries and car manufacturing assembly.
HOW exactly then would Apple price their cars to be competitive with Tesla to make a decent profit margin ???
So, in my opinion, unless Apple builds both the car manufacturing and battery production on their own, I,e fully integrated, they simply will get out- priced by Tesla, by maybe at a minimum $5,000 to $8,500 per car !
Will Apple's car be that much better than Tesla's car in 2019 or 2020 that people will pay $5,000 - $8,500 per car more, in large numbers ( say 1 million buyers per year ) over what they would pay for a Tesla car???
Folks, it's just worth reflecting on all of this.
Whether Apple builds on their own and matches Tesla from a cost standpoint, or buys batteries from say a Panasonic ....and outsources to BMW or a Hon Hai type manufacturer in Germany or Asia for assembly and then ships those cars to the USA ......after both the outsourced battery supplier and car assembler has added their margins.....in either scenario, 90 percent of the work is NOT included in the 1800 head count!!!
I just don't see how Apple can compete unless they BOTH build the batteries and assemble the cars on their own without having to share margins with others in the supply chain....IF they want to compete against a fully integrated Tesla with a multi year head start ! Unless, Apple buys Tesla !!!
Well, Apple could buy a smaller car company (Saab, Mazda, etc.) with factories. In terms of batteries I would suspect that they already are the top buyer of Li-batteries already and have the know-how, money and connections to expand factories on WW basis. Finally, given the very low level of supply of BEVs in 2019 & 2020 I think they could sell what they make.
I also think that Tesla will be able to sell all the Model 3 cars they make as well even if AAPL is on the market
They could start building a battery factory at any time and keep it a secret. The building could already exist right now.
They could already be acquiring land for a charging network. Again nobody would know until they start permitting. They could catch and pass the entire supercharger network in less than a year by spending money and simultaneously permitting hundreds of sites.
Apple does not need to sell cars at all. They can just sell a car service you access with your iDevices. No need to fight with dealers or build out showrooms.
Apple has 200 billion dollars. That money can buy them all the factories, distribution centers, charging locations that they want. It can also buy them plenty of secrecy. There is no way to know how far along they are on the development of their car or assembly processes. They don't have to ask anyone for financing or attract investors.
I'm somewhat dubious about the trustworthiness of the claims in this story. I have no inside information, but it would be extraordinarily unusual for Apple to divulge these kind of details, especially this far from the target date. The meetings and general information about the program have been well-known for some time, but divulging a specific target date to ship is hard to believe, especially for such a radical new business line.
I wouldn't be surprised if Tesla uses more Li-ion batteries than Apple. Apple produces far more devices with Li-ion batteries, but each device uses small batteries while the Model S and X use lots of cells per car. I have read that Tesla has been consuming 10% of the world production of Li-ion batteries for the Model S alone.
I think Apple is being a bit optimistic about getting a car into production by 2019. They have a lot of experience with mass production of electronic devices, though most of the recent experience is with third parties doing the production. However producing cars is far more complex than building phones or even computers. Even if they farm out production (most likely to a Chinese car maker), batteries will be a bottleneck to mass production. They use a lot of Li-ion batteries today, but they aren't going to quit making iPhones to divert all those batteries to car production. A new source of batteries at least as big as a Gigafactory has to be brought online. They would not be able to hide building such a thing (there would be rumors at minimum), so it doesn't exist yet.
I also think Apple will have to dedicate a lot more money than $1.5 billion to do this. This sounds like a rush development effort, which means it will cost more. They need to build a research facility, a design center, do some kind of infrastructure build out, even if they partner with a car maker with an existing dealership network and use something like CHAdeMO for a charger infrastructure. If they partner with an established car maker for marketing through dealerships, that will put them at a disadvantage vs Tesla in the world of alternative car buyers. Tesla's sales strategy is very popular with consumers and going with the old school way of selling cars would hurt Apple. On the other hand if they decide to sell them like Tesla, that would probably take partnerships with any car makers currently selling in the US off the table and leave them with Chinese makers wanting to break into the US market. That would require Apple build up an entire chain of Apple car stores like Tesla has done in only 4 year starting from not even any kind of car existing.
Right now Apple is where Tesla was in 2004. They can learn from Tesla's mistakes and they can throw a heck of a lot more money at it, but they aren't going to be able to compact 11 years of development into 4 years. It's going to take them 6-8 years to reach full production. They might have some sort of hand built, limited production car available by 2019 just to claim they have a car in production, but it will only be available in small numbers. And I am skeptical about even achieving that.
I would not be surprised if they end up throwing $40-$50 billion into this by the time it's in full production.
Of the players making noises about making electric cars to compete with Tesla, I give Apple the best odds of succeeding, but by the time they get their cars in production, I think Tesla will be well enough established they will be able to survive some serious competition. It will be like Android and iOS in the phone market. Both are strong players and neither is going away any time soon.
Why 11 years? A new car model takes about 4-7 years to put into production (depending if it's a derivative model or something completely new, hence the wide range).
Apple started this project back in 2013 (exploration phase) with more people added in 2014 (first poachings, many experts added, see LinkedIn) and now the project is apparently again tripling to close to 2000 people.
It's feasible to create a car within this timeframe, especially given the vast resources Apple has worldwide (both in terms of existing suppliers and financial resources). They could also license a car (BMW i3 rumors) as a technology platform to accelerate the first model launch.
As for contract vs vertically integrated manufacturing, I already discussed this topic here in detail:
Apple developing their own car? - Page 14
I'm much more skeptical of Atieva's and FF's (Faraday Future) EV timeplans, they want to launch their EVs well before Apple's rumored 2019-2020 timeline.
Finally, Apple can and will poach more senior personnel experts thanks to their resources, this will slow down the existing EV/battery competition (as A123 and Tesla already complained about publicly).
I think Tesla investors need to face the fact that the entire PHEV and EV car sector will be very crowded across all models and price ranges by 2018-2020.
This really should be excellent news to everyone. That sector is a small pie now but can only grow, and quickly.
That scenario would be good for consumers (car buyers) and EV/PHEVs as a category, but not for suppliers and car companies (revenues will multiply, but margins will likely contract sharply).
Look what happened in other new sectors where revenues multiplied (e.g. PCs, processor and storage technology, solar companies, CE such as flat screens or cameras...).
There are both
- constant technology gaps (resulting in heavy cap-ex over many years, eg. the upcoming gap from Li-Ion to solid-state batteries)
- price wars erupting in the mass market space (this could especially be a problem for Tesla with the upcoming Model 3 and volume production in the upper mass-market, $30-50k, price range).
until a sector matures.
Looking at sales charts, most PC or solar companies clearly leading the field a decade or two ago are gone today. The common "pioneers with arrows in the back" syndrome gobbled up or killed by fast followers with heavy resources.
I'm not saying this will/must happen to Tesla in the EV space over the coming decade - but most Tesla investors buying in at prices around $200-300 clearly and completely discount this scenario imho.
Still waiting for the Apple TV 4 years and counting, at least 5000 people working on it.
the netflix ev car should be interesting.
There will most likely never be an Apple TV with a screen (I even wrote an entire article on SA about this very topic back in 2014 if you are interested, "Why an Apple TV is still a bad idea", lol), there is not enough differentiation. That's why they recently updated their Apple TV box that works with any modern TV.
I see Apple working on these major (new) sector intiatives over the coming years:
- Expand the Wearables Category (possibly expand both the Apple Watch and other bodyworn devices with more sensors and functions and/or going into the AR/VR space long-term)
- Transportation Solution (what is commonly discussed here as the "Apple car", knowing Apple this could end up evolving into an entire "Transport as a Service" solution/ecosystem over time).
Apple doesn't use the shotgun approach and see what sticks (very unlike Google X or other large tech companies).
They are very focused on a few key areas with big revenue opportunities where they can add significant value - and they work in secrecy until they are ready to go to market.
PS: Of course, keeping a car project with 2000 employees and later testing that car in secrecy is close to impossible - but Apple will still keep mum on the subject. Again very different to Google Labs or others that show off their prototypes and concepts years in advance.
BEV manufacturing is not as capital intensive as ICEv manufacturing but still much more so than solar panels or PCs.
Distribution of BEVs is also more complicated and capital intensive than distributing PCs or solar panels.
And solar panel prices fell through the floor when the Chinese government decided to fund exporting solar panels to the point they were selling in Europe and USA far below manufacturing cost.
I doubt the Chinese government is going to give Europeans and Americans almost free BEVs. Cool by me if they do though.