April 11, 2021
The biggest threat to Tesla? Apple - Video

The biggest threat to Tesla? Apple – Video


Apple is about to build a car.
No Apple is going to make technology for someone else’s car or Apple is doing now what?
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Gene Munster is going to give us some clues to figuring out this almost soap opera at this point.
He’s co founder and managing partner at loop ventures and that is and he is one of the voices that I always listen to when it comes to things apple and generally anything tech gene.
Well, it was funny when we booked this interview, it was supposedly on the cusp of Hyundai and Kia announcing a deal with Apple.
Now a few days later, we’re doing the interview, and we woke up to a word that Hyundai and Kia said We’re not doing anything with them.
Where is this carousel right now?
So I think it’s important to make a distinction between when Apple works on something versus it sees the light of day, and the carousel, is moving at a speed where it is very clear.
Player.
Apple has ambitions to build a car.
It was not clear six months ago two months ago whether they wanted to build technology that they’re licensed to car makers, existing car makers Similar to what they do with CarPlay or build the their own car but what is more clear today is that they want to do that so we do not have a deal assigned deal with any sort of automotive maker that does not I think change this direction where Apple is going and Trying to guess when it will see the light of day when some of these announcements will happen is very difficult and we can talk about timing later but the carousel is moving at a proper speed whenever Apple orbits around large untapped markets and they want to do something here in the car.
So that’s interesting.
You’re talking about a car, not just technology for cars, and also talking about automotive partners.
Is that the most likely or you think the smartest path to go his whole car with a manufacturing partner?
Tim Cook gave a little indication.
I think it was Katie Huber and the last Apple earnings call asked a question about how they think about getting into new markets and Tim Cook responded by we want to do hardware, software and services, bring all those together to create a delightful experience for our customers.
I mean, it just kind of rolled a very similar if you have if you’re listening to the response to that question in thinking about the car.
You say this is yet another data point that they are going to get into a car because that’s what a car of the future is hardware, software and services.
That’s something that Apple does exceptionally well what they don’t do exceptionally well as manufacturer.
And so I think it really is if they are going to build a car they’re gonna need some sort of a partner it could be magnetic which makes cars for other company other Auto OEMs could be somebody we’ve never heard of that could be existing auto OEM, what it is not going to be, and I feel strongly about this.
It’s not gonna be some sort of a hybrid project between an existing car maker where they get some same design and Apple gets the same design.
And you get somewhere in between Apple wants full control over design.
That’s why in our belief, the Tesla experiment never worked out with Apple is because the control design was really important for both companies.
So yes, they need a manufacturing partner and if they are going to move in this direction, it would be like an apple branded car.
Hard to imagine when I say it But I think that’s actually what they want to do.
It is hard to imagine and you and your colleague Andrew Murphy put something out in late December that got me thinking about this talk in a blog post titled Apple cars on the roadmap, and you called out several things that were important discussion points, and one of them was about this idea of well, should they make technology, either software and service layer Licensed that to carmakers and you pointed out so I think that reminds a lot of people who don’t know this history that Apple tried that licensing Mac OS to other Mac makers if you will.
Swore to never do it again.
So can we rule out that Apple is going to make software for someone else’s car?
They do dabble in that with CarPlay today CarPlay started the point here.
Yeah, so that I guess that is in a sense.
It’s kind of like they’ll embed their Apple TV on Samsung’s televisions but it’s one of those few occasions where they feel comfortable putting there.
experience on someone else’s device.
Right?
Right and it I would say that those typically don’t work out that well I think CarPlay has worked out because I think the in car experience is that bad that there but if you look at for example some of these, quote smart TVs that have Apple some of Apple TV software embedded I happen to own one of those Samsung TVs.
It’s so bad that software, when it runs on Samsung that I actually turn it off and I just hooked up an Apple TV box to the back because the interface was better.
Licensing models are a lot easier to approach, but it’s just not an Apple’s DNA to do that.
And then you end at this conclusion, which is the part that’s hard to believe.
It’s like actually imagine Apple coming out with a card is
I do for me for somebody who’s following the company it it just still seems like a long ways away.
So that’s another point you made in that post was, you know, Apple likes to take a product and when they when they bring it to Market its uniquely Apple in almost every facet they can possibly engineer a car has a lot more facets in my mind.
Then a phone.
Whats an apple dome light going to do to be better than whats in the market.
What apple headliner is going to be better than whats already out there.
I see an awful lots of part of a car that apple wouldnt want to bother with.
Or do you think that that’s something that’s going to really evolve and say yes,
A lot of our cars like others, but the key parts are different
And potentially just bringing it all together could be different.
It’s the the details is what really separates it.
Tesla’s done a wonderful job of that today and I think there’s an opportunity for Apple to progress along that.
There’s been rumors that the kind of point of differentiation is the battery.
I find that hard to believe for A lot of reasons and one for example is that Apple they work with a lot of battery technology today with their phones but the batteries still continue to be a pain point for many smartphone users, not just Apple, but for many they have not cracked the code.
Code when it comes to battery life.
Therefore some of these rumors that they’ve done that for the automotive world I think is a little bit far fetched.
But design is a competitive advantage for Apple.
I think the the software piece of it If you go and put it on a table and compare features, he asked both the BMW and the Apple car will have software, they are both check that box, but the experience can be a much different in how they integrate that.
And I guess at the most basic levels, Apple’s done a good job of Kind of slowly delighting its customers over, you know, the decades with just small incremental improvements that a lot of other companies are doing.
And My bet is if they get in the car, they’re gonna they’re gonna pull off That’s a magic.
The auto industry has reputation for chewing up a lot of capital, not spitting out tremendously high profit margins and being pretty lumping feast and famine seasons not just yours.
What do you think is attractive about that business for Tim Cook.
The addressable market is orders of magnitude bigger than Apple’s ever gone after before If you look at the smartphone market, annual smartphone sales are around $500 billion per year Apple this year is going to be a little bit over 300 billion in total revenue.
And so when you think about the addressable market for just take passenger cars alone, that’s about a two Trillion dollar a year market and then you start layering on top of other opportunities.
For example, just movement it’s looks at everything from Lyft and Uber to public transportation to short flights.
And then you can even play on top of that in terms of things that they could do around logistics.
And moving.
I don’t expect the apple semi truck any anytime soon.
But that is what gets it going.
What keeps these big tech companies up at night is how they can keep growth going.
And it is just part of the DNA of a successful tech companies knowing that you.
Need to grow you need to reinvent yourself every 10 years Apple has written the book on this.
And I think they’re looking to reinvent themselves again in automotive.
Well, that brings up a quote, I want to run by you here from the late Fiat Chrysler CEO Sergio Marchionne, who said I’ve always been intrigued by the notion.
Of having technology disruptors show up in the marketplace and change the paradigm if they show up and they are truly successful with their cash piles and their know-how, he said they could fundamentally hurt this industry.
I’ve studied this for the past.
We do a lot of work on Tesla and been studying that for the past four years.
Just how tight of a spot traditional auto is in and i think that quote kind of, to me it speaks to that and i think there is gonna be a changing of the guard.
I think that these brands these car companies that have been around for 100 years, I think they will still be around in 10 years but I think they some of them will be a fraction of what they are today.
They may be just.
Have an idle brand, if you will.
And so, to put into perspective is how big of a transition the car really hasn’t changed since it began.
It’s still gas powered there’s still four wheels a steering wheel.
It’s gotten more comfortable there’s more comfort around it.
The styles are different but the substance of a car has not changed and if you think about the future of Automotive Transportation, it is a computer on Wheels.
That’s a whole different type of technology.
And whether it’s autonomy or electrification and this is a big deal, what’s gonna happen and I think there’s gonna be some, unfortunately, some brands that we love that just simply won’t be have the same luster a decade from now.
So we just looked at one quote that talked about the pain it could bring to traditional automakers.
What about the pain Apple in the auto industry could bring to Tesla, which is this almost insurmountable zenith of smart thinking and future power train and over the air updates.
And eventually a high degree of autonomy.
Is there any risk that Apple getting in?
And a couple of existing car makers being smart and coming out bright on the other side because I imagine a couple will suddenly relegate Tesla to being the TiVo of electric or modern cars, the the innovator that ended up being.
Forgotten.
I think Apple is the biggest competitive risk that Tesla has faced now.
They’re just still trying to figure themselves out what Apple’s gonna do, but I think it is the biggest competitive risk.
That’s one piece to this.
And I’m actually surprised that we kinda look at investors and how they do things the surprise that Tesla shares have not been more negatively impacted on this news.
I’m surprised that Apple’s shares haven’t moved up more on this.
And so, I mean, back to the a topic here is I think Apple is Tesla’s biggest competitor.
Despite that, I still think that both of these companies can coexist and part of it is this, Rigid belief that I have, on the structure of Traditional Auto, and their ability to compete, whether it’s with their manufacture facilities, their expertise around software-hardware integration, whether it’s their pension funds, and some of the long term business model, that they carry forward, and so, I really think that this next wave of, transportation is gonna come from tech That means Apple is going to be a competitor, to Tesla.
That means that Tesla needs to figure this out.
If you’re going to ask me how this ultimately plays out, I put Tesla a decade from now as, I call it 25% of the global Evie market share and I bet Apple probably has, a decade from now 510 15% something like that, there’s room for both of them.
So it’s interesting.
We’re talking here about companies making cars that carry the attributes of the future not too long ago, but not so much lately.
We’ve talked about companies like Uber, who were going to move into this and they were going to upset the auto industry really coming from a service point of view.
But now the conversation seems to have swung back to certainly if Apple gets in.
A car centric with radically different services and models radiating from it is that does that feel more comfortable to do that?
That is a great analogy.
It really visualizes exactly what we’re talking about here.
That kind of the car is at the center.
And then there’s these other things that are going to radiate from it.
As you said, and The most obvious thing that comes out of that is Robo taxis and you think about what Tesla, we believe one of our predictions this year is that by the end of this year that Tesla is going to beta test their, their Robo taxi fleet in the US.
That doesn’t mean that Tesla’s are going around without drivers will be chaperoned.
So effectively you were I could.
Summon a Tesla and have a driver still be there.
They can be kind of half awake, but they’ll be there and take us around but that’s the kind of thing I think that apple ultimately wants to get into is this robo taxi when you talk to companies who are really building it’s future It’s the consumer conversations typically centered around the car and they know their car.
When we talk to the geeks who are kind of building this it’s a lot around Robo taxis quick aside here is why would any Tesla owner which is still expensive cars wanna Put their car to work for the fleet to be a robot taxi during the day when they’re at work.
And the answer is probably very few, but you will see mom and pop businesses, kind of people buying 10 cars, whether they’re Apple or Tesla, and basically have them join the network and work during the day.
And then they come in at night and clean them up and turn them around, charge them up and turn them on from the next day.
So.
Big opportunity for traditional passenger cars to have that radiating effect into Robo taxis.
And that’s negative for Lyft.
And Uber,
like you said a couple times earlier in the conversation, it’s almost odd to hear us saying what we’re saying and that this doesn’t seem unlikely within 10 years, this general idea of what we’ve just described in terms of new leaders in automotive What their cars will be based on what the value of them will be.
Just an amazingly short timeline for that much change.
It is and I think that we’re going to a decade from now it’s going to be part of the most obvious impact of tech on everyone’s lives, just how transportation.
Think about around us today.
How much is really automated.
It’s almost nothing.
I mean, I always think of like
The trams at airports is being automated.
But when you think about where we’re going over the next decade automation electrification, it is gonna take a little bit longer than most thing can something, Apple’s gonna have a car in two or three years.
I think it’s gonna take longer, but ultimately it will be more transformative than I think any of us could imagine.
And I think both of these companies will be talking about.
Apple specifically, I think they’re gonna have a big benefit from from that.
Yeah, I think a lot of people don’t realize how much of the world around us has been dictated by about a century of traditional motor vehicles and the traditional way that we use them, which basically is we don’t use them at all that well, you know, the generally accepted numbers, what 95% of the time From sales floor to crusher, a car sits they basically the ultimate parking machine, not the ultimate driving machine.
And utilization is a major part of this story but like you say, even if only a certain percentage of Tesla or Apple car owners
Put their car into constant utilization.
That still can be transformative goodness,
yeah, if you can increase that utilization, I think that that is a massive lever and these are expensive.
It’s typically the most second most expensive thing that people purchase.
And so I think improving utilization around that, I think is a great opportunity and then you have all this domino effect about,
Saving land and Horace Dediu from a Simcoe I love his work.
He’s done studies on terms of how much if we can just reduce the number of cars that we have how much space We can open up for,
yeah
doing other things.
It’s quite remarkable.
I would say maybe after thinking about what we’re talking about today, Ryan, you’re never gonna look at a parking lot the same when you think about how often cars sit around idle.
But I mean, that is an example to us as an opportunity for disruption.
I can already tell what I want our next interview to be I don’t know when it’ll happen but because when you display when you explain the way Apple is getting into this for addressable market, the only other next thought I have is the apple house right?
You got I’ve heard a lot of stuff on app.
Never heard Apple house.
We’re gonna
We finally brought something new to a guy, what’s new,
You got it right there you nailed it.
Perhaps if I can just take a little bit of that and go Further is that, Tesla talks about getting into h fac taking their core technologies and applying to other and H back in the home.
Perhaps Apple wants to do something similar.
Alright G monster is co founder and managing partner of loop ventures
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