Tesla, Google, Apple: is Silicon Valley the future of the US car?

February 22, 2015 by Luc Olinga
The Apple logo is seen in this September 2012 file photo at the Yerba Buena Center for Arts in San Francisco

Is the future of the US car industry in Silicon Valley?

After Tesla and Google, Apple appears to be readying for a plunge into the industry long rooted far away in the steel belt of the US upper Midwest.

According to various media reports, the maker of iPhones and iPads has created a special unit baptized "Titan" with hundreds of staff to begin developing an electric car, with 2020 the target date.

Apple remains silent on the project, but the reports were partially backed up by a lawsuit filed against the tech giant. Battery maker 123 Systems has accused Apple of aggressively poaching its staff.

But it puts Apple in line with Tesla, the current champion of the electric car, and Google, the online giant which is focused on the self-driving, also-electric Google Car.

The Big Three US automakers—General Motors, Ford and Chrysler (now a part of Fiat Chrysler Automobiles, FCA)—are taking the threat from the Detroit outsiders seriously.

"Given the company's (Apple's) tremendous capabilities, that is no surprise to anyone," GM spokesman Dan Flores told AFP.

At Chrysler, spokesman Eric Maynes said: "We can't comment on something we haven't seen."

Ford too had no comment on Apple's plans, but the number two automaker recently opened a research center in Palo Alto, the heart of Silicon Valley, as it looks to the future of self-driving automobiles.

Bill Visnic, an analyst at industry specialist Edmunds.com, said that given the seven-year average time frame to develop and bring a car to the mass market, the Detroit giants are not under serious pressure yet.

Even with the unexpected success of Tesla, for instance, the company still sold less than 35,000 cars last year in an national market of more than 16 million units. And Tesla's cars are confined to a very high-end niche market.

"Apple is not an immediate threat to the US auto industry. I don't think you'll see the volume there, the number of cars won't really begin to approach anything like Detroit is making right now at any time soon," said Visnic.

Alec Gutierrez, a market analyst at Kelley Blue Book, said Apple's strength is its role as a "disruptor" in industries, and that the "comprehensive ecosystem" of its popular consumer electronics could be extended to an "Apple car".

A worker pushes his machine past a 2014 Tesla P85s on display at the LA Auto Show in November 2014
Money to spend

Apple has the money to put into a new car—some $180 billion in capital built up to invest in new projects.

Even so, said Gutierrez, given the costs and competition in the auto industry, "it's fraught with risk."

"The automotive space is so highly competitive today, and margins in new car sales are extraordinarily thin, which is something Apple is not used to."

"How many companies have totally failed into trying to enter the automotive industry? It's a tough thing and it's very expensive," added Brett Smith, program director at the Center for Automotive Research.

He pointed to Tesla continuing to lose money despite its success in marketing its luxury cars with battery systems superior to any offered by Detroit.

People walk on the Google campus in Mountain View, California, on February 20, 2015

And the major automakers are all working hard on making more and better hybrid and all-electric vehicles.

That sets a high bar for any new entrant, notes Smith.

"Does Apple have better technologies than Mercedes or Ford or GM or Toyota to build a car? I really doubt it."

What Apple could bring to the industry is what Google brings: ways to process and use data.

This January 2015 file photo shows the Chevrolet electric concept car Bolt EV at the North American International Auto Show in Detroit, Michigan

Google is focused not on the physical car itself but on the technology that will allow cars to run themselves. Its self-driving vehicles, in the guise of various car models, have already driven hundreds of thousands of miles (kilometers) on California roads in test runs.

Apple already has something to offer the industry, notes Visnic. It could become a key supplier of connectivity technology for cars, putting its operating systems up against Google's Android, already being installed in many car models.

"For Apple, they have proven to be phenomenally good at user experience," Smith told AFP.

"The car for them will become another user experience device, and that will differentiate them."

Explore further: Report: Apple has hundreds working on electric car project (Update)

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1 / 5 (2) Feb 22, 2015
Just keep DC out of whatever center of creativity appears.
not rated yet Feb 22, 2015
Self driving consumer vehicles almost seem like a distraction at this point: its a gamble as to whether people will want them, and do they really want a piece of the unstable auto markets?

The huge money, sadly, is in replacing commercial drivers. I just googled and saw that there are 3.5 million truck drivers in US, with average salaray $40k. So these tech companies can take that $120 billion a year, and still out-compete the humans, as their self driving trucks can go around the clock. That doesn't include all the other types of commercial drivers they can replace too, surely several million US jobs could be eradicated, and several hundred billion a year to be gained for pocketing their salaries.

The next thing these tech companies need to work on innovating is how to put millions of unemployed workers to work in a profitable way!
5 / 5 (3) Feb 22, 2015
Just keep DC out of whatever center of creativity appears.

Yes because Silicon Valley has no history whatsoever of government co-dependence that spurred innovation.

'Federal funding of research into computer networking at Stanford was instrumental to the development of networking technologies that Leonard Bosack and Sandy Lerner ultimately commercialized as Cisco. Funding from the National Science Foundation's Digital Library Initiative played a role in Larry Page and Sergey Brin developing a new algorithm, PageRank, which gave rise to Google. The founders of Genentech and other Bay Area biotech firms relied in part on federal research money to universities. In fact, the Science Coalition's report Sparking Economic Growth 2.0 traces well over a dozen innovative Silicon Valley companies that got their start directly as a result of federally funded research into Silicon Valley area universities such as Stanford and the University of California at Berkeley.'
not rated yet Feb 22, 2015
Google has cited 2018 as the year it brings the self driving car to the world, by which i believe they mean "a small part of California". What will be interesting is if they roll out the plans for a auto driven car in a manner similar to android.

Where if you have the hardware feel free to load their brains into it. The economic potential is huge, with the ability to truly disrupt the way travel and freight are conducted, in all formats from driving to the shop, to work to cross country and the other side of the world, new infrastructure will have to be built to support that avenue of invention.

I would like to see Google tackle the problems of tax, of corporate and political greed/corruption. Unless intelligence communities have truly been at this for so long they have such a huge lead as to be incomprehensible, Google truly posses the ability to seal tax black holes, to remove political buying of votes, etc. They we see automation at it's best.
not rated yet Feb 23, 2015

Yes you are right to worry about the jobs of the drivers in the future. I consider that this will be a major problem for the 21th century. Low income jobs will probably be obsolete, as humans will be replaced by robots who in some work areas have their advantages. Off course this doesn't mean that other jobs won't be created. Those robots have to be maintained, their software has to be upgraded, production frameworks have to be reshaped etc, which will mean that other opportunities will arise, not on a ratio 1:1 but still. The main problem is that it is very hard to educate a software engineer from a driver, especially if he is older, and remaining jobs will need higher IQ.
But on the other hand who can stop technological progress and optimization, as producing with a lesser cost?
Finding an equilibrium between these 2 aspects will be indeed challenging, unless we have a 3rd WW, our population will be considerably reduced and we will have to start over...
5 / 5 (1) Feb 23, 2015
To hit the 3 children on the right or the four adults on the left? . . .

As you are tempted to toss out these contrived examples, ask yourself how often these happen in our existing driving situation today. Then, here are some counter-examples to consider: how often do accidents occur today because the driver was looking the other way? Or fiddling with the console? Or on the phone? Or trying to drive with their knees? Or not skilled enough to compensate for bad conditions like ice or fog? Or intoxicated?

On job obsolescence: what happens to the displaced workers is a hard question. Forcing companies to retrain them or otherwise employ them is not even remotely a satisfactory answer.
not rated yet Feb 23, 2015
Yeah, that's a really good point you make: "who can stop technological progress and optimization?" It completely shapes our world. If tech can do something cheaper, markets will go to it, there's no debate about it. That's why I tune in to what scientists are doing, their research directions can define what tech is out there, and thus what the future looks like. Also I wasn't kidding when I said these silicon valley guys should be thinking about ways to innovate jobs, I think they could: Being a programmer isn't everything. On the web for instance, content is king... Unskilled people could play a role in content generation, stuff like 3D scanning stuff everywhere, or driving virtual trucks to train AI's better for complex situations. There's got to be a way.
not rated yet Feb 28, 2015
Will the self-driving car be able to tell the difference between a puff of steam(as from a manhole cover) and a solid object? A horse can't. How about a cloud of leaves, a wind blown sheet of newspaper, or just a bird? How will it determine if an obstacle is very temporary, like a garbage truck or parking car, requiring just a short wait, or more permanent, like a fallen tree or vehicle fire, requiring a detour? How will it negotiate black ice? Can it see deep water, like a flooded underpass or even a bad pothole filled with water? Is heavy snow falling just a non-starter? I think these vehicles have a ways to go. Driving in the real world is much more complex than driving in sunny California. :-)

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