Apple car Followup

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I recently wrote about Apple Car and how it made sense for them to enter the car business as a service, not a product. That is, rent-per-trip.

I pointed out that if they serviced 100 cities with 10,000 cars they would need 1-Million cars and at a cost of $40K each this had the enormous capital requirement of $40B. Apple is perhaps the only company that has that kind of cash.

But the real math is more revealing: only Apple can play in this game. 10,000 cars in an average city is not enough. It’s a nice starter. But it seems like a ratio of 1 car for every 10 people is quite reasonable. With about 200-Million people living in major metropolitan cities That means an opportunity for 20-Million cars. That would require $800 Billion in capital to make the cars. Only Apple has or could possibly find that kind of cash.

And, this is just the US. On a global basis the metropolitan need for cars is perhaps 100-Million rental cars, a $4-Trillion investment requirement eventually.

The game of winning the auto business will be won by a Tim Cook type: A financier & logistics guy. Success in this business is not so much about styling and fashion as it is about logistics (massive and complex) and finance (getting a never-before-seen hoard of cash.)

Apple can win this business because they have the largest hoard of cash. They alone have experience in this scale of logistics. They alone have the necessary massive data centers, manufacturing logistics, and global reach.

Apple can dominate if they simply have an acceptable self-driving car. They don’t need the best one. They just need one that always works, that is affordably priced, and that is nearby any customer at any moment it is needed.

If I were Tim Cook I would have sleepless nights waiting for Christmas to arrive. I would not be envisioning the day when my company was worth $1-Trillion. I would count how many Trillions like most people count sheep stalling asleep.

Apple will surely start small with a city or five. When they enter a city they need thousands of cars because critical mass and dependable availability is critical for it to work. The lucky cities will be a success. And other cities will beg for Apple to enter their business. Apple will face incredible shortages of cars as they scale up over the ensuing decade.

Yes, Apple will have competitors. But each competitor will necessarily grow slowly. The high R&D will kill some. The logistics and data center needs will kill most. The need for cash on a scale never before needed in all of mankind’s history will kill all others. Apple will win this if Tim Cook stays alive.

Now, it makes sense why Apple is hoarding all of this cash. They will need it.

Exciting stuff, right?

Colin Berkshire