Apple Could Dominate Cars

by Colin Berkshire

If I ran Apple I might get into the car business, but not in a way everybody is expecting. Everybody thinks Apple is gong to sell an Apple car and somehow make a profit in this low margin business. That would require opening up Apple Car Service centers everywhere. This is ludicrous to consider.

But I think there is an opportunity for Apple that makes sense.

Apple could (and should) get into the taxi business. Apple would design cars to be rented on a per trip basis. This is the next, new frontier.

I realize that GM and other auto makers are looking at this business model. But it is brand new. Apple can have a superior vehicle that is more comfortable and establish themselves.

Unlike any other company out there, Apple has enough cash to finance a nationwide fleet in every major city. Apple has the logistics to make the cars in India or China. They can sub-contract all maintenance and service out to existing shops who operate entirely “behind the scenes.” It’s very different if a car needs service that it auto-drives up into Butch’s auto repair for a checkup than if a customer brings a car in and expects a gleaming white service center.

What Apple can do is scale faster than anybody. They can sell car service through their TV commercials and Apple stores and Genius bars. They have business synergies with this model.

I think Apple can make their usual high margins with the rent-per-trip model. It compliments everything about their existing business.

The player who is gong to win the rent-per-trip car model is the one that has massive scale. This will be an enormously capital intensive business. It will require vast data centers. It will need a big TV ad campaign. Why, it’s just perfect for Apple.

Here is the math: Let’s say a car costs $40,000 to make. That will be a high-end car. Let’s say they want to initially be in the top 100 cities in the US. Let’s say that each city needs 10,000 cars. This works out to 1-Million cars and a cash need of $40-Billion.

I can think of no other company besides Apple that can pull this off. It’s a great fit for them.