Apple and Alphabet Cannot Disrupt the Auto Industry, and Here’s Why

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Google

The tech world is adrift with rumors that Alphabet Inc (NASDAQ: GOOGL) and Apple Inc. (NASDAQ: AAPL) can meaningfully disrupt the auto industry. Although traditional tech wisdom does provide some support for this contention, it does not have any clear base. The word disruption is an overly used term, especially in connection with automakers.

Google and Apple, the two tech giants, have registered Google.car and Apple.car recently and ever since then the rumors of these two causing disruption in the auto industry are making rounds.

BMW executive dismantles the notion

With Apple tripling the size of its automotive development team, some of the automakers have already started tracking its progress. However, it seems that the big players in the business are not much worried. Bob Lutz, a former General Motors Co. (NYSE: GM) and BMW executive said on CNBC that Apple does not even have a fighting chance of making a small dent in the auto industry.

Firstly, the automobile is an integrated system that cannot be handed down like a Smartphone since all of its functions including code, safety systems, driver assist technologies, hardware, wiring and radar tools have to work in unison.

It will be difficult for Google or Apple to develop a team with such manufacturing expertise that has evolved through many years of experience and investment of skill, time and money. Google and Apple may have capital, but not so much the knowhow for mass production of large pieces of integrated hardware. Prototypes are one thing. Mass production and sale is entirely different.

Apple recently employed a group of Tesla Motors Inc. (NASDAQ: TSLA) engineers indicating its serious intentions but it would be foolhardy to compare that to the real plants and manufacturing units of the major automakers with years of legacy.

According to Elon Musk, Tesla’s CEO, it is impossible to use the same outsourcing model for the cars as used for iPhone and Android mobiles. Moreover, Google and car design do not sound like an intuitively good match. Apple can certainly design, but gadgets and cars are very different things.

 

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