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Apple, Inc. Is Pushing Ahead With Testing Self-Driving Cars

By Evan Niu, CFA – Apr 15, 2017 at 7:49PM

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The California DMV grants Apple a permit to begin testing.

Apple's (AAPL -1.96%) autonomous-car plans have been seemingly up in the air for the past year. The New York Times reported in September that the company was rethinking its strategy, laying off "dozens of employees" in the process. A month later, in October, Bloomberg further detailed the shift, saying Apple had "drastically scaled back its automotive ambitions" and was instead focusing on developing autonomous-driving software; Apple was reportedly no longer interested in actually building a car -- even though focusing on software without integrating the hardware is decidedly very un-Apple-like. Apple then sent a letter to the National Highway Transportation Safety Administration in December, confirming that it was making self-driving-car investments while offering some input on the proposed Federal Automated Vehicles Policy.

The most recent development is that Apple has now secured a permit from the California Department of Motor Vehicles to test autonomous vehicles.

Visualization of autonomous driving software

Image source: Getty Images.

Last but not least

Last week, the California DMV updated its site for autonomous-vehicle testing. Manufacturers that hold permits to test autonomous vehicles are listed in chronological order, and "Apple Inc." is the latest addition.

These are the same permits that Uber complained about in December, after the DMV told Uber it needed to obtain a permit to continue testing its self-driving cars. The episode was a bit absurd, since the permits cost just $150, and Uber moved its self-driving-vehicle pilot to Arizona instead, a transition that undoubtedly cost much more than $150. Uber has since relented and obtained its permit last month. (Uber is listed a few spots above Apple.)

Bloomberg says Apple is nearly ready to begin testing its autonomous-driving software, and the California DMV permit includes three Lexus hybrid SUVs and six drivers; a driver must be present to disengage the autonomous-driving software if necessary. Manufacturers with permits must also submit annual disengagement reports that detail when a human driver had to take control during testing.

Technology first; strategy later

The hardest nut to crack when it comes to self-driving vehicles is the software. Most companies have gravitated toward the same set of hardware sensors, more or less. With one notable exception, most approaches include some type of LIDAR system combined with radar and cameras. It's not clear what hardware suite Apple is planning on using, but presumably it is exploring several potential configurations.

It seems that Apple's overall strategy is still up in the air. Apple would probably prefer to build its own vehicle with integrated hardware and software, but manufacturing vehicles in volume is incredibly difficult and expensive. Yet autonomous driving as a technology has so much potential to save lives and deliver societal value in other ways -- such as convenience and vehicle utilization efficiency -- that Apple can't ignore it.

Given the regulatory considerations, combined with the leaky nature of Silicon Valley, there's no way for Apple to keep its plans completely secret. For now, it looks as if Apple is pushing ahead with testing its self-driving-car software and will figure out the market strategy later. 

Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has a disclosure policy.

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