An Apple (NASDAQ:AAPL) car sounds a bit "out there" -- especially to anyone familiar with the auto industry. Plagued by narrow net margins and intense competition, it's difficult to imagine the tech giant's fat profits translating to autos. But as former Apple executive Jean-Louis Gassee points out in a new post on his blog, the same skepticism surrounded the company's foray into MP3 players with the iPod -- a device that helped to completely transform the old Apple Computer into the powerful Apple brand it is today.
In an excellent analysis of why Apple could decide to build an Apple Car, Gassee makes some great points worth highlighting.
No discussion of an ICE vehicle
One of the first takeaways from Gassee is what he doesn't address: whether Apple should build a traditional internal-combustion car or an electric car. Indeed, there's very little meaningful debate anywhere (if there's any debate at all) as to whether or not the rumored Apple Car should be electric or not.
The missing discussion in Gassee's post about what type of car Apple should build likely stems from his belief that ICE vehicles are too complex -- a complaint about the old technology he voiced in a previous article:
Electric car designers are lucky that they don't have to deal with a gasoline engine's complications: ignition control, fuel injection, cooling, lubrication, turbo compressor, exhaust recirculation, catalytic converter.
Defying industry margin trends
Not all major publicly traded auto manufacturers have net margins below 5%. Toyota, as Gassee notes, has recently beefed up its net margin to 10% -- still far from Apple's 23% net margin, of course. But Gassee believes that Apple could find ways to defy industry norms, just as it did in the MP3 player market with the iPod.
To remedy margins, Gassee suggests Apple could opt for a single-model approach, limiting its product portfolio as it has with iPhone.
Another possible path to higher margins for autos? Simpler design.
Take a look at any automaker's website and you'll see a similarly convoluted product line with logic puzzle options and configurations. It smells like Product Management -- or, simply, Management -- run amok
Finally, Gassee proposes that Apple could use its cash hoard to "offer attractive terms to suppliers."
User interface could be a big advantage
Citing a recent study by Accenture that found consumers "value in-car technology more than driving performance," Gassee makes the case that the auto industry's poor job with technological UI highlights a key opportunity for Apple.
"An Apple Car UI could easily score points compared to Ford's Sync UI or GM's (recently improved) Cue," the former executive points out.
Charging stations will be ubiquitous
As I've previously explained, charging infrastructure isn't likely to be a key challenge for the electric vehicle driving experience -- even if sales pick up. Two catalysts for charging infrastructure are clear: Charging stations are cheap to build and maintain, and the value of home charging is both underestimated and understated, as it's best understood through personal experience.
Gassee agrees. After listing a range of places charging stations are popping up rapidly, Gassee predicts, "By the time the putative Apple Car comes out, finding a charger won't be an issue."
Of course, as Gassee rightly admits, this is all speculation:
There are sharp minds in Cupertino at work on the problem, and you can guess what I hope their answer will be. But there are no warranties expressed or implied: Exciting as they are, Apple Car rumors don't obligate the company to a vehicle, in 2019, or at any other date.
What do you think? Will Apple bring an electric car to market? If it does, can it succeed?
Daniel Sparks owns shares of Apple. The Motley Fool owns shares of and recommends Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.