Around a decade ago, Tim Cook travelled to Munich to see BMW.
The Apple chief executive spent several days touring its factories and design studios, according to two people with knowledge of the trip.
Cook stunned a senior BMW executive by saying that the iPhone-maker could, in fact, turn its hand to replicating the automaker’s engineering and production capacity.
He was wrong.
On Tuesday, Apple announced to its staff it would abandon a years-long effort to develop an electric vehicle that could compete with the likes of Tesla, instead switching its research funding towards building artificial intelligence.
The move to kill off the car project — known internally under the code name “Project Titan” — has been seen as a vote against the state of the EV industry as a whole.
“The natural state of a car company is dead,” said Tesla chief Elon Musk on his social media platform X in response to the news.
EV sales growth — both from start-ups and from established players — is slowing worldwide as mass market consumers remain put off by their higher prices and perceived compromises with charging.
While sales are still rising worldwide, battery vehicles’ share of the market rose 2.8 percentage points to 15.8 per cent last year, compared with a 4.7 percentage-point rise during 2022, according to data from EV-Volumes, while in some regions such as the UK market share declined.
Even Apple, which has cultivated itself as a luxury brand that also makes must-buy products for millions worldwide, may have struggled to break into this market. Apple’s car would have cost a reported $100,000, while falling short of the fat profit margins the company enjoys from sales of iPhones.
Tesla remains the only new company to have broken through selling EVs, as dozens of well intended start-ups fell by the wayside. Even China’s BYD, which has overtaken Tesla in EV sales, had a legacy making engine cars. Then, last week, fellow start-ups Rivian and Lucid Motors also announced lacklustre results, sending their shares tumbling.
“Given the thrashing that Lucid and Rivian just received, it’s not surprising,” said Brian Mulberry at Zacks Investment Management. Consumers, Mulberry said, were voting with their wallets, and sales across the EV market were slowing measurably.
The industry nonetheless expects EVs to become dominant in time as governments push to decarbonise road transport. Apple had been betting on that future, with one of the few elements of the company’s automotive project that it had publicly acknowledged being its attempts to master self-driving technology.
In 2021, Cook called autonomy “a core technology, in my view”, adding: “If you sort of step back, the car, in a lot of ways, is a robot. An autonomous car is a robot. And so there are lots of things you can do with autonomy. And we’ll see what Apple does.”
Yet, much like EVs, autonomous vehicles have suffered a reality check following years of investment and hype.
General Motors scaled back plans for its self-driving Cruise unit last year following an accident while testing on public roads, while Ford pulled out of the technology altogether to focus on driver-assistance systems that will cost less but can be deployed earlier.
Few appear close to cracking the technological issues around self-driving cars. Waymo has deployed a live, customer-paying service, while many of the other new entrants have switched focus to niche applications such as commercial vehicles, or have been acquired.
The move to exit carmaking also comes as Apple has been a laggard on releasing generative AI — software that can produce text, images and code in seconds. Rivals such as OpenAI, Microsoft and Google are among those to make splashy announcements in recent weeks around the technology. Apple’s release this month of its Vision Pro, a “mixed-reality” headset, is another bet on future growth.
As competitors roll out smartphones with new AI capabilities, investors are impatient for Apple to reveal some of its own work in the space — something Cook has promised to do this year.
The Californian company has said its research and development efforts are focused heavily on AI, as it races to bring new products to its devices powered by its own large language models and silicon.
“There are new, shiny objects out there to tech titans trying to get a competitive edge that yields a higher valuation — and that’s AI,” said David Wagner at Aptus Capital Advisors.
Apple began to build up Project Titan about a decade ago. In 2017, the company was granted a licence to test autonomous cars in California. Soon after, the company hired Doug Field, Tesla’s former vice-president of engineering. In June 2019 it acquired self-driving start-up Drive.ai.
A few months earlier, in January 2019, Apple cut a fifth of the 200 staff working on the project. In 2021, Field was poached by Ford. Around the same time, Apple approached both Nissan and Hyundai about collaborating on the project, the FT reported, potentially tapping into the carmakers’ manufacturing knowledge. The talks did not last long.
“While we think the car initiative likely offered the greatest long-term upside to [Apple’s] revenue trajectory, it was also likely to erode margins,” wrote Angelo Zino at CFRA Research.
“Still, we viewed the car initiative as more of a ‘pie in the sky’ opportunity,” he added. “Investors are unlikely to see this as having major implications to the stock price as it wasn’t modelled into our (and most) long-term expectations.”
Apple shares barely moved in early New York trading on Wednesday, keeping steady at $181.84.
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