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An Apple logo hangs above the entrance to the Apple store on 5th Avenue in the Manhattan borough of New York City, in this July 21, 2015, file photo.

Apple car might be a disaster

Apple is rumored to be producing its first car in 2019. Industry legend Bob Lutz is calling the move a disaster.

Yesterday morning, we reported that Apple had discussed requirements for testing autonomous cars on California's public roads with the state's Department of Motor Vehicles. At the end of that article, we made some predictions about Apple's automotive plans, and we guessed that, based on Apple's track record with making sleek, desirable consumer goods, it was probably planning to make cars, too. (Unlike Google, which may be just about the software.)

Within moments, our hunches were confirmed. Citing everyone's favorite sources --  "people familiar with the matter" -- the Wall Street Journal reported that that Apple plans to complete its first vehicle in 2019. 

When consumers will be able to drive away in those vehicles remains unclear. If the report is accurate, however, it does share a couple of interesting details about Apple's first car:

1. The car won't be fully autonomous -- at least, not at first. Like Tesla, Apple is focused on electrification, with autonomous features to roll out over time, until vehicles are fully self-driving.

2. "Project Titan" is about to become a major line-item in Apple's budget. Sources suggest that Apple plans to triple the size of its as-yet-unconfirmed car division from 600 employees to around 1,800.

Of course, when there's car news like this, the media wants to talk to someone who knows a bit about the automotive business. That's why CNBC rang up industry legend Bob Lutz and asked him about Apple's plans. 

Not surprisingly, the notoriously gruff Lutz was pretty dismissive, suggesting that Apple was standing on the brink of a "gigantic money pit". His rationale?

  • Apple is used to making high-margin consumer goods, and cars are low-margin products. 
  • Electric cars make up a tiny portion of the auto market, so there's not much money to be made anyway.
  • Batteries are among the biggest barriers to profitability on electric vehicles, and Apple has no expertise in that area.

However, Lutz does hit upon a very interesting idea as far as manufacturing is concerned -- and he seems to do so without realizing it. When asked about whether Apple could outsource the building of the vehicles themselves, he responds:

"They could get Hyundai, Kia or a Chinese manufacturer to manufacture the cars for them and then they would put all of their software and interconnectivity in it afterwards, but I don’t see the advantage to that…"

Except that's exactly the advantage that Apple has employed to create millions upon millions of iPhones, iPads, and other much-loved devices. Apple doesn't build the iPhone, it has suicidally inclined workers at Foxconn do all that.

Will Apple follow the same plan for cars? Could be, though based on your comments on other articles here at TCC, we're not entirely sure U.S. consumers would be very eager to buy it.

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