Opinion: why scrapping the electric car project makes sense for Apple

Apple has decided to stop trying to make a car, and is disbanding the project team of 2,000 people. That's according to authoritative reports from Bloomberg, also shared by BBC News.

The reason, it seems, is that Apple expects that developing generative AI can be turned into more profit more quickly. Tesla's Elon Musk responded to the report with a tweet of salute and cigarette emojis.

Sources say the car engineering team were told this week. Around half of them are autonomous-drive and interface software engineers and they are being moved to the AI team. Many of the rest might well be laid off. Still, good engineers are in short supply elsewhere in the car industry.

The Apple car project, known internally as Project Titan, started around 2014. High-profile recruiting went in either direction to and from Tesla, Ford, VW Group and others.

Apple was aiming to introduce a luxury autonomous-driving machine. Reports in 2021 said the aim was for launch this year, and with autonomy at Level 4 which means fully self-driving nearly everywhere. But only a few weeks ago it emerged the launch date had slipped to 2028 and the tech was scaled back to Level 2, which is what is commonplace in many cars now.

At various times Apple management discussed manufacturing ventures with Hyundai and with Magna – which builds vehicles for Mercedes, BMW, Jaguar and Toyota among others. In 2020 Elon Musk said that in 2017 he was thinking of selling Tesla – then losing big money in launching the Model 3 – to Apple. But, said Musk, he was 'snubbed' by Apple boss Tim Cook.

During those years, Top Gear has always agreed with the widespread view that Apple could probably have developed and launched a car, to a self-driving standard equalling any other. That's because Apple has so much R&D money to spend and so many vast brains available to it.

Where your reporter differed from the common view was that I was sure Apple would in the end conclude it wouldn't actually want to do so. Because carmaking is far more troublesome and far less profitable than the businesses Apple is used to and is so good at.

(Note to commenters who will inevitably pitch in below: I'm not saying, and I'm not not saying, that Apple products and services are 'good'. I'm saying that Apple is good at making money off them.)

As far back as February 2015 I wrote a piece on this site that explained my reasoning. Even when Apple recruited a high-profile Fiat-Chrysler engineer five months later we re-ran my opinion because it hadn't changed. It was quite lengthy but if you've time you can read it here.

If you don't have time, I'll summarise. Yes, Apple has the money to develop a car. If done well, it would further polish its brand. And of course the people riding in this autonomous car would be the perfect market for more of Apple's online services. That's the upside.

But the downside is far bigger. I realise making a smartphone or computer or VR headset is difficult. It needs huge R&D. It has to be beautifully marketed. It has to clear complex regulatory hurdles. It needs big capital investment. But if you do it as well as Apple, the profit margins can be 100 per cent or more.

To successfully launch a car, the R&D requirement, the marketing nous, the regulatory hurdles and the capital investment are all perhaps an order of magnitude more than for a phone. Yet the profit margins are generally about an order of magnitude less.

I always thought Apple was capable of doing a car. But I also thought it was smart enough to resist doing a car. So it proves.