By Daisuke Wakabayashi and Mike Ramsey
Apple Inc. has revolutionized music and phones. Now it is aiming
at a much bigger target: automobiles.
The Cupertino, Calif., company has several hundred employees
working secretly toward creating an Apple-branded electric vehicle,
according to people familiar with the matter. The project,
code-named "Titan," initially is working on the design of a vehicle
that resembles a minivan, one of the people said.
An Apple spokesman declined to comment.
Apple ultimately could decide not to proceed with a car. In
addition, many technologies used in an electric car, such as
advanced batteries and in-car electronics, could be useful to other
Apple products, including the iPhone and iPad.
Apple often investigates technologies and potential products,
going as far as building multiple prototypes for some things that
it won't ever sell. Any car would take several years to complete
and obtain safety certifications.
But the size of the project team and the senior people involved
indicate that the company is serious, these people said. Apple
executives have flown to Austria to meet with contract
manufacturers for high-end cars including the Magna Steyr unit of
Canadian auto supplier Magna International Inc. A Magna spokeswoman
declined to comment.
Apple's industrial design team is staffed with several people
who have experience at European auto makers. Last year, Apple hired
Marc Newson, a famous industrial designer and close friend of the
company's design guru, Jony Ive. In the past, Mr. Newson created a
concept car for Ford Motor Co.
Apple hopes to put its stamp on the electric vehicle market in
the same way it did the smartphone with its iPhone, said a person
familiar with its work. Even though Apple defied expectations of
slowing growth with a 30% rise in revenue in the quarter ended
December, the company is under constant scrutiny of where its next
breakthrough product will come from.
Earlier this week, Mr. Cook said at an investor conference that
he does not believe that companies naturally start to slow as their
revenue grows. He said this was "dogma" and that Apple didn't
believe in putting limits on what it was capable of.
A side benefit of the project, according to one of the people,
is that it has persuaded many Apple employees who were thinking of
leaving the company to stay and work on an exciting new endeavor
without the pressure of churning new products every year.
Other Silicon Valley giants are looking at autos. Google Inc.
has been working on a self-driving car for years. The head of
Google's autonomous vehicle project said last year that the company
aims to forge a partnership with auto makers to build a
self-driving car within the next few years. A self-driving car is
not part of Apple's current plan, one of the people familiar with
the project said.
"There are products that we're working on that no one knows
about," Chief Executive Tim Cook told interviewer Charlie Rose in
September. "That haven't been rumored about yet."
Building cars is capital intensive, costing hundreds of millions
of dollars for design, tools and production and certifications.
Auto makers also must help ramp up a supply network for the
thousands of components that go into a vehicle.
Battery-powered cars add another dimension. Tesla Motors Inc.,
for instance, has seen losses widen amid rising expenses to build
an electric sport-utility vehicle. It expects to spend $1.5 billion
on capital expenditures and R&D this year.
Mr. Cook approved the car project almost a year ago and assigned
veteran product design Vice President Steve Zadesky to lead the
group, the people familiar with the matter said. Mr. Zadesky is a
former Ford engineer who helped lead the Apple teams that created
the iPod and iPhone.
Mr. Zadesky was given permission to create a 1,000-person team
and poach employees from different parts of the company, one of the
people familiar with the matter said. Working from a private
location a few miles from Apple's corporate headquarters in
Cupertino, the team is researching different types of robotics,
metals and materials consistent with automobile manufacturing, the
people said.
In September, Apple hired Johann Jungwirth, who had been the
president and chief executive of Mercedes-Benz Research and
Development North America, which has operations in Sunnyvale,
Calif., near Apple's campus, according to his LinkedIn profile.
The Financial Times reported earlier that dozens of Apple
employees are researching automotive products, citing people
familiar with the company.
Over the past 15 years, Apple has built a track record of
upending industries. Its iPod music players and iTunes service
accelerated the shift to digital music. The iPhone established the
smartphone market and changed the notion of mobile computing. Apple
plans to introduce its Apple Watch in April, which the company
hopes will create a market for wearable devices.
Manufacturing a car is enormously expensive. A single plant
usually costs well over $1 billion and requires a massive supply
chain to produce the more than 10,000 components in a car. Elon
Musk, chief executive of electric-car maker Tesla, complained last
fall that it is "really hard" to make a car amid the company's
struggle to ramp up production of its Model S sedan.
The expense is a barrier to entry to many potential competitors,
but would be less of a hurdle for Apple, which reported holding
$178 billion in cash as of Dec. 27, 2014.
Tesla was able to ramp up its manufacturing quickly and
relatively cheaply by buying a former Toyota Motor Corp. factory in
Fremont, Calif., for $42 million in 2010. Tesla has since invested
hundreds of millions of dollars to tool up the factory and still
only produced 35,000 vehicles in 2014.
Auto makers tend to operate their own factories. For years,
Apple has relied on contract manufacturers to build its products.
That has helped Apple keep a lean supply chain and reduce inventory
exposure.
Apple has been working with auto makers on bringing its software
expertise into the car. More than two dozen auto makers plan to use
its CarPlay service, which allows a driver to access Apple services
like iTunes music, maps and Siri through the vehicle's dashboard
information system.
Write to Daisuke Wakabayashi at Daisuke.Wakabayashi@wsj.com and
Mike Ramsey at michael.ramsey@wsj.com
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