With technology behemoths such as Google or even Apple looking towards the automotive industry as the next frontier for innovation, they could stare the reality in the face: building and selling autos is times harder than smartphones.
Industry veterans, critics and analysts all warn the automotive sector is different from the industries the two giants have made wonders so far. There are massive costs involved: you need besides research and development some plants to build your products, sales and service systems to deliver and care for your vehicles and numerous liabilities as human lives are now also at stake. Just look at the staggering recall record of last year – 64 million vehicles, more than twice the old threshold of 30.8 million set in 2004. GM meanwhile paid $5.3 billion for faulty ignition switches, Toyota or Honda paid huge penalties for not reporting safety defects and victims while VW AG has already provisioned $7.3 billion to cover the costs related to its emissions cheating scandal. “I think, like so many Silicon Valley techies, that they believe they are smarter than the world’s automobile business, and that they will do it better,” comments industry veteran Bob Lutz about the technology companies.
While Google and Apple have a huge lump of cash to cover expenses – around $270 billion in the bank in between – transforming into traditional automakers would see them pay the same high costs as GM or Mercedes-Benz, for example. Their answer could be simple and if successful – turn into a breakthrough – they could go towards revolutionizing the auto industry without becoming real carmakers.