Fear of Apple’s perpetual growth plateauing has plagued the company in recent years, but a new analysis of Apple’s research and development spending suggests it is preparing to pivot towards an entirely new industry. Enter the Apple Car at last?
We’ve been discussing rumors of the fabled Apple Car for years without any particularly damning evidence to suggest the tech company is in fact preparing its own vehicle platform. We do know the company has a growing team of hundreds of automotive experts working on the lucrative “Project Titan,” with possibly more than one development site, and an affinity for classic Fiats.
But the safe bet has been on the company developing a connectivity platform to integrate into existing vehicles, or possibly some kind of autonomous ride-sharing vehicle, not an Apple-branded manufacturing attempt at bringing a car to market.
However, an analysis by Neil Cybart published this week on Above Avalon, a blog dedicated to following the business trends of Apple since 2010, suggests that patterns in the increased research and development spending by the company could prove it is preparing to launch its next big product.
The popular suggestion at the moment? Fax machines.
No, the Apple car, of course. The analysis report argues that a spike in research and development spending since 2014 fits an existing pattern of similar increases. The charts below from Above Avalon displays a step pattern in expense increases in research and development based on company reports:
The previous spike in research and development expense beginning in 2010 was followed by a flattening of spending signifying development of the Apple Watch. Then, in the third quarter of 2014, R&D spending began to grow exponentially only to flatten out again in 2015, suggesting the company is currently in the development stage on a new project.
The report outlines a few possibilities for what the company is developing. The first is simply that costs have increased to maintain an expanded lineup for the brand. More gadgets equates to more spending to keep the software, services, and hardware updated. However the previous pattern in spending suggests that the increase in expenses demonstrates more development work being done than simply continuing the existing product lines.
The suggestion that the company is developing something new could, of course, be just about anything Apple can image consumers can connect with and want to purchase that fits within the brand lineup. The report suggests this new product is most likely the Apple car. From Cybart on Above Avalon:
Apple is not spending $10 billion on R&D just to come up with new Watch bands, larger iPads, or a video streaming service. Instead, Apple is planning on something much bigger: a pivot into the automobile industry.
The word “pivot” has become a buzzword lately, often misused to simply mean change. In reality, pivoting is actually a sign of strength as a company takes what it learns from one business model in one market and applies it a new one with a different business model. Apple would be taking lessons learned from its long-standing view on the world based on the Mac, iPod, and broader iOS lineup to begin selling an electric car.
This sounds incredibly ambitious and bold, and that is the point. Apple wants to move beyond the iPhone. In this regard, pivot seems like the wrong word to use since the iPhone is a very successful product generating more cash flows than the rest of Apple’s product line put together times two. However, it is this success that ultimately serves as the greatest motivation for Apple management to figure out the next big thing.
Cybart continues to make the argument that an electric car would not just be another product line, but a new platform for the entire company to pivot towards. As the tech industry and automotive industry continues to collide on the development of electric and autonomous vehicles, connectivity will be the biggest development goal, and selling point, of the vehicle of the future.
Reports discussions between Apple CEO Tim Cook and German automaker giants BMW and Daimler (owners of Mercedes-Benz) suggest the company is seriously interested in vehicle development, possibly out shopping for an experienced, established manufacturing partner. However these discussions, and similar talks between Google and General Motors, reportedly failed over disagreements on who would manage consumer and product data.
Apple has undoubtedly shown interest in the automotive industry, and assuredly has the capital to fund any project it dreams up. But with the company’s effective level of secrecy leaving “Project Titan” in a fog of rumors, is the car of the future really going to be Apple’s next big thing?
Hat tip to Kyle Mathews and Ed Niedermeyer via Twitter.