Why Apple’s entry into the auto market has been repeatedly frustrated? Too much emphasis on confidentiality culture, too overbearing to suppliers


Key points
Tencent technology news on February 24: for a long time, Apple has been seeking to enter the automotive industry, but its over emphasis on confidentiality culture and domineering approach to subcontractors seem to hinder it from reaching a key partnership and frustrate its ambition. These factors are seen as a reason for the suspension of Apple’s negotiations with major automakers over the autonomous electric vehicle (EV) it is developing.
Obsessed with secrecy culture
Many former employees say Apple’s obsession with secrecy is almost like a cult. Kia, a subsidiary of South Korea’s Hyundai Motor Company, has been negotiating with iPhone designers, and various reports say that the two entities were even close to reaching an agreement. But Hyundai claimed earlier this month that it had not discussed co developing what Apple calls “I-car.”. The talks are thought to have broken down because Apple is clearly uncomfortable with the alleged breach of confidentiality in potential manufacturing deals.
But recent comments by ashwanti Gupta, Nissan’s chief executive, suggest that there are more obstacles to the automaker’s alliance with the technology giant. As we all know, Apple has approached Nissan, but the “short” negotiation ended in failure due to what Nissan called the “brand” issue. Gupta hinted that Nissan hopes to gain the upper hand in any potential new car development. Apple, however, is thought to want to design, market and sell cars of the future, while the automaker assembles them, but that’s clearly not what Nissan wants.
Too overbearing with suppliers
Apple has a strong brand influence, driven by its complex design and global fans. Given Apple’s influence and position in the industry, the companies they work with dare not offend it. Despite the low profit margins, manufacturers have to follow Apple’s advice, because entering the company’s supply chain is seen as a test of advanced technology. This has enabled the technology company to make unilateral demands, which the subcontractor has been forced to agree to.
“Apple is known for its strict management of its brand,” an industry source said. Unless the OEM makes a huge profit margin, in many cases, cooperation will not be very good for them. ”
Apple, for example, informed Samsung display, the iPhone’s OLED panel supplier, that it would remove specific terms from the contract. The clause provides that if there is an oversupply, Apple will compensate for unsold products. SamSung monitor declined to comment.
Another industry source said: “apple is a tough business customer because it has high requirements for suppliers.” As for the telecom companies with Apple’s mobile phone sales channels, Apple has always insisted that SKT, KT and LG uplus pay for the expenses related to iPhone TV ads, although the mobile operator logo is added at the end of each ad.
An industry official said: “apple is the only smartphone manufacturer to ask telecom companies to pay 100% of advertising costs. In other cases, the cost is shared between the manufacturer and the telecommunications company. ” Apple also asked its mobile operators to bear the cost of repairing faulty phones.
That led to an investigation by an antitrust regulator, which promised to set up a 100 billion won (about $90 million) fund to partly subsidize customers’ maintenance fees and support small businesses’ research and development. The mobile operator said it had no impact on advertising costs, as the technology giant did not make any specific comments. “According to Apple’s sales strength, apple is absolutely dominant in such contracts,” the source said
There are short board need to find cooperation
But compared with the car manufacturers that already have the ability to produce electric cars, Apple’s conditions for developing future cars seem less favorable. Given their market share, automakers don’t seem to be worried about Apple’s planned cars. The media quoted Herbert diess, VW’s chief executive, as saying the group “is not afraid of apple” given that the auto business will take longer to build up.
Moreover, considering that any expected transaction between the automaker and Apple may eventually result in the former only becoming a subcontractor and the latter not sharing its technology or R & D achievements, there seems to be no convincing reason for the automaker to enter into any partnership. Hyundai will continue to focus on developing its own brand of electric vehicles. Hyundai’s original e-gmp electric vehicle platform and Kia’s electric vehicle supply chain are its key advantages. Hyundai has an annual capacity of 7 million vehicles.
The reason why Apple has a firm foothold in the global smartphone market is that it has established an unprecedented ecosystem. In the future, the pattern of automobile industry is different, because the existing automobile manufacturers have advantages in this aspect.
Observers point out that Apple needs to work with established automakers to launch the self driving electric car it envisions. That’s because, while Apple may have key technologies in software, it has neither the expertise to make cars nor the supply chain to make them. The latter area is the entry point for automakers, but given the fact that some major automakers have been in business for more than 100 years, it seems unlikely that they would be willing to become subcontractors merely assembling Apple cars.
Based on the forecast of the explosive growth of electric vehicles and autopilot cars, the smart car will have the same effect as mobile phone. At the same time, Apple seems to be in a dilemma: it has to consider the future automotive market prospects while maintaining its dominant position in any partner.
Japanese automakers in a dilemma
As early as the end of 2014, Japanese Prime Minister Shinzo Abe disclosed that Apple was building its first technology center in Japan. This immediately sparked speculation that Apple might be looking for a Japanese partner for its secret project to produce autonomous electric vehicles. As a result, after Apple’s suspension of talks with Hyundai on auto cooperation broke down, the focus of the market once again fell on the eight Japanese automakers.

In the past two weeks’ results, almost every Japanese automaker has been asked if Apple has ever approached it to participate in its auto business. Mazda, Subaru, Nissan and Honda responded differently. It seems true that apple is looking for a partner in Japan. But for Japanese automakers, working with apple is a double-edged sword. If Apple really cooperates with Japanese companies and successfully enters the automotive field, this alliance may become a very powerful force in the process of global shift to zero emission vehicles.
On the other hand, the joint production of Apple branded cars could turn Japanese automakers into contract manufacturers, which many angry executives call “Apple’s moving box.”. After companies such as sharp and Panasonic shifted their focus from consumer products to parts suppliers for apple and Tesla, Japan’s electronics industry is facing profound introspection.
Apple has always been silent about its car ambitions, and it is not clear how it will find potential partners. But changing from a supplier of parts to an assembler like Foxconn will take Japanese manufacturing to a new level. According to Euromonitor, a research firm, the psychological blow will be greater for the auto industry, which accounts for 20% of Japan’s exports, because cars contribute more to Japan’s economy than even German automakers.
In some ways, Apple’s interest is seen as recognition of the quality of Japanese manufacturing, and apple has established partnerships with more than 900 Japanese suppliers. From the perspective of this US company, the fragmentation of Japan’s auto industry is attractive because smaller companies will not be able to make the huge investment needed to switch to electric vehicles. Even before the start of the battery powered car race, the combined market value of Japan’s eight automakers was less than half that of Tesla (US $750 billion).
At present, companies from Subaru, Suzuki to Mazda have formed a capital alliance with the industry leader Toyota, but this loose alliance will not be a permanent solution for survival. Faced with an uncertain future, some companies may be attracted by Apple’s capital and brand strength, which may help make electric vehicles mainstream. As expected, Toyota, the world’s largest automaker by car sales, did not face any problems with apple in its financial reports.
Globally, automakers are already working closely with technology companies, such as waymo, a sister company of Google, with Jaguar, Volvo, Renault and Nissan. Toyota has also teamed up with Aurora, an Amazon backed self driving start-up, which recently acquired the self driving division of Uber, an online car Hailing giant. (Tencent technology reviser / Jinlu)