Is Apple Ditching the Car Business?

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Apple Inc. (NASDAQ: AAPL) has been rumored to have been hiring hundreds of people to work on an also-rumored self-driving car. But according to a report Friday in The New York Times, the company has fired dozens of employees in its car development group as part of a “reboot” in Apple’s plans.

In July, Apple veteran Bob Mansfield was put in charge of the company’s Project Titan, purportedly its self-driving car initiative. Mansfield apparently has decided that building a self-driving car from the ground up, a la Tesla Motors Inc. (NYSE: TSLA), was not the correct approach for the world’s most valuable company.

For one thing, designing and building a car takes a long time, and the interest and investment in self-driving cars is at a near fever pitch. Last month Apple announced a $1 billion investment in China’s leading ride-hailing service, Didi Chuxing, at the same time that Didi announced a similar sized investment in U.S. ride-hailing unicorn, Uber. So Apple got its foot in the door with the two leading firms that are believed to be most likely to benefit from self-driving technology.

Is scaling back on what seemed to be its original plan a smart move for Apple, or is it an admission that the company just doesn’t want to throw more good money after bad in pursuit of a dream shared by dozens of other players? Probably a little of both.

Certainly an estimated delivery date for a self-driving car in 2020 or 2021 was too far into the future to position Apple as a leader in the field. And if you’re not going to lead, then you need to offer some refinements that are unique. Think iPod and iPhone.

Creating a world-class user interface is something that Apple does better than any other company in the world. Building a software ecosystem around that interface is another proven winner for Apple. Making hardware leaps like the iPhone takes time, and that is one thing that Apple doesn’t have in the self-driving car space.

Think about how hard it has been for the company to come up with the next big idea. Tablet sales are slow and the Apple Watch has not done the trick either. Apple now lives on the iPhone, and the new iPhones released last week have a lot of technological improvements but generated virtually no enthusiasm among analysts or investors looking for the company to deliver something no one ever thought they needed.

The self-driving car is not something that most consumers think they can live without. Widespread adoption may be a decade or more away. By putting its development effort into the software that controls self-driving cars and the systems that consumers will use to control those cars, Apple is placing its bets on its strengths rather than on its hopes.

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