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Bruce Newton20 Feb 2015
NEWS

Mercedes-Benz: Don't build an iCar!

Daimler boss can’t understand why Apple is interested in becoming a car-maker, as other brands also weigh in

Tech giant Apple will be biting off more than it can chew if it tries to become a car manufacturer, Daimler boss Dieter Zetsche has warned.

Speaking to motoring.com.au at the launch of the new Mercedes-AMG C 63 sports sedan in Portugal overnight (Australian time), Zetsche was dismissive of the threat Apple potentially posed to established players in the automotive industry with an ‘iCar’.

“If there were a rumour that Mercedes or Daimler planned to start building smartphones then they (Apple) would not be sleepless at night. And the same applies to me.

“And this is full of respect for Apple. That is what I am saying.”

News of Apple’s project ‘Titan’ broke this week, although it has reputedly been underway for a year and has hundreds of staff.

Daimler, owner of Mercedes-Benz cars, has lost its North American research and development chief, Johann Jungwirth, to Titan, while other experts said to have been recruited include the leading Australian industrial designer Marc Newson.

News has also surfaced of a lawsuit filed against Apple this month by electric car battery maker A123 Systems. The company, which makes batteries for BMW, Daimler and Tata, accuses Apple of poaching its employees.

Apple is a hugely profitable company, currently sitting on a $US178 billion hoard of cash and securities. The 80-million-a-year global new vehicle market offers an undoubted opportunity to spend some of that money, especially with the emergence of EVs.

But cars cost a lot to develop. Apple runs at about a 25 per cent return on investment (ROI), while an exceptional ROI for a car company would be 10 per cent.

Considering that income imbalance, Zetsche was clearly bemused by the concept of Apple becoming a car manufacturer.

“I don’t find any rationale (for Apple to build a car),” he said. “Why (Apple) with this kind of margin would now go into this business? I think investors will hate it because they don’t like conglomerates, they want focussed management on what they understand.

“Perhaps some neighbouring fields but not somewhere different. The fact you can listen to iTunes in a car doesn’t make it in itself consistent.

“I don’t know their strategy and I do not know what they are doing, but I would be very surprised if that proved to be right.”

Of course, Apple isn’t the only computer company to venture into automotive; Google has a long-standing autonomous project underway and revealed its first car last year. Elon Musk made his money selling out of Paypal before creating Tesla.

Zetsche hasn’t been alone in the car industry to question Apple’s new venture.

“I think somebody is kind of trying to cough up a hairball here,” retired GM chief Dan Akerson told Bloomberg. “If I were an Apple shareholder, I wouldn’t be very happy. I would be highly suspect of the long-term prospect of getting into a low-margin, heavy-manufacturing [business]."

Akerson said the car industry, with its extensive regulatory and safety requirements, is harder to succeed in than people realise.

“A lot of people who don’t ever operate in it don’t understand and have a tendency to underestimate [it],” he said.

“Look at the margins of an iPhone versus a car. I’d rather have the margins associated with the phone…

"They’d better think carefully if they want to get into the hard-core manufacturing. We take steel, raw steel, and turn it into car. They have no idea what they’re getting into if they get into that.”

Rendering from the Facebook page of Theophilus Chin

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