While most people are excited about the possibility that Apple might build a car to take on Tesla, former CEO of General Motors, Dan Akerson, has some warning words for Tim Cook: namely that Apple should steer clear of getting into the automotive industry.
“If I were an Apple shareholder, I wouldn’t be very happy,” Akerson told Bloomberg. “I would be highly suspect of the long-term prospect of getting into a low-margin, heavy-manufacturing.”
Well, if anyone would know, it’s the ex-head of beleaguered GM.
Akerson ran GM from 2010 until last year, when he voluntarily stepped down. Although Akerson pushed the company to investigate new technological solutions — such as expanding its electric car offerings — during his time at the top, his criticisms will be familiar to anyone who remembers how the music and smartphone industries reacted to Apple’s entry into a new market.
“They’d better think carefully if they want to get into the hard-core manufacturing,” he said, referring to Apple. “We take steel, raw steel, and turn it into car. They have no idea what they’re getting into if they get into that.” Akerson also notes that, “A lot of people who don’t ever operate in [the automotive industry] don’t understand and have a tendency to underestimate [it].”
While these criticisms are perfectly understandable for anyone defending an industry they’ve been a leader in, it’s also important to note how many people have voiced similar sentiments about Apple getting into new product categories — just to backtrack on them later. Most recently, Swatch CEO Nick Hayek said that he was skeptical of a coming smartwatch revolution, only to recently announce his company is getting ready to launch a new Swatch smartwatch boasting (sound familiar?) mobile payments and a variety of other Apple Watch-style functions.
Akerson also shows himself to be slightly ignorant of Apple’s business model when he describes Apple as a company interested in high-margin hardware only. “Look at the margins of an iPhone versus a car,” he told Bloomberg. “I’d rather have the margins associated with the phone and produce [ 74.5 million of the devices, as Apple did last quarter].”
Akerson is certainly correct that high-margin devices make up the majority of Apple products, but Apple has shown itself to be more than happy to explore other business models in the past — so long as these work for both Apple itself and the end user. Apple TV, for instance, follows the Kindle-style model of cheap devices with premium content. If there is another way for Apple to monetize a car, which doesn’t simply rely on a one-off payment, it will certainly do so.
The ex-GM boss did acknowledge his admiration for Apple’s CarPlay technology, however. Saying that Apple would be better off partnering with the automotive industry, rather than rivalling it, Akerson says that, “I’d have turned over the infotainment and interconnectivity of every GM car” to Apple, were he still running the show.
If only Apple’s car ambitions were still that small!