Hacker News Reader

Comment by christophilus | Hacker News Reader

If I was an Apple shareholder (I guess I am, indirectly through Berkshire), this would piss me off. Apple is in a very good business. Cars are a terrible business. Just compare Apple’s margins to any car company. Also, it’s really hard to move into a business that is widely outside your core competency. It can be done, but the effort is huge, and I suspect the median track record is poor.

View on HN

I'm a small time Apple shareholder and have the opposite reaction. Apple is sitting on 300 billion in cash - I expect them to do something with it. They need to move into some other market because their existing ones are tapped out. Cars are a great fit:

1. Big enough market for an investment of 10s of billions

2. Its international (quit a bit of that money is stuck overseas)

3. Making electric cars isn't too hard (see Tesla)

4. Its a consumer product and they have the best consumer brand which they can easily leverage.

5. The car market is poised to be radically disrupted in the short term - electric cars/self driving cars

> Making electric cars isn't too hard (see Tesla)

I don't know, I think Tesla is a good example of how difficult it is to penetrate the car market as a new company. It took them nearly 20 years to get where they are today, and it's not like that was 20 years of smooth sailing. From what I've read they came close to going under multiple times. Aren't they the first major new US car company to start up and not go under since the early 20th century?

The situation for Apple is certainly different, given their size and the massive leaps in terms of EV tech compared to when Tesla started out, but let's not trivialise the complexity of the task and the inherent financial expenditure and risk.

Tesla's worst year (2017) had them at -3.5B$ cash flow. Apple has 200B$ in cash reserves. With that kind of money they could afford to purchase an existing car company and sustain similar losses for a few decades.

> Apple is sitting on 300 billion in cash - I expect them to do something with it.

“Do something with it” doesn’t have to be reinvesting within the company. Apple has been doing a good job returning excess cash to shareholders, spending roughly $250 billion since 2015 to reduce shares outstanding from 22 billion to 17 billion.

> Apple is sitting on 300 billion in cash - I expect them to do something with it.

Why can't they just pay it out to shareholders and let them figure out how to invest it?

They can, but then their company doesn't grow. Why would you do that?

They have been. Apple has returned over half a trillion dollars to shareholders over the past 6 years or so. They have pledged to be cashflow neutral going forward. They do still have a monster cash reserve, but they are also very good to shareholders at the same time.

Edit: corrected an order of magnitude error in figures! Thanks umeshunni

I think you mean half a trillion

I think the Goal would be Uber, but with a fleet of Apple Cars. I still dont see how selling and servicing Apple Cars would work for Apple if it is sold as an originally car. That large investment and sunk cost would be a good use for its Cash. ( And it would be part of their Services Revenue ) Apple also gets to trial and gather Data with their current Map Data Collection vehicle.

The problem is there is nothing, absolutely zero indication that we can crack Level 5 self driving within next 5 years. It is always easy to get the first 80%, the last 20%, the small and minor details will often take as long if not longer than the first 80%. We have just arrived at the 80% point, and there is always the illusion of we are close to Self Driving Goal. And we are not.

And apart from that there are no indication as to how Apple is competing with Batteries. Tesla as a car manufacture may be easy to replicate, ( only on a relative scale, it is actually difficult to make cars in mass quantities, especially with Apple that demands perfection. Unlike Tesla ) but Tesla Battery is at least 4 - 5 years ahead of everyone else from both technological and manufacturing. And no have seems to have shown a plausible plan of how Apple is going to tackle this.

Do we need level 5?

Waymo has level 4 robotaxis that anyone can request after landing at the Phoenix airport, by just downloading the app. I feel like this use case is sufficient to build a business around.

Apple makes more money per unit selling an iPhone than most automakers make from selling an entire car.

The auto industry has historically been a low margin, low volume, high capital investment industry with significant government subsidies.

They make money from servicing the car, which Apple is quite skilled at capturing as well..

Which is expected to be severely reduced with EVs unless Apple's plans are to enter the ICE market.

Fair point.

Makes me wonder if they're going to try to make money off of services and subscriptions...

One can say many things about Tim Cook, but not that he doesn't understand "business". So if Apple makes a car, they certainly have a plan on how to make a profit from it.

>One can say many things about Tim Cook, but not that he doesn't understand "business".

He understands business perfectly, but does he understand product?

I don't know, but so far under his lead, Apple managed very well selling the new products they bring to the market.

Have they? The Apple Watch is selling well now after a few iterations. Have any other products launched that have sold well?

M1 looks good, but it's on the back of several years of lackluster laptops and things nobody wants like the touchbar. The pro video and audio community is increasingly alienated by $700 wheels and are switching to Windows or Linux. Earpods have been a success but has the Homepod? Iphones have been iterating but not really revolutionizing.

I'd say his record is pretty spotty.

I was talking from the business side and if you look at Apples ernings, they are excellent. So excellent that Apple has become the most valuable company of the world. It is the sum of all the products launched and marketed. The Macs had a few bad years, mostly because of the keyboards and the lack of a Mac Pro. They fixed the keyboards and the 16" MB Pro is selling like hotcakes, wait times are often long. And so far their switch to Apple Silicon exceends every expectations. I don't think the pro video and audio community is switching because of those wheels, which certainly are overpriced, but because Apple waited too long for a new Mac Pro and the current machine is extremely expensive. This all might change a lot with Apple Silicon though.

Edit: after using the touchbar for a while, I love it. For a lot of tasks it is a great addition to their laptops, especially when you don't have a mouse around.

>if you look at Apples ernings, they are excellent

That's a business persons qualifier for success, it's not a product persons qualifier for success.

Steve Jobs spent his days thinking about how to make the best computer or phone.

Tim Cook spends his days thinking new ways to reduce the BOM of the product by removing things from the box or changing parts, how to carve the features into a product matrix to cause people to spend more.

How much of that is driven by his own success vs. inertia from the success of his predecessor? I've heard many people say that they don't want to leave the ecosystem because they're already so invested into it.

The finances? Most of his own success. Even with Steve Jobs still at the helm, it was Tim Cook who managed the supply chain and operations. Tim Cook probably isn't the product manager Steve Jobs was, though Jobs sometimes went badly astray with his decisions too. But from a business point of view, Apple is doing greater than ever.

And yes, I was also someone who got unhappy with the Mac ecosystem and partially stayed because of being too much dependent on the eco system, but also because of the lack of true alternatives for my requirements. However, this has changed drastically with the switch to Apple Silicon, now it looks like a strong technical choice again.

Nobody was making hundreds of billions off of cell phones, either. Until Apple suddenly did.

Exactly.

Apple's not going to go into cars unless it's confident of being able to make equivalent margins.

That's the entire point.

Cars in the future will be different than Cars of the past. It will be a high-margin business. Exactly the same as it was with "dumb phones" to "smart phones". Esp. with semi self driving.

I completely agree but then Tesla came along.

Tesla isn’t really that profitable, especially relative to market cap.

They could have easily bought like 40% of Tesla a couple years ago, instead they were fucking around with their own car idea for years and years.

Buying 40% of Tesla would have been a drop in the bucket for Apple, and it would have already payed off big time.

They should be very happy in assuming they have a good plan. You are assuming they are planning a traditional biz model.

I am an Apple share holder and I am thrilled. How did you feel when the first iPhone came out? Isn't this similar?

If you make a different enough product, you don't need to have similar prices to your competitors.

Same thought.

is BRK share somewhat similar to a Mutual Fund unit ?

Reply on news.ycombinator.com