On Roads and Apple Cars

An abundance of evidence suggests that Apple is developing a car. Significant to their motivation may be the fact that automotive sales exceed $1 trillion of revenue per year in the US alone, and thus are one of the few consumer goods that command greater spending than smartphones. The rumors started with frequent sightings of Apple-leased Dodge Caravan minivans on public roads. The minivans are equipped with cameras and other apparatus, sparking speculation that they either may be part of a Streetview-style mapping operation or that they may represent an attempt to develop a self-driving car. For a couple of reasons, I have been virtually certain since the initial article that they represent the former rather than the latter:

  1. Per the original article, Rob Enderle claims, “it’s a self-driving car rather than a mapping car.” The fact that Rob Enderle claims it’s not a mapping car should make you fairly confident that it’s a mapping car.
  2. Apple vans have been spotted in Hawaii. It seems incredibly unlikely that Hawaii would be a convenient test location for any Apple Car, self-driving or otherwise.

The Economics of Mapping

Adding to my confidence that the vans represent a mapping effort is the fact that Streetview-style maps are surprisingly cheap to create. Apple Maps has improved tremendously in coverage and accuracy since its rocky 2012 debut, but Streetview is one genuinely useful feature that it still lacks.1 It makes sense that Apple would add Streetview if the cost is reasonable, but how much might that cost be?

If a mapping van averages 20 mph – including stops, breaks, pauses for bad weather, etc. – for 4,000 hours per year (two shifts), then each van can cover 80,000 miles per year. The United States currently has 8.7 million lane-miles of public roads. Thus a fleet of 110 vans could map every public road in the US in one year. If accurate mapping requires multiple passes, it might take several hundred vans – conservatively assume 300 of them.

Hiring a light vehicle typically costs up to several dollars per mile, so the operating costs for a single van might be as high as $300,000 per year. Even at that level, total costs to map every public road in the US would be “only” $90 million (plus associated hardware, server, programming, and data processing costs).

In reality, mapping efficiency is probably higher than estimated here, and Apple needn’t map every public road in the first iteration (about 30% of lane-miles are on unpaved rural roads that receive almost no traffic). Still, even $90 million is much cheaper than I would’ve expected. It equates to 8 hours of operating income during one of Apple’s most recent financial quarters.

The bottom line is that creating Streetview-style maps costs a drop in Apple’s revenue bucket and eliminates one of the last two big gaps in their mapping product. It seems like a no-brainer, and I will be very surprised if they don’t announce this feature by iOS 10, and possibly as soon as Monday.

The Apple Car

Although the camera-equipped vans are clearly related to maps, not car development, it is immediately clear why Apple might also have an interest in building a car. Cars represent a market that has existed for the better part of a century but has yet to be commoditized. From a purely utilitarian perspective, the Toyota Corolla and Toyota Sienna are more than “good enough” to meet the transportation needs of almost all American families; higher-end models and luxury vehicles provide virtually no functional advantage in real-life driving scenarios over these baseline vehicles. Yet many Americans buy vehicles that are significantly more expensive than a basic sedan or minivan. A market like this one that resists trends towards commoditization is one in which Apple can profit from its design skills.

For the same reason, I’m skeptical that Apple would want to design a fully autonomous vehicle like the proposed Google self-driving car. Fully autonomous vehicles make little sense to own, particularly in urban areas, because they can simply be summoned on demand as robo-taxis. The problem with a robo-taxi, from Apple’s perspective, is that most people don’t particularly care what kind of taxi or rental car they hire, as long as it meets a certain baseline. Hence traditional taxis (and now UberX and Lyft) have much more market share than limousine services, and midsize sedans from Kia, Hyundai, and the Big Three dominate rental fleets. The robo-taxi market, which would almost surely become commoditized, would be an unattractive market for Apple to play in. But the good news for Apple’s automotive ambitions is that true mass-market Level 4 autonomous vehicles are likely still far away.


1. The other is transit directions, but it sounds like this too may be addressed shortly.


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