In Depth: The Apple Car could benefit Uber - or destroy it

Introduction

Lost in yesterday's excitement over the Apple Watch and a new MacBook was Apple's intention to create electric cars. Recently the conversation surrounding the possibilities of Apple a smart car has become less about "if" and more about "when."

Fueling the speculation are recent articles by the likes of Wall Street Journal, which reports that Apple has several hundred employees working on an electric vehicle that is being concealed under the code-name "Titan," and resembles a minivan. Bloomberg has reported that Apple could start production of an electric car as soon as 2020, which seems awfully soon, until you consider that this is the world of technology we're talking about, which moves far faster that we can logically process. Just look at where we were five years ago with smartphones.

Apple has remained tightlipped on the matter, but even if it is working on a car, that doesn't mean it will actually go to production. It could also be working on something car-related, like an alternative to or improved version of its in-dash touchscreen system, CarPlay. But let's, for the sake of argument, say that it will launch a car in the not too distant future. What would it mean for on demand businesses like Uber and the overall "Uberification" of the world which, by 2020, likely will have exploded in growth?

Taking on Tesla

There is reason to believe that Apple is entering the automotive market with a competitor in mind - that competitor is Tesla, the company that has proven that if the there's one thing Silicon Valley startups can't succeed in, automobiles aren't it. This is interesting because Apple doesn't usually invent something with rivalry in mind; or rather its products are not designed solely to go head to head with existing products by other companies. For Apple, it's usually the other way around. Similar to Uber, Apple revolutionizes and sets the bar for new standards. It inspires competition and disrupts the current order of affairs. Like the Walter White of premium brands, Apple is the one who knocks.

And yet, Tesla, with its Model S in particular, has created an impeccable machine that is wowing drivers and passengers around the globe. Consumer Reports has identified it as its "top-scoring" car and the "best car it has ever tested." That's some hefty praise and Apple is clearly paying attention.

Last month, Business Insider reported that it received an unsolicited email from an Apple employee saying that Tesla employees were "jumping ship" to work on Apple's new automotive initiative. The article also noted that according to LinkedIn, about 50 people currently employed at Apple had previously worked at Tesla, mostly as engineers. Undoubtedly, those 50 are among the "several hundred" WSJ has cited as working on the new car.

A feasible business model

While Apple may want to make a car that could give Tesla's Model S "a run for its money" as a source tells Business Insider, it's not going to want to stop at that. Unless Apple is partnering directly with Tesla, the tech mammoth is going to want to squash Tesla by creating a trailblazing vehicle. This is where Apple's business model will come into play, as could Uber and other on-demand car services like Lyft and Sidecar.

Tesla may be a supreme product, but it's not a very popular one - at least, not in the states. This isn't just because it's expensive, it's because it's difficult to purchase in much of the country. Tesla sells its cars directly to consumers, a method that cuts out the middleman and allows customers to order online. It's an appealing sales model for today's tech-loving, dare we say Uber-minded consumer, who is all about transparency and getting what it wants without any unnecessary hassle or loaded fees. But manufacturer direct sales methods are banned in 26 states. While one can still order a car online and arrange for delivery, that's not a terribly appealing option for the average consumer.

And, who make up the majority of Uber's drivers? The average consumer. That's a big reason behind why Uber is so successful. Anyone with a relatively new car and a clean driving record can join its troops. If Apple is making a car like Tesla's, it would be smart to make it more affordable (by 2020, that should be doable), and also to sell it in a way that doesn't cross red tape. This would not only benefit Uber, which could then begin to offer it users the supreme Apple car experience, likely as one of its luxury options, it would benefit Apple by getting its products on the road. What's more, it would save the company from a lot of legal headaches.

"Tesla has been waging a state-by-state battle to sell directly to consumers, which dealerships say violates franchise laws," Joe Wiesenfelder, Executive Editor for Cars.com tells TechRadar. "Tesla gets away with it in some states, in part, because it's a relatively low-volume seller. If a company the size of Apple were to attempt the same, I suspect it would be in for a battle royale from dealership organizations, which are among the most politically powerful groups in the country."

What it means for Uber and SMBs

Invest in Uber and team up with small businesses

Wiesenfelder adds that Apple would probably "build out a dealer network or partner with an existing automaker." It could partner directly with Uber or with a similar company. That could be a clever move, but it would be difficult to pull off without shattering Uber's current business model, one that relies on employees using their own bought or leased vehicles.

If - as we have reason to suspect - the Apple Car is autonomous, i.e. self-driving, then it could herald a new age for the Ubers of the world. Ideally, the consumer would request a car through the Uber iOS app as she does today, but have a more personalized, guaranteed safe experience. Perhaps a screen on the passenger seat would play selected media from her iTunes library or enable her to browse Safari. She'd pay with Apple Pay. She'd be guided by Apple Maps. Probably, she wouldn't just use Uber's Apple Car feature for her own rides, she'd use it for those she doesn't have to be present for like deliveries and pick-ups. It's not as though she'd have to tip anybody for his or her services.

In that same vein, small businesses could use the Apple Car for services that require ground transportation. They wouldn't have to hire a driver, they'd just have to hire a car - or even a fleet of cars.

"If the assumption is that the Apple Car is a fully connected car, then as small business delivery vehicles they can seamlessly talk to each other as part of a hive of vehicles, providing real time updates on schedules and drop off/pick up confirmations," says Jane Nakagawa, Managing Director of Portia Consulting. "Routes can be adjusted depending on traffic updates/road conditions. Cars can communicate seamlessly among the fleet making decisions in which vehicles will perform what tasks, where. Customers would have the ability to change delivery locations in real time."

Pave its own road

But if Apple is going to go to through all this trouble to create a connected car - why would it stop at just the vehicle? Why wouldn't it go all the way and create its own car service? It has the technology, the capital, the talent, and the consumer trust to do so. And hey, maybe it could take on Google by then, which may have launched itsown car service.

An Apple Car service would devastate Uber, Lyft, Sidecar, and whatever other like-minded businesses have popped up by 2020, but it would help it to maximize profits and disrupt the car service industry even further. Of course, this is all just conjecture, some of it a bit wild, but when it comes to Apple, the possibilities go from zero to 60 in seconds.

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