Apple Inc. has a tried and true approach to launching new products: The company designs in-house, sources its own components, and works with a contract manufacturer to assemble it for sale.
As the tech giant plots a foray into the car market, it could adopt a similar strategy — working with a lesser known contract manufacturer — after talks with some brand name automakers stalled.
To build a vehicle, Apple has three primary options: Partner with an existing carmaker; build its own manufacturing facilities; or team up with a contract manufacturer such as Foxconn or Magna International Inc.
The Cupertino, California-based company has reached out to automakers including Hyundai Motor Co., but the discussions have not gone well. In this scenario, Apple would develop an autonomous system for the vehicle, the interior and external design, and on-board technology, while leaving the final production to the carmaker. Such a deal would essentially ask an existing car company to shed its brand and become a contract assembler for a new rival.
A longtime manager at both Apple and Tesla Inc. said this would be like Apple asking bitter smartphone rival Samsung Electronics Co. to manufacture the iPhone. Apple wants to challenge the assumptions of how a car works — how the seats are made, how the body looks, the person said. A traditional automaker would be reluctant to help such a potentially disruptive competitor, said the person, who asked not to be identified discussing private matters.
Indeed, discussions between Apple and the car industry seem to have fizzled in recent months. Hyundai and Kia Motors Corp. confirmed talks on the development of an electric car, but backtracked soon after. Apple’s self-driving car team met with representatives from Ferrari NV last year. It’s unclear what was discussed, but the talks didn’t advance, according to a person familiar with the meeting.
In February, Nissan Motor Co. said it wasn’t in talks with Apple. Volkswagen AG Chief Executive Officer Herbert Diess said he’s “not scared” of Apple’s entry into the industry.
AG’s CFO recently said he sleeps peacefully.
For its computers, phones and tablets, Apple relies on contract manufacturers such as Foxconn, Pegatron, Wistron, Flex Ltd. and Luxshare. The iPhone maker has avoided building its own factories, an effort that would cost billions of dollars in construction, worker pay and training, along with new liabilities and complex deals with local governments.
Factories are generally low-margin businesses. Apple leaves that to partners, while focusing on product design and development. The company’s profit margins dwarf those of suppliers such as Foxconn and Pegatron.