6 ms·

As an Apple shareholder, I am thankful Apple has shelved plans to dump billions into a cyclical, low margin, low return business.

• coldtea 10y ago
  Low margin? They wouldn't be making Yugos. Like with their laptops and such, they'd be targeting the higher end of the market. Cyclical is also great -- that's exactly what the laptop and especially the phone market are.
  • brianfitz 10y ago
    Simply targeting the higher end market doesn't tell you anything about the margins of the business. You need to know the size of each segment of the market and then what can be done to increase margins in each segment. For Tesla, they can't simply stay in the higher end of the market as they need to get greater economies of scale with more volume. Like with the Model 3, they want to move down-market so that they can make the business model work in the long term. As it stands, they only serve the high end of the market and lose money on each car they sell.
    • CardenB 10y ago
      IIRC Tesla's margins are typically higher than competitors. They only lose money on each car because the R&D budget is wrapped into that. They lose money because they're investing into scale.
      • Meegul 10y ago
        IIRC from a shareholders call, a Model S has margins from 20-30% percent, even after R&D is taken out. Tesla's losses have primarily stemmed from capital expenditures.
  • intoverflow2 10y ago
    Apple products haven't been the high end of the market for a long time, they're mass produced, mass consumed, purely disposable tech.
    • j2bax 10y ago
      Do tell us what the high end of the laptop and mobile device market looks like and what products occupy it.
      • ChemicalWarfare 10y ago
        Laptops - macs are more "high end" (although sometimes that just means paying more for the same spec) then your typical best buy pc selection but the loaded gaming laptops with what I'd call a "high end spec" are almost 100% PCs.
      • applecarcont 10y ago
        OP has a point though: Macs have always historically been high-end and Apple's marketshare has historically hovered around 10%. Apple has come to dominate the high-end computer in recent years ― specifically the high-end laptop segment; at one point attaining 90% marketshare of laptops priced over $1,000 ― but that peak has receded and Apple never did penetrate the desktop market as much (which is another important segment foe high-end computers) On the other hand, Apple's first mobile device (the iPod) was decidedly mass market and mass produced as Apple offered products for every price and segment ending up with over 70% marketshare for ALL mp3 players. The iPhone is an interesting inflection point. Like the iPod it started out priced at the high end but Apple didn't quickly followup with cheaper products for all segments. Why not? The reason instead is that Apple went the mobile carrier subsidy route. The iPhone is mass market, mass produced and has ~50% marketshare in USA. However in markets where carrier subsidies aren't the norm e.g Europe, Apple has less than 20% marketshare. Guess which other major technology purchase receives subsidies/payment plans? Cars. Apple could feasibly sell 'high-end' cars on mass market contracts and still retain their margins. However car manufacturing is very hard and Apple doesn't have any leverage from their existing products to force an advantage from the car parts factories...
      • 10y ago
  • aetherson 10y ago
    I don't think he means "cyclical" like "they obsolete themselves quickly so you have to buy a new one," but rather "cyclical" like "when the economy is down, people just hang on to the car they have for 5+ more years rather than buy a new one." Margins is super complicated. iPhones don't cost more than Samsung flagships -- Apple's margins seem to come mostly from controlling manufacturing costs. Could Apple assert similar control over manufacturing costs for cars? Maybe! But maybe not. Cars are more complicated than phones. If a margin inflation gets passed along to consumers, well, there are more people willing to pay an extra $200 (compared to a lower-cost competitor) every few years to have an iPhone than there are people willing to pay an extra $20,000 every few more years to buy an iCar -- just because it's a lot more money. And to be clear, $20,000 is an equivalent margin to the $200, scaled up for costs.
    • hiringmanager 10y ago
      ICE cars are more complicated than phones, but I'm not sure pure-electric cars are that much more complicated. One of the nice things about the electric car business is the the part count is a lot lower, they are basically much simpler devices, and thus should be able to be made much more cheaply. We may see a Yugo level electric car for $10,000 in a few years. This would allow for margin expansion, especially if Apple can innovate in the manufacturing side (eg: go one better on automating the factory) Plus since currently a Toyota RAV4 level vehicle goes for $30k-$40k, if Tesla gets down to the low $30k, Apple could produce a car for the $40k price point and be making $10k-$15k profit on each one. Lower gross margin than the phone business, but offers the opportunity of significant revenue upside. Plus with Apple there would be follow on revenue as well. Since people are in the habit of paying mid $30k for a car right now, while there will be cheaper electric cars at the lower end of the market, Apple wouldn't require people to change behavior to be able to afford a car that gives Apple the kind of margins it wants. Plus I expect there will be several innovations that are things "only apple can do" that add value-- the interiors of cars and especially the electronics and instrumentation of modern cars are terrible. Even the Tesla which tried a new approach, I think has bad usability. There's a lot of opportunity there.
      • aetherson 10y ago
• Fricken 10y ago
  Low margin? Uber collects ~20% from the cost of every trip taken. Given the hypothetical that full autonomy is a solved problem, A premium robotaxi service could readily command Apple-grade profit margins. The barriers to entry are insanely high, of course, and that places Apple amongst a handful of companies with the resources to clear those barriers. Autonomous vehicle pioneers have recently amended their expectations for when autonomous car will be fully realized, claiming it will now be more than 20 years. This is a far cry from conventional expectations in the self driving car world 3 years ago, when it was assumed that one or several big industry players would be mass producing robotaxis by the mid-2020s.
  • CPLX 10y ago
    > Given the hypothetical that full autonomy is a solved problem lol
    • greedo 10y ago
      I can't see fully autonomous vehicles in my lifetime. Everyone will chime in to tell me about advances in robotics, ML, sensor technology and fusion, how many miles Google cars have driven, so on and so forth. I have approximately 30 more years before departing this mortal coil. Roads are tough. Sometimes they're covered in snow, ice, rain with poor visibility. Sometimes they're well constructed, other times they're in disrepair. That's just the technical side of the issue. The social side (at least in the US) is much more difficult. In the foreseeable future, any AV will have to share the road with "classic" cars, driven by humans of modest computing power. Trying to anticipate how they will interact should be interesting to say the least. And in our hyper-litigious and hyper-protective society, the clash between AVs and traditional cars will be difficult to resolve.
  • hodder 10y ago
    Margins depend on a competitive advantage. I was speaking about car manufacturing, though I personally doubt there will be sustainability to 20% margins in a car service. Uber may arguably have a first mover and scale network advantage. I personally doubt that will hold.
• Zigurd 10y ago
  Porsche makes a gross margin of $23,000 per car.