Project Titan Cutbacks: Apple Inc.’s (AAPL) Auto Ambitions Hit a Big Speedbump

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Apple Inc. (NASDAQ:AAPL) has been looking for its next big hit, and a self-driving, electric car looked to be it. However, Project Titan has been rumored to be plagued by numerous challenges that resulted in the company parachuting in new leadership for its Apple car.

Project Titan Cutbacks: Apple Inc.’s (AAPL) Auto Ambitions Hit a Big Speedbump

Source: Apple

Now Bloomberg is reporting AAPL’s auto ambitions are in trouble, with hundreds of staff departures, dropped plans to build its own car and a 2017 deadline to prove the feasibility of moving forward with developing a self-driving software platform.

Project Titan’s Secretive Road

With slowing iPhone sales in its future, Apple was looking for a new product that would deliver serious revenue. Not Apple TV or Apple Watch revenue, but big numbers.

The auto market — valued at nearly four times the size of the smartphone market and dominated by the kind of older, entrenched companies AAPL likes to shake up — was a prime target.

With the success of Tesla Motors Inc (NASDAQ:TSLA) and Alphabet Inc’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google self-driving car, Apple was believed to have green lit its own electric car in 2014. Under the code-name of Project Titan, AAPL began assembling a team of automotive engineers tasked with building an electric Apple car.

Soon there were reports of Apple minivans prowling the streets of California, top-secret testing tracks and complaints that AAPL was poaching electric car talent from Tesla and its suppliers.

The Wheels Start to Fall Off

In January 2016, the 17-year Apple veteran leading up Project Titan abruptly left the company. AAPL brought in senior executive and special projects expert Bob Mansfield to take over in the summer. The hiring of a former head of BlackBerry Ltd’s (NASDAQ:BBRY) QNX auto software division marked a potential shift in focus from an electric car to a self-driving car. AAPL was reportedly targeting 2021 as an Apple car release date at this point.

In September, rumors began to circulate that Apple was “rebooting” Project Titan. The challenges of building its own car, including trying to coordinate suppliers and sourcing a manufacturing partner, were proving too difficult.

Now, the report published in Bloomberg and citing “people familiar with the project” says Project Titan is being scaled back in a big way. There have been hundreds of job cuts and more staff have chosen to bail. According to Bloomberg, remaining engineers are largely focusing on autonomous driving software and sensors.

Project Titan appears to have been not only dramatically scaled back, but Apple’s automotive plans in general seem to be at a crossroads. Bloomberg says:

“Apple executives have given the car team a deadline of late next year to prove the feasibility of the self-driving system and decide on a final direction.”

As pointed out in the Bloomberg report, AAPL may be coming to grips with the reality of an automotive market that may have seemed ripe for the picking, but is in reality much more difficult to disrupt.

Although the industry is expected to be worth a whopping $6.7 trillion by 2030, it’s dominated by companies like Ford Motor Company (NYSE:F) that have been in business for over a century. Profit margins aren’t the 60% or more AAPL can wring out of the iPhone, they are more like 10%. And with thousands of parts and suppliers who are reluctant to commit to a low-volume new auto maker, the supply chain is far more complex than Apple has experience with.

At this point, it looks as though TSLA’s place as the marquee high-tech car manufacturer is safe — at least from Apple. Instead, Project Titan is completing a pivot toward chasing Google’s self-driving car project, with the potential to license the software to car manufacturers the way it does with its CarPlay infotainment software.

At least if the company ultimately decides even that is feasible…

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

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Brad Moon has been writing for InvestorPlace.com since 2012. He also writes about stocks for Kiplinger and has been a senior contributor focusing on consumer technology for Forbes since 2015.


Article printed from InvestorPlace Media, https://investorplace.com/2016/10/project-titan-apple-inc-aapl-stock-speedbump/.

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