Reports have been circulating that Apple Inc. (NASDAQ:AAPL) has been in talks with McLaren about a possible acquisition. Those claims were quickly denied by McLaren, but where there’s smoke there’s often fire. If AAPL were to actually snap up the British automaker, the deal would be about much more than supercars.
All of this started with a report in the New York Times. Anonymous sources said that AAPL has been in talks with McLaren about an investment. That was quickly followed by a story in the Financial Times claiming Apple was looking to acquire McLaren outright.
McLaren issued a denial, while AAPL — as usual — refused to comment.
However, a denial doesn’t necessarily mean McLaren wasn’t actually approached by Apple. It also doesn’t mean the two aren’t in discussion about working together on an Apple car.
If all this is true, why would Apple approach McLaren in the first place?
McLaren is Not Ford
One of the key pieces currently missing from Apple car aspirations is auto design expertise. McLaren, however, is not Ford Motor Company (NYSE:F). With only 1,654 vehicles sold last year, the supercar maker is the furthest things from a mass-production outlet.
Apple doesn’t need the manufacturing. As it does with most of its products, it can outsource the actual assembly to a third party. In this case, Canada’s Magna International Inc. (USA) (NYSE:MGA) is frequently mentioned as that partner for an Apple car.
The appeal of McLaren is on the engineering side.
The company is active in cutting-edge Formula One racing technology. It makes extensive use of high-tech materials, including carbon fiber, carbon composites and aluminum in its cars. It is known for its expertise in advanced drivetrains and vehicle control systems and has already released a hybrid electric car.
And, as The Verge points out, McLaren is heavily weighted toward R&D. The McLaren Technology Group has 5,000 employees, while McLaren Applied Technology works with a wide range of companies to provide technology and R&D expertise.
If it came down to acquisition, as a “small” and privately owned company, purchasing McLaren is a lot less complicated than going after a big automaker as well.
In other words, if you wanted to pick an established auto maker that fits what we expect AAPL’s vision for an Apple car to be, McLaren is a logical choice. It offers engineers, futuristic technology, experience in designing key auto components and a proven ability to collaborate with other companies — not to mention a respected brand name.
It’s a logical complement to Apple’s current approach, which seems to be focusing on the autonomous software side of things.
Apple Car Project Following the Tesla Model?
What if AAPL were to work with McLaren to deliver an initial Apple car that was a high-priced sports car? That may seem like an odd move for a company that has its sights set on the mass market with its products.
However, Apple could follow the trail blazed by electric car pioneer Tesla Motors Inc (NASDAQ:TSLA). Elon Musk’s company has aspirations of driving an electric, autonomous automobile revolution. The Tesla Model 3, which will start at $35K when it launches, is the key product for achieving that goal. But the company’s road to the Model 3 started with the Tesla Roadster. And that car started at over $128K –hardly friendly to bringing electric cars mainstream.
And Tesla launched its electric car production with technological and engineering assistance from another low-volume, luxury sports car manufacturer —Lotus.
If Apple were to buy McLaren and release an Apple car that only the one percent could afford, that would hardly be the endgame. Instead, it could be marketed as a status symbol, boasting the McLaren pedigree and an Apple logo.
The strategy would then be to build demand among consumers for a version affordable enough for mass-market sales. While the hype builds, AAPL — with the help of the engineers and technology it gained from McLaren — would be hard at work developing the true Apple car.
With any release date well into the future, and AAPL keeping tight wraps on any development, whatever is going on with McLaren will stay under wraps … unless Apple does indeed buy the company outright, despite McLaren’s denial.
Until then, we wait…
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
