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What the Project Titan Reboot Means for Apple Inc. (AAPL)

Project Titan is the code name for Apple Inc.’s (NASDAQ:AAPL) bet on the next big thing beyond the iPhone, iPad and Apple Watch: its top-secret “car” project. A report from the New York Times says Apple is rebooting Project Titan, complete with staff layoffs.

AAPL: What the Project Titan Reboot Means for Apple's Future

Source: via Apple

Rumors of Project Titan first began picking up steam in 2015. With AAPL looking for a new product, the idea that the company might be entering the automotive market with its own electric car made a certain amount of sense — despite the company’s lack of experience in the industry.

It needed a new high-volume, high-revenue product to take the reins from the iPhone, which was beginning to face the reality of a maturing smartphone market. An electric car could definitely meet those criteria, especially with consumer interest in the vehicles ramping up. Electric car manufacturer Tesla Motors Inc (NASDAQ:TSLA) was in the spotlight, but AAPL had a history of successfully entering new markets and improving on early entries to build a dominant lead.

It did it with the iPod and then then iPhone, quickly eclipsing industry pioneers and market leaders Sony Corp (ADR) (NYSE:SNE) and Blackberry Ltd (NASDAQ:BBRY), respectively.

With Apple leasing facilities, hiring automotive industry insiders, meeting with leading auto manufacturers and a mysterious Apple minivan prowling San Francisco, Tesla CEO Elon Musk said it was obvious that AAPL was preparing to take on his company.

In a BBC interview, he commented: “It’s pretty hard to hide something if you hire over a thousand engineers to do it.”

Project Titan: Reboot

However, things appear to be changing rapidly for Project Titan.

The beginning of the shake-up was the departure of team lead Steve Zadesky at the start of the year. In the summer, former senior AAPL executive and current special projects go-to guy Bob Mansfield was reported to have taken over leadership of Project Titan.

Now, The New York Times says AAPL is rebooting Project Titan, including shutting down parts of the project and laying off dozens of staff.

Speculation is that Apple is changing its focus from building its own electric car to developing the software to power self-driving cars, a similar approach to Alphabet Inc‘s (NASDAQ:GOOG, NASDAQ:GOOGL) Google. The pivot plays to Apple’s strength in building operating systems. It would also likely incorporate elements of other key software products as it continues to evolve: Apple Maps navigation, Car Play auto infotainment integration, iCloud online storage and processing and Siri, the company’s digital assistant.

With Tesla committed to bringing electric vehicle costs down with the Model 3 and other car manufacturers pushing their own affordable electric vehicles, Apple may have decided that the market was getting too competitive to break into. Especially for a company that has zero automotive engineering experience and no manufacturing capability of its own. Or, the technological hurdles may have been too much to tackle from scratch.

However, applying its expertise to the ongoing race to develop a self-driving car could still position Apple to be a leading player in the automotive industry. In one scenario, instead of the cars themselves sporting an Apple logo on the hood, they’d have a “powered by Apple” badge on the back. The revenue of selling a big-ticket item to consumers would be replaced by licensing revenue from car manufacturers.

Of course, nothing prevents AAPL from also building its own self-driving car as part of Project Titan. It’s possible the company will continue improving the autonomous software, while simultaneously working on its own car. But for now, it seems as though any Apple Car would not be electric, at least not in its initial iterations.

With a target release date that keeps slipping (the last estimate was 2021), it’s going to be a while before any of Apple’s moves are confirmed by an actual product launch. Until then, expect Project Titan to continue to be one of AAPL’s most interesting — and potentially game-changing — secrets.

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

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Article printed from InvestorPlace Media, https://investorplace.com/2016/09/apple-inc-aapl-project-titan-reboot-future/.

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