Apple's dream of making cars for ten years has been shattered.

Byline | Zhou Zhiyu

Editor | Zhang Xiaoling

After a decade and billions of dollars invested, Apple's highly anticipated car project, which has attracted attention from the tech and automotive industries, came to an abrupt end.

During an internal meeting on February 27th, Apple's Chief Operating Officer Jeff Williams announced the termination of the car manufacturing plan. Some employees from the electric car team may be reassigned to the AI department.

Subsequently, Apple CEO Tim Cook confirmed at the shareholder meeting on February 28th that Apple will further focus on AI. This is the clearest signal to date that Cook has given about Apple's foray into AI.

For the past decade, Apple's ambition to "build a car" has been a sword hanging over every car manufacturer and tech company intending to enter the car manufacturing industry. Everyone feared that Apple, which has brought disruptive experiences to the PC and mobile phone industries, would suddenly announce the creation of an "Apple car" one day, once again revolutionizing the automotive industry.

Now, including Tesla CEO Elon Musk and Xiaomi-WR Chairman Lei Jun, industry leaders can breathe a sigh of relief.

However, amidst the shock and regret, Lei Jun and others now face greater pressure. If a company like Apple, with substantial financial and technological strength that is highly sought after by global automotive suppliers, gives up on building a car, then the difficulty of making a breakthrough in this field is self-evident.

Next, Apple will focus more on the AI field, aiming to be the one laughing last in the "tortoise and hare race" of artificial intelligence.

Perhaps one day in the future when AI technology matures, Apple will once again overcome the challenges of intelligent vehicles. But for now, it must win the battle of AI.

A Decade Wasted

In 2014, when Apple decided to build a car, it was the peak of the new energy vehicle and autonomous driving trends.

At that time, LeEco founder Jia Yueting was still "suffocating for his dream" and founded Faraday Future; Nio and XPeng had just been established, and Li Auto, which is now in the limelight, was founded a year later. It was an era where a car manufacturing PowerPoint presentation could secure funding in the hundreds of millions or even billions.

Intelligent cars were seen as an extension of smartphones, and it seemed only natural for Apple to launch one and replicate the iPhone myth. The car project under the internal codename "Titan" was secretly established at the end of 2014.

It was also one of the most valued projects within Apple.

Apple board member Mikey Drexler once mentioned that Steve Jobs was very interested in cars and highly praised Tesla, saying "its significance is not just a car."

Cook also had a high regard for the automotive industry, believing that the industry was at a turning point of significant transformation, and he once praised autonomous driving as the "mother of all Apple AI projects."

Apple has poached executives or key talents from companies like Tesla, Mercedes-Benz, and Volkswagen multiple times, to the extent that even Musk felt disgruntled, calling Apple "Tesla's graveyard" and stating that those who couldn't stay at Tesla would go to Apple.

Until last year, Apple was still conducting a series of autonomous driving road tests. According to the California Department of Motor Vehicles (DMA) data, as of January 5 this year, Apple had 162 drivers and 68 test vehicles.

However, Apple's car-making plan has not been smooth. In the past decade, Apple's project has changed four project leaders, and its focus has shifted back and forth between car-making and developing autonomous driving systems.

Currently, Apple has not shown a leading position in car-making technology and autonomous driving. Data shows that in the full year of 2023, Apple's test vehicle road test mileage reached 450,000 miles. Compared to Waymo (3.7 million miles) and Cruise (2.6 million miles), Apple's test mileage is significantly lower.

An executive from a top autonomous driving company believes that Apple's current level of autonomous driving is limited. Despite Apple's annual R&D investment in the billions, their funding towards cars is very restrained.

With slow progress, a lukewarm outlook for electric vehicles, and delayed breakthroughs in autonomous driving policies, a series of internal and external factors make Apple's car-making venture seem "not worthwhile".

In fact, signs that Apple wants to abandon direct car-making have emerged since last year.

"The analyst who understands Apple the most", Guo Mingchi from TF International Securities, stated in September last year that the development of the Apple Car seems to have "disappeared". If Apple does not enter the car market through acquiring car companies, he doubts the Apple Car will enter mass production in the next few years.

In January this year, there were reports that Apple is adjusting the release schedule for electric cars, delaying the launch from 2026 to 2028, and lowering the goal of autonomous driving from the initially planned L5 level to L2+.

With Chinese car companies like Huawei Aito, XPeng already mass-producing L2+ level intelligent driving assistance features, and BMW, Mercedes-Benz gradually obtaining China's L3 level autonomous driving high-speed road test licenses, Apple's progress is clearly lagging behind, and industry expectations for Apple have diminished.

Several Apple employees in California told Wall Street News that Apple has made significant progress in chips and autonomous driving systems, and the announcement to terminate car-making came as a surprise.

One employee believes that Apple would want their product to "stay ahead" and achieve a substantial "return on investment". Given the current situation, continuing investment seems less meaningful.

Wedbush analyst Daniel Ives stated in an email that the current demand for electric vehicles is weak and the competition is fierce. The landscape of the electric vehicle industry is vastly different from previous years, and Apple sees ominous signs.

Even if Apple succeeds in car-making, how to achieve the same high gross profit on cars as on core products like the iPhone remains a challenge for Apple. This is not a profitable business.

Now, the titan has fallen. The imaginative and "Apple-flavored" car that was pieced together from patents applied by Apple will not appear for a long time to come.

The Battle of Titans

Professor Hu Yong from Peking University pointed out that even a company like Apple, with massive cash reserves, cannot produce a good car, revealing how challenging car manufacturing truly is. Huawei, Baidu, and Xiaomi should take heed.

After a decade of exploring the smart car field, the sweeping AI wave has made Apple realize what it should focus on next.

It intends to invest more energy in AI competition rather than building its own cars or car factories.

The AI battle is the current high ground of global giants' competition, and Apple cannot afford to fall behind. This is the battle of the titans that will determine its market position for the next decade and beyond.

Li Xiang, the founder of Li Auto, also emphasized that the essential condition for the success of cars still lies in artificial intelligence. The electrification of cars is just the first half, while artificial intelligence is the final. Artificial intelligence will become the top entry point for all devices, services, applications, and transactions, making it Apple's crucial battleground.

Currently, consumers and investors believe that Apple is lagging behind other giants in the field of AI.

The product named Rabbit R-1 became a sensation at CES (Consumer Electronics Show) with its impressive conversational abilities. Similar AI products like AI pin and OpenAI, supported by Microsoft, are showing some disruptive changes in terminal applications. Tech companies are rushing to create the "iPhone of the AI era," aiming to revolutionize user habits in terminal usage just like the iPhone did with feature phones.

Companies like NVIDIA, Microsoft, Google, Meta, and Tesla are all enhancing the connection between their products and AI. Almost every tech giant's product launch and executive speech revolve around AI—except for Apple.

Reflecting on stock prices, in January this year, Microsoft surpassed Apple to become the world's largest company by market value. As of the close on February 28th, Microsoft's cumulative increase reached 8.63% this year, with a market value exceeding $3 trillion.

In contrast, Apple has declined by 5.65% this year, widening the market value gap with Microsoft. During the same period, NVIDIA rose by 56.83%, and Amazon rose by 13.97%.

Driven by AI, the "Magnificent Seven" tech giants are starting to diverge. Many investors are concerned that this might be a preview of the future market landscape.

Shareholders including the Norwegian Sovereign Wealth Fund, Norges Bank Investment Management, and AXA are pressuring Apple's management to disclose its plans in the AI field and increase transparency. AXA stated that shareholders' continued investment in Apple to some extent depends on understanding these plans.

This pressure is making Tim Cook and other Apple executives feel the heat. Hence, following the rare mention of Apple's significant investments in AI last November, Cook reiterated the importance of AI at the shareholder meeting on February 28th, rather than using the previously common term "machine learning." In addition, Cook also mentioned that Apple will later this year share a new approach in the field of generative AI, which will "redefine the future of technology." According to investment firms, Apple's AI applications are expected to debut at this year's WWDC in early June.

Industry insiders believe that Apple appears to lag behind in the AI field because its AI technology is currently scattered across a wide range of projects and products, rather than being concentrated on core products like the iPhone, iPad, and iMac. Apple is reluctant to take the risk of applying immature AI technology to core products like the iPhone.

Furthermore, due to Apple's strict data privacy policies, the data collected from billions of Apple devices cannot be flexibly utilized by Apple. From this perspective, the key factor of data, which is crucial for training and improving artificial intelligence systems, limits the iteration speed of Apple's AI capabilities.

Changes are also happening. In early February, Apple open-sourced the image editing AI model MGIE, indicating that Apple is moving away from its past closed approach to product and technology development, enhancing internal and external communication to drive advancements in cutting-edge AI technology.

What makes Apple Apple is not necessarily being the inventor of a new technology, or even developing new technologies later than other companies, but its ability to strive to provide the best products in the application of that technology. Other industry peers follow Apple's lead.

In the era of AI, Apple also needs to prove this point once again in order to continue gaining recognition and remain a leader in the next era.