Hey Tim Cook, How about buying into Volkswagen

05 April 2017

An Apple Audi 3e could become our "fourth place" argues Richard Brookes.

I'd like to title this opinion piece: "Hello, Volkswagen? Apple here" even though it's actually an email to Tim Cook, CEO of Apple.

Tim, if you've read last-week's New York Times article: "Ex-VW chief looks to sell $1.2 billion stake, creating uncertainty", I hope you've rung Ferdinand Piech and said: "We'll offer you US$2 billion."

Why? Because US$2b is peanuts, given your cash reserves of some US$250b.

And Volkswagen is currently the world's biggest carmaker, with production in every major market. However, they have an incessant corporate reputation issue about diesel emissions that needs remediating, especially in the US and Germany.

BMW, recently beaten in luxury car sales by Mercedes-Benz, has announced a new product mix strategy to regain its position.

Given your own platform strategy and a model line-up that includes Audi, Volkswagen, Porsche, and Bentley, Apple would bring you the brand/design/retailing/digital credo, plus higher specifications and pricing opportunities, that could make both of you top contenders.

I know you're working on something, for you once said, "We want people to have an iPhone experience in their car."

Imagine the enhanced-reality experience they could get in early 2020 when they sit inside their US$50,000 Apple Audi 3e from a new 400,000-unit California plant.

Trump that, you may say to rivals.

While there is a shift toward "intelligent" mobility, the truly autonomous car is still some way off.

As PWC said, in a recent strategy+business report: "Perhaps the most pressing hurdle for the industry is the need to meet increasingly restrictive emissions and fuel-consumption requirements."

The small-car sector is where electric vehicles are making their entry. The Toyota Prius and Nissan Leaf have been there for years. General Motor's new Bolt has entered, and the Tesla 3 will be here soon.

An Apple Audi 3e would be different and inevitable.

As an Apple senior executive recently said: "The car is the ultimate mobile device."

Given how much time we now spend in our cars each day (up two hours according to one report), imagine the experience of actually being "inside" our mobile device. Starbucks touts its restaurants as our "third place", after our home and office. Apple Audi 3e could become our "fourth place".

It's perhaps hard to fathom, but not beyond the technological realms.

And as Walter Isaacson noted recently in his book The Innovators, in the artificial intelligence stakes, a human-computer symbiosis is better than an autonomous "artificial intelligence machine" working alone.

George Day, one of academia's leading strategic thinkers, said in a 2007 Harvard Business Review article that four questions are needed when assessing a new venture:

(1) "Is the product real?" Well, if Jony Ive's renowned design team can't do it, who can?

(2) "Is the market real?" How many of those 600 million+ iPhone users do you need? To find out, I suggest announcing a $5000 down-payment bond from potential buyers. Look what Tesla 3 achieved last year.

(3) "Can we do it?" If unsure, I suggest you ring Mary Barra, the General Motors chief executive, and ask her: "Wouldn't you rather be building the next auto industry than building Bolts?"

(4) "Is it worth it?" Let's assume a US$50,000 ($71,428) price. That's high, but there are lot of wealthy iPhone owners out there too.

Let's also assume you build the car in China in 2020, and in Europe in 2021. That's 3 x 400,000 x $50,000 for the third year.

The mind boggles. That's for just the first Apple Audi 3e model. Given he once owned a Porsche, do you think Steve Jobs might like that?

One more thing ... What's Apple's take on the NZ tax system?

Read the published article: NZ Herald

Richard Brookes

Richard Brookes is an Associate Professor in the University of Auckland Business School's Department of Marketing.


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