They stopped providing EarPods? And the charger? An Apple Pencil costs how much?
It’s a running joke that every year, Apple charges more and more for less and less. And while it’s fun to scoff as the cost of a new iPhone inches up each year, many of us know that we will continue to buy Apple products.
There are myriad reasons why we do, such as Apple’s beautiful and simple design, top-of-the-line specifications or premium branding. But an undeniably critical component to Apple’s dominance and its ability to keep users has been its ecosystem.
Today, the tech powerhouse’s lineup of devices, services and unifying software serves as the most comprehensive and dominant ecosystem of the 21st century. Apple is very much aware of a consumer’s cost of leaving it, as well as how closely the brand’s products work together within it. It is why the company doesn’t worry when you laugh at the new iPhone price, complain about a $129 Apple Pencil or rant about its omission of chargers and earbuds; very few people will actually leave its walled garden.
However, as will become increasingly clear as the decade progresses, there is a new addition to the tech ecosystem — the electric vehicle, or EV. Cars are becoming robots on wheels, differentiated increasingly by software instead of traditional car metrics. Eventually, most EVs will have great range and performance at affordable prices. As we approach autonomous driving, people will focus less on the driving experience and more on what they can do, entertainmentwise or productivitywise, while being robotically chauffeured from point A to B. In 2030, consumers will care more about what apps are available in their cars than the cars’ zero-to-60 mph time.
It is in this sense that the need for the upcoming Apple Car to be successful is greater than it seems. A failure to offer a great EV would leave Apple’s once-complete product ecosystem with a dangerous hole — one that top EV manufacturers could capitalize on by entering the smartphone industry and beyond. The Apple Car is not only a major growth prospect; it may also be critical to the survival of Apple’s entire business.
When software is a critical aspect of a product, as will be the case with EVs, sharing the same operating system with other products can greatly improve a user’s experience. This practicality is a major reason why people buy Apple products today, but if Apple cannot deliver a great EV, it loses this competitive advantage. The longer the tech giant takes to do so, the more consumers may be tempted to do the unthinkable and leave Apple for more “complete” ecosystems — ones with great cars and phones that were designed for each other.
Crucially for Apple’s business, the iPhone is the gateway device into the Apple ecosystem. If a consumer chooses a competitor’s phone over an iPhone, Apple not only loses a phone sale but also potential MacBook, AirPods and Apple Watch sales, too.
To some extent, the threat of EV companies infiltrating Apple’s kingdom of smartphones is self-induced. Apple’s reputation for technological brilliance and its access to exorbitant amounts of capital and talent suggest the Apple Car will be a highly competitive EV. But most importantly for EV competitors, the Apple Car will integrate seamlessly into the Apple ecosystem. Apple will be sure to make the car highly appealing for users to unlock synergies between the Apple Car and other Apple products.
“If by 2025 an (Apple Car) is released and 60% or more of NIO’s users use Apple phones, NIO has no defense at all. If NIO doesn’t do something today to prepare, it’s not going to be fun at that point,” said William Li, CEO of NIO, one of China’s premium EV brands.
Put simply, even if EV companies are able to match Apple or outperform it in an EV versus EV battle, consumers may still be highly incentivized to choose the Apple Car due to the convenience of having both a car and phone in the same ecosystem. An iPhone and Samsung Galaxy may have similar specs, but if you own a MacBook and AirPods along with the rest of your family, the choice becomes pretty easy.
Although this is an incredible competitive advantage that Apple should tap into, the danger for Apple is that EV companies have time.
The victors of the EV age will be companies that can provide world-class personal devices (smartphones, laptops, etc.) and EVs at scale first. That is to say, in the same way that Apple has already mastered the first half of the pie with its product lineup today, soon there will be multiple EV companies selling millions of EVs, dominating the second half. It’s a race to the top, and the race is closer than one might think.
Although the Apple Car is slated for release in 2025, from there, Apple will still need to scale rapidly and reach volume production. EV startups’ struggles in the first quarter of 2022 have highlighted the difficulties of transitioning from creating an amazing EV prototype to pumping out millions of them a year. Last quarter, Rivian and Lucid produced 2,553 and 700 cars, respectively. More mature manufacturers include XPeng, which has cumulatively delivered more than 100,000 cars in four years, and Polestar with nearly 40,000 in two years. In addition, some EV manufacturers are highly technology-focused, already designing their own chips, operating systems and software. They would not be starting from zero if they decided to enter the smartphone industry.
The EV will be the next integral piece of tech in our daily lives, and therefore Apple must make sure it offers a world-class model soon and at scale. If not, it risks weakening its overall ecosystem and loosening its grip on its loyal customers.
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ABOUT THE WRITER
Lukas Grunzke is a student at the University of Chicago.
