Apple picks a better road to AI dominance

NEW YORK, Feb 28 (Breakingviews) – Apple’s (AAPL.O), car project has run out of road. The $2.8 trillion maker of iPhones has ended its decade-long electric-vehicle effort internally dubbed Project Titan, Bloomberg reported, on Tuesday. That relinquishes a shot at a huge market. But the business of cars is increasingly cutthroat, and mostly held value as a way to capture customer data and attention. Apple has better ways to get to the same place.

Over the last few years, there has been one good reason for companies like Apple to try and build an electric car: Tesla (TSLA.O). The firm run by Elon Musk has grown at a dizzying speed, and investors have awarded it a lofty valuation. Back in 2021, Tesla shares traded at a peak of over 220 times their forward-year estimated earnings, according to LSEG. Musk envisioned selling 20 million cars a year; at $50,000 apiece that would have amounted to $1 trillion in revenue, almost triple Apple’s top line last year.

The industry has since turned for the worse. Tesla’s gross profit margin nearly halved amid waning demand growth. And Apple never jumped in fully: Bloomberg reported, the company was spending $1 billion annually on Project Titan. Tesla spent $4 billion in research last year, while automotive stalwart General Motors (GM.N), dropped $10 billion.

Ultimately for a company like Apple, cars would only be a means to an end – namely increasing user engagement with its other services. The American Automobile Association reckons Americans spent 93 billion hours behind the wheel in 2022. A self-driving vehicle would leave motorists hands-free and interacting with Apple’s services during that time. The data that would flow Apple’s way in return would be powerful fuel for its artificial intelligence efforts. That’s true for Tesla too: Morgan Stanley analyst Adam Jonas imputes roughly one-third of his valuation of Musk’s company to services unlocked by AI.

But if the goal is to map and anticipate users’ movements, tastes and habits, Apple can do that without producing giant hunks of steel. It already has the recently released Vision Pro augmented reality headset – and of course the iPhone. Both deliver superior profit margins to cars, without the burden of costly production and restive workers with which actual automakers contend. Apple is still on course for AI riches, even if it’s not traveling on four wheels.

Apple told employees that it will wind down an internal project to develop a car, Bloomberg reported on Feb. 27. Some of the technology giant’s employees will be reassigned to the company’s efforts in generative artificial intelligence, according to the report.

Apple had sought to release its car, dubbed Project Titan, in 2024 or 2025, Reuters had previously reported. That was then delayed to 2026, according to Bloomberg. The decade-long endeavor counted roughly 2,000 employees.