Apple Builds a Car: The Evidence Mounts

Jim Motavalli

Jim Motavalli | Feb 24, 2015

As I recently reported, Apple appears to be building an electric minivan in a secretive operation involving 200 dedicated employees, and code-named Project Titan.

Chrysler fielded this clutch of A123-powered ENVI electric cars, then promptly disbanded its division in the midst of bankruptcy. (Chrysler photo)The evidence is pretty substantive. In addition to Reuters and Wall Street Journal stories attributed to insiders, there’s the detail of Apple hiring some experienced car guys, with expertise in both design and autonomous driving. Tesla’s Elon Musk, said to be the target of Apple's car plans, claimed that his people were being offered $250,000 as a signing bonus plus a big raise if they’d go work for Apple. Musk says it hasn't worked. About 50 former Tesla employees actually do work at Apple now, but that could be normal movement between tech companies.

Now a lawsuit has come to light, with troubled battery giant A123 Systems accusing Apple of stealing its employees to build a “large-scale battery division.” The suit, now filed in federal court in Massachusetts, accuses Apple of enticing away engineers since June of 2014, despite existing employment contracts with A123.

According to the suit, Apple made off with no less than five Ph.Ds, the loss causing the company “irreparable harm.” Morale at A123 is said to be “very low” as a result.

The battery maker declined to elaborate. “Thank you for your interest,” said spokeswoman Paulette Spagnuolo. “Unfortunately, as a matter of policy, A123 is unable to comment on current litigation.”

Ferrari was the first automaker to host Apple's delayed CarPlay. Working with automakers may have convinced the tech giant to actually build its own car. (Apple/Ferrari photo)You may remember some of A123’s colorful history. The company, holding nanotechnology licenses from MIT, said it had a lock on cutting-edge technology and energy density. I was there in 2009, when Chrysler showed a fleet of no fewer than five electric vehicles, all powered by A123 batteries. Ironically, the lineup included a minivan. At least one of the five was to go into production under the company’s new ENVI division, headed by Lou Rhodes. I wrote at the time, “Chrysler says it wants to build a full range of these cars, but analysts wonder if the financially challenged company has the wherewithal to fully develop them.”

It didn’t. Chrysler declared bankruptcy, and (despite assurances to the contrary) the ENVI division disappeared, along with many of A123’s prospects. Waltham, Massachusetts-based A123 got a $249 million grant from the Department of Energy in 2010, and (because the terms of the grant required it) built plants in Michigan. But the company had capacity without customers, and it received a further blow when client Fisker, maker of a Tesla-challenging plug-in hybrid, also went belly-up after producing only a handful of cars.

The little Chevy Spark EV used A123 batteries, but GM took the production in-house with partner LG Chem last year. BMW put A123 batteries into some of its hybrid cars, but it wasn’t enough. A123 declared Chapter 11 bankruptcy in 2012, and its assets were purchased by China’s Wanxiang America. Not surprisingly, that caused a political uproar—because a tech company subsidized by the U.S. taxpayer was being sold abroad.

A123 today is still focused on being in automotive, particularly with batteries for start-stop systems, but it’s been quiet lately.

The Renault Samsung QM3: Hardly a game changer. (Renault Samsung photo)That story could serve as a cautionary tale for Apple, as it contemplates building a car. It’s tough out there. Ask Samsung, a pioneer in putting tech companies on wheels. Samsung and Nissan teamed up on the SM5, a glorified Maxima, for the Asian market in 1998. The venture wasn’t a barn burner, and Samsung soon sold 70 percent of its share to Renault, which now operates it as the modest (and not very successful) Renault Samsung Motors with several models.
Top Gear is one of many doubters about Apple’s car:

So although Apple could afford to do a car, why should it? Apple likes doing very high-margin goods and services over which it can exert enormous control. And it likes to dominate the markets it enters. Apple might well do a lot of research and early engineering on a car, but that doesn’t mean it won’t drop the idea before it hits the market. It’s done that with other new ventures before. I suspect this one will drop too.

Personally, I’m more optimistic. Yes, there are obstacles, but as I said in the earlier piece, Apple can and likely will farm out many of its minivan’s subsystems to suppliers—it’s experienced in that. Electric cars don’t have that many moving parts, and all the essential components are readily available. The company—now launching its important CarPlay system for most of the world’s automakers—has infotainment covered. Here's more on video:

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