Apple Is Losing To Rivals in Smart Cars

"After a decade, Apple still hasn't introduced an Apple car. Some of its biggest smartphone rivals in China are moving faster.

Huawei and Xiaomi, whose phones battle the iPhone for supremacy in China, both released new cars this week with advanced digital features. The companies' goal is to keep their phone customers engaged in high-tech vehicles and seize turf before Apple's possible entry into the fray.

"Chinese smartphone giants now recognize the importance of cars, making smart vehicles in a software-defined approach before the anticipated arrival of Apple's vehicle products," said Tang Jin, a senior research officer at Mizuho Bank.

Though reports emerged in the mid-2010s of Apple's interest in cars, the company has yet to describe plans publicly. It didn't respond to a request for comment.

China is a top market for Apple and Tesla, accounting for roughly one-fifth of each company's revenue.

It also is the country where the majority of the world's electric vehicles are sold, making it a bellwether for global trends.

The latest announcements show that futurists' notion of an EV as a smartphone on wheels is beginning to turn into reality. Not only are smartphone makers getting into EVs, but Chinese EV maker NIO has started selling a phone.

On Thursday, Xiaomi, which shipped about 150 million smartphones last year globally, showed off its first car, an electric sedan it is manufacturing.

At an event in Beijing, founder Lei Jun stressed what he described as Xiaomi's global-standard manufacturing methods. He said the car would be built with a Tesla-like casting method for the body and would use chips and components from suppliers such as Nvidia, Qualcomm and Bosch.

"Xiaomi's goal for its car is to build a dream car that can rival the likes of Porsche and Tesla," Lei said. He didn't give the price of the car and said it would take a few months to reach the market.

Two days before Xiaomi, Huawei displayed models including a pure-electric SUV that it plans to sell starting from around $70,000, competing against the likes of Tesla and BMW. Tesla's Model X SUV starts at around $100,000 in China.

Tesla has been slashing prices in China and some in the industry warn of overcapacity and thinning profit margins as more tech companies pivot to cars.

"I think the Chinese car companies are extremely competitive," Tesla CEO Elon Musk said at a New York Times event in November. "By far our toughest competition is in China."

Huawei is trying to recover after being hit in recent years by tough U.S. sanctions that blocked it from getting advanced chips made with U.S. technology. It recently released phones with homegrown chips that offer high download speeds similar to fifth-generation, or 5G, phones available in the U.S.

Richard Yu, the director of Huawei's automotive business, said the company can offset the impact of U.S. sanctions by selling cars.

Huawei's car strategy reflects its smartphone roots and the goal of keeping its customers engaged while they are on the road. The company isn't selling Huawei-branded cars but rather codesigning its models with several established carmakers. These models come with Huawei's operating system and driver-assistance software, and its smartphone customers can synchronize settings and apps between phone and car.

Huawei's latest SUV, a collaboration with Chinese carmaker Seres, follows a lower-end model released by the duo in September with a starting price of $35,000. Seres said the lower-end model garnered more than 100,000 orders with nonrefundable deposits in its first 2 1/2 months. By comparison, Tesla's Model Y starts at $37,500 in China.

Xiaomi resembles Huawei in seeing cars as a way out of a tight spot. After rapid growth in China and emerging markets with low-cost phones that appealed to younger users, Xiaomi in recent years has seen profit fall, while demand for smartphones has plateaued. It has been squeezed by other phone makers on the lower end.

Lei, Xiaomi's founder, has said he wants to target the higher end and go head-to-head with the likes of Apple, Samsung and Huawei in key technologies such as chips, smart manufacturing and robotics.

If there is any reassurance for Apple in the rapid market shifts, it is that its suppliers in China and Taiwan are jumping into the EV business, too. That suggests the iPhone maker would have ready access to partners and technology if it ever decided to make a car.

Foxconn Technology, the biggest assembler of iPhones, wants to serve as a contract manufacturer for brand-name carmakers, while iPhone assembler Luxshare Precision is expanding its car-parts business. China's biggest EV maker, BYD, is an Apple business partner, assembling some Apple products and supplying components.

Dan Ives, an analyst with Wedbush Securities, said he didn't think Apple would want to be on the outside looking in for too long. Ives expects an Apple car to arrive sometime around 2026." [1]

1. Apple Is Losing To Rivals in Smart Cars. Yang, Jie.  Wall Street Journal, Eastern edition; New York, N.Y.. 29 Dec 2023: B.1.