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Auto industry, meet the 'Apple effect'

Auto industry, meet the 'Apple effect'


An age-old phenomenon of the tech industry is bleeding over to cars

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Hannelore Foerster/Getty Images

For many years, there was a running gag at each January’s CES that Apple had "won the show," despite the fact that it doesn’t even show up at CES in any official capacity at all. The original iPhone was announced smack in the middle of CES in San Francisco, not Las Vegas, prompting planes full of weary tech journalists to abruptly leave the Nevada desert only to return the following day. And even when Apple doesn’t explicitly interfere with the show, there have always been the inevitable rumors and comparisons: Can this new Samsung phone compete with the iPhone? What is Apple going to do with television? Is there any tablet that matters other than the iPad?

It’s perceived as a standards-bearer, a unilateral force that is silently dictating the temperature and direction of the market from afar. Auto shows are starting to fall under a similar spell: Apple and Google have become indelible parts of the conversation, even though neither company has announced a commercial transportation product and may not for several years. (Apple hasn’t even officially acknowledged that it’s working on cars at all.) Nowhere has that phenomenon felt more real than this week’s IAA — the globally important Frankfurt auto show — where the world’s biggest automotive brands spent most of their airtime talking about electrification, autonomy, and the connected car. Those topics are in line with the current state of technology in the industry, but the influence of the automotive non-traditionalists in the Valley was palpable with almost everything executives in Frankfurt said.

Speaking at his company’s huge, multi-brand IAA press conference through a translator, Volkswagen Group chairman Martin Winterkorn addressed those elephants in the room head-on:

Of course, I know that all of you are nowadays looking at the new players in automotive — on the automotive playing field, as it were. We’re doing that, too. But the fact that the big IT companies are interested in cars shows us first and foremost that our core product is highly attractive. And you know us: we at Volkswagen love a good competition for the best solution. And I can also say that Volkswagen will remain in the driver’s seat. Mobility, with all its facets, will remain our core domain and our core passion, even in the digital age.

And, last but not least, one important point for me. Even though many people claim the contrary, I can say people’s passion for cars has not declined a single bit. But people’s passion for cars is changing. Of course, a Bentley Bentayga, a Bugatti, a Lamborghini, and a Porsche 911 will always have room in the automotive industry and in people’s hearts. But even at the top of the automotive world, we see that faster, higher, farther all the time is no longer sufficient. Technology leadership is not just defined on the basis of horsepower and torque. Fun, with economical zero-emissions driving, enjoying interconnection with your car, allowing you to take part in digital life, the wonderful opportunities offered by automated driving.

Arguing that Apple’s and Google’s interest in transportation validates Volkswagen’s "core product" misses the point, of course. Google is angling to fundamentally alter what a car is and its role in our lives, and it’s likely that Apple will try to do the same. There’s also nothing about a Google car that appeals to one’s emotions the way a Lamborghini might, or even a Volkswagen GTI; these adorable little plastic pods are designed for efficiency, safety, and environmental friendliness, nothing more. But Winterkorn’s acknowledgement on stage that "big IT companies" are pushing directly into his territory — right in his keynote, not a Q&A session — is significant.

The ultimate self-driving machine

At the same show, both Mercedes-Benz and BMW suggested that the future probably involves self-driving taxi services in one form or another, and that they’ll be involved. Without Google and its ilk aggressively pushing the self-driving agenda, I’m skeptical that BMW — "The Ultimate Driving Machine" — would keep suggesting that perhaps its cars don’t need drivers at all.

And then there’s Tesla, a low-key presence at automotive events that still manages to make headlines: everything electric becomes a "Tesla killer," every company a "Tesla challenger." Like Apple and Google, Tesla’s commercial impact on the 2015 automotive landscape is a blip on the radar: it delivered around 11,500 cars in the last reported quarter, while Toyota delivered around 2.1 million. Elon Musk’s mystique certainly helps, but the reality is that the six-figure Model S sedan has progressed from a curiosity to the best all-around car in the world; besides being ridiculously safe, fast, and well-connected, it has single-handedly normalized the notion that electrics can charge fast enough and go far enough to compete with gasoline. Yes, Tesla loses money on these cars hand over fist, but every car off the line pushes EV R&D a bit further, and fossil fuels — cheap as they may be at the moment — aren’t going to be around forever. Basically, you’d need to be an idiot to exist in this industry without paying Tesla any mind.

Audi e-tron quattro

Audi's e-tron quattro. (Audi)

That push to get traditional automakers thinking about real-world electrics, a goal that Musk has repeatedly said he shares, is finally yielding spectacular results. Porsche’s Mission E concept, which houses a long-range electric powertrain Porsche clearly intends to eventually use on a production vehicle, was the obvious winner of the show — in fact, it’s perhaps the most beautiful car that the company has ever made. It also happens to feature Tesla Supercharger-besting charging times. ("Tesla killer," indeed.) Volkswagen Group stablemate Audi, meanwhile, revealed its e-tron quattro concept, a near-production electric SUV with over 300 miles per charge.

Would electrics exist without Tesla? Of course, but I can’t confidently say they’d be as compelling. I also can’t say that a staunchly traditional sports car manufacturer like Porsche — a brand whose flagship car has scarcely diverged from its original 1960s design — would be showing a sedan that screams, "We can do better than the Model S."

A flash of self-awareness

So while Apple may "win" CES from time to time, the response to the Valley’s incursion in Frankfurt seems in some ways sharper and more compelling: at the very least, legacy automakers claim they can make great electrics, they can embrace self-driving, and they can see upcoming disruptions in the way they do business. And in that regard, there is a flash of self-awareness, a sense that an adapt-or-die mentality may be setting in. It’s a far cry from infamously short-sighted responses to the original iPhone, where Microsoft’s Steve Ballmer insisted it wouldn’t get traction in enterprise and Palm’s Ed Colligan said that Apple was "not just going to walk in."

Today, Palm no longer exists, and Microsoft’s phone business — a remnant of Nokia, the largest phone maker in the world until just a few years ago — is a gaunt shadow of what it once was. Can the Volkswagen Groups of the world avoid the same fate? Let’s start by putting the Mission E into production, and we’ll find out.

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