Steve Jobs and Martin Winterkorn, chief executives of Apple and Volkswagen, respectively, met late last month in California to discuss the possibility of the iCar, the Associated Press reported. A VW spokesman told the news agencies that "scores of ideas" were tossed around, and the CEOs planned to hold more meetings.
VW and many other carmakers offer in-car hookups for the iPod. An integrated system, however, would take the technology to another level, and could be lucrative for both companies. Apple isn't alone in going after the auto industry. Microsoft and German engineering company Siemens said this month that they were working together on an in-vehicle information, communications, navigational, and entertainment system.
Nevertheless, the journey from talks to production is long, and it's unlikely VW, or any other automaker, would be ready to sell a car with integrated Apple technology for years, iSuppli said. "Based on standard automotive industry practice, even if Apple and VW press the 'Go' button today, it's highly unlikely that we would see the first iCars until at least 2010 or 2011," iSuppli analyst Richard Robinson said in a statement.
Two key stumbling blocks are the difference in approach to engineering, and product warranties. In the latter, Apple doesn't make iPods or other products that are serviceable for 10 years or more, as in the case of automakers. IPods, for examples, are relatively cheap, and consumers are willing dump one after a year or two to get the latest model, which usually has more features.
Automakers typically offer product warranties that last three to five years, which means the carmakers would likely be responsible for fixing internal infotainment centers. Automakers also would be open to expensive product recalls, if the technology failed. "Vehicle manufacturers aren't interested in the next big thing and instead are focused on producing solid, tried and tested products that will be reliable for years," Robinson said. "While consumer-electronics warranty returns might eat into a company's profits, automotive recalls are the stuff of nightmares in a car industry that operates at the very margins of profitability."
Besides differing standards for product reliability, Apple and VW would also have to find common ground in vastly different cultures. "Although the old cliché says 'opposites attract,' the cultural divide between Apple and Volkswagen may be too wide to bridge," Robinson said.
Apple is an innovative company that generates significant profits from its ability to supply niche markets with the next big thing in music players, mobile phones, and personal computers, iSuppli said. VW, on the other hand, is from a conservative industry that works within four- to five-year development cycles, tight margins and "production-standard compliance requirements that would bring even the most enthusiastic designer from Cupertino to his knees," Robinson said. Apple is based in Cupertino, Calif.
Nevertheless, talks are expected to continue because the stakes are high. iSuppli predicts the total automotive infotainment segment to break the $50 billion mark in 2012. While car production is rising at a steady 3% rate, the infotainment segment will have a compound annual growth rate of 8% from 2006 to 2013, according to iSuppli.