Tech Tonic | Adieu, Apple car! You prove it is not easy to make a motor vehicle

Whilst Apple exits its car project to refocus on things of immediate importance, Xiaomi’s energetic approach must draw warnings from the struggles of EV makers.

We’ve just had a rare sighting. A week of contrasting fortunes. Another chapter in the continued complex existence of motor vehicles. Apple, which in 2017 began work on motoring tech, namely autonomous systems for automobiles, has now drawn the curtain over those aspirations. The belief is that many from this team have since been realigned to work on generative AI projects (with Siri falling behind all the new avatars, Apple is expected to respond comprehensively in the coming months). For us watching, this is the end of the Apple car project. A car that never came to exist.

FILE PHOTO: The Apple Inc logo is seen hanging at the entrance to the Apple store on 5th Avenue in Manhattan, New York, U.S., October 16, 2019. REUTERS/Mike Segar/File Photo (REUTERS)

At one point, cars were supposed to define a chapter in Apple and Google’s rivalry. A decade later, neither has succeeded. Apple Car, if at all it ever made its way to a street near you, would likely have been an electric vehicle (EV; an internal combustion engine would be irreverence, wouldn’t it?). Wall Street was never convinced Apple could make one, and analysts are cheering Apple for “ripping the band-aid off” (Dan Ives of Wedbush) saying “Apple has little to gain from building their own vehicles” (Sam Fiorani of AutoForecast Solutions).

At no point in the decade did the Apple Car feel real. But then again, neither did an actual TV from Apple. It is just one of those things. Yet, Apple has a more complex and multi-dimensional competition landscape to contend with now than it did when money was first directed towards a car. The Apple iPhone must make efforts annually to keep up – and globally, the likes of Xiaomi and Huawei, are eyeing its market share. Generative AI is on everyone’s quick access (rivals Google and Microsoft have a significant lead; that must play out loudly in Cupertino). There are the European Union guidelines that keep throwing curveballs and introducing minefields.

In stark contrast to this, is the emergence of Xiaomi not just as a software company or a phone maker, but more. It is clear about what it wants to be – a tech giant. A piece of that puzzle is an electric vehicle. The first global glimpse of this came just days earlier. The photos may not betray as such, but I can tell from my in-person attendance at the Xiaomi SU7’s first moment in the sun in Barcelona that this is the one car that hasn’t been cutting corners (look closely, those Brembo brakes signify the cutting-edge luxury and sports car culture).

As an aside, this is a very spacious car – around 5 meters in length, if my estimates aren’t wrong. That’s BMW's 5-series footprint. While Apple simply reaffirms it isn’t easy to make a car, Xiaomi wants to prove that with persistence, it is very much possible.

Their approach tells me it is not some common corporate-plus-manufacturing template they are following, more in hope than expectation. The 10 billion CNY or Chinese Yuan (approximately $1,38,98,15,000) funding doesn’t include a single penny from external investment – that pool continues to be created by setting aside a part of profits made by the tech company’s other businesses. Yet, I fear the ability to fund a project internally runs the risk of spending much, much more than the average. That’ll become troublesome later because those costs will have to be recouped.

It is crucial to look within, for as much of the car as possible. The five core technologies for the SU7, also being developed in-house are e-motors, battery tech, HyperCasting chassis, autonomous driving and a smart cabin. If Xiaomi reduces the need to buy components and systems from vendors, it can and will reduce input costs down the line. Alongside reliance on the supply chain, which can be eccentric at times, Xiaomi’s phones will play a role in the success of the SU7 – its HyperOS software platform will determine a lot of the in-car experience.

While Xiaomi is understatedly confident about sitting at the table with the top five carmakers globally within 20 years, none of that determination should distract from the fact that the EV space is in churn. It is a market in trouble. At the turn of this year, Tesla recorded two quarters (Q1 and Q3) in 2023 when EV revenues dipped, owing to a slowdown in sales. So much so, that the automaker has refused to present an outlook for 2024 vehicle sales. That is rare.

Another pure EV automaker Lucid has also cut production targets for this year, by about 30%. General Motors has said there’s “diminishing demand” for EVs, and they’ve responded by pushing the launch of a much-awaited Chevrolet Silverado EV. Perhaps late 2024? Or early 2025? No one really is sure. Then there’s Chinese EV maker, BYD (also present in India), which has slashed prices of their new cars in some markets. The Xiaomi SU7 means business and it sure looks fast. But other factors may hold it back. We can hope that doesn’t happen, and that the EV slowdown is a temporary blip.

Pricing continues to be an issue (input costs for EVs are still high; batteries are around 50% of the cost of a car). Tesla cars cannot exactly be categorised as affordable for a large demographic of buyers. Neither are Lucid or Rivian’s EVs. Those who could afford one, likely already have one. And will probably hold on, for a few years. Upgrade cycles aren’t a real thing, yet. Worryingly, there is no second wave of customers swarming showrooms.

Another issue will be the inevitable battery replacements, a few years down the line. An executive of an Indian automaker, who is extremely bullish on EVs, told me a few years ago that an EV’s battery replacement cost will be half the price of the car you’re paying for now (An EV for ₹20 lakh will have a battery replacement cost out of warranty, of around ₹10 lakh).

Let all these factors be a warning for Xiaomi’s accountants in charge of signing off on the SU7 price tags. They’ll have to be careful.

Vishal Mathur is technology editor for Hindustan Times. Tech Tonic is a weekly column that looks at the impact of personal technology on the way we live, and vice-versa. The views expressed are personal