Google's prototype of its self-driving car.
You may or may not know this, but both
Google and
Apple are spending big bucks and resources at building cars. Both companies are focused on electric cars, promising (along with Tesla) to drag the transportation industry into the 21st century.
Of course, the incumbents don't like the idea of yet more competition, so it's understandable that they'd dismiss Silicon Valley's disruptive attempts. But ... this is the argument they're going with?
Industry veterans and critics warn that the auto business is a different animal. It's fraught with massive costs to erect auto plants, complexities in developing new sales and service systems, and daunting liabilities involved when human lives are at stake.
Automakers recalled a record 64 million vehicles in 2014, shattering the old record of 30.8 million set in 2004.
General Motors Co. has had to pay $5.3 billion to cover fines, victim compensation and the recall of millions of vehicles for faulty ignition switches. Toyota Motor Corp. paid a $1.2 billion fine for failing to report safety defects, and Volkswagen Group has set aside $7.3 billion for the potential costs of its emissions scandal.
"I think, like so many Silicon Valley techies, that they believe they are smarter than the world's automobile business, and that they will do it better," said Bob Lutz, a retired General Motors vice chairman. "No way."
So the biggest reason the Silicon Valley tech giants can't build cars is supposedly because of liability concerns. And to support that argument, the article cites the record number of cars recalled last year and automaker fraud and cheating. Then Lutz literally says, "they believe they are smarter than the world's automobile business, and that they will do it better. No way."
Given the record number of recalls, lying and cheating, could Apple and Google do it worse?
An industry that can't build solid, reliable cars, that has resisted higher fuel standards despite severe environmental degradation and global climate change, that defrauds its customers, and that persists on distributing its product through hated middle-men auto dealers is the textbook definition of an industry begging to be disrupted.
Can Apple and Google do it better? Who knows. Maybe, maybe not. But the idea that the status quo can't be improved is ... suspect at best. And resources certainly won't be the impediment.
I don't have the numbers handy, but Tesla has spent about $4-5 billion building its business thus far (correct me in comments If I'm off), and is spending heavily on further infrastructure, like its Gigafactory battery factory, supercharger network, and a European assembly plant. Let's say they spend another $5 billion to further expand, you're talking about building a car company from scratch for $10 billion.
Apple is sitting on a $205.7 billion cash horde, while Google has $72.8 billion to play with. Yup, money won't be the holdup.