Outspoken Auto Industry Executive Bob Lutz Claims Apple’s Car Is Certain To Fail

Bob Lutz, current executive for BMW and GM, is definitely a man with a reputation for making bold statements, and he is not known to shy away from saying what he thinks. Recently, Lutz appeared on CNBC to discuss Apple’s plans to get into the auto industry, and he sure didn’t have hopeful things to say.

Lutz’s comments came immediately after the Wall Street Journal reported Apple is definitely going forward with the creation of some type of automobile and is actually tripling the size of its development team. Lutz’s opinion is that Apple is wasting both its time and massive amounts of money, as there is no chance the technology giant will experience success in its venture into the world of automobiles.

Truthfully, Lutz is far from Apple’s only detractor. The idea that Apple will fail miserably if it goes through with its plans to develop a car is a common prediction in the auto industry, and the reality is Tesla is the only new car company that was founded by a non-car company yet experienced success. Many other attempts have gone up in flames, illustrating time and time again that the auto industry is perhaps the most difficult sector to penetrate.

On the other side, Apple does have a lot going for it, especially capital. Because it’s one of the wealthiest companies in the world, Apple can make a reasonable attempt at breaking into any industry. However, the auto industry is very low margin with extremely stiff competition, making the common skepticism completely understandable.

When Lutz was asked whether or not he thinks Apple’s decision to enter into the auto industry is a good move, he certainly didn’t mince his words.

“No, I don’t think so,” said Lutz. “If I were a shareholder, I’d be very upset because they’re currently engaged in a very high margin business and the automobile business, at best, is a very low margin business. And you can’t show me one company in the world that, to date, has made a nickel on electric cars. They are generally money losers and the only reason that everyone is producing them is because they are necessary to meet European fuel economy regulations and U.S. fuel economy regulations. There is absolutely no reason to assume that Apple is going to be financially successful in the electric car business.”

Although there are some who say that Apple enjoys high margins in everything that it does and would therefore do the same in the auto industry, it may not be that simple. Automobile production costs are much higher than iPhones or other current Apple products, and many other specific difficulties exist in the auto industry, including the high cost of vehicle distribution, the legal red-tape that automakers must overcome, strict safety regulations, crash testing, and much more.

Certainly, Apple has been hiring some of the best minds in the technology business, especially when it comes to battery development. However, the ever-skeptical Lutz doesn’t feel that this will help them in this initiative.

“First of all, Apple has no expertise in batteries,” said Lutz. “They don’t make batteries. The specialized electrochemical companies make batteries and Apple is going to buy batteries like everyone else. And when it comes to actually making cars, there is no reason to assume that Apple, with no experience, will suddenly do a better job than General Motors, Ford, Volkswagen, Toyota or Hyundai. So, I think this is going to be a gigantic money pit, but then it doesn’t matter. I mean, Apple has an embarrassment of riches. They don’t know where to put the cash anymore. So, if they burn 30 or 40 billion dollars in the car business, no one’s going to notice.”

Is Lutz correct in his thinking, or is his position coming from an unfair bias against non-car companies getting involved in the auto industry?