Apple Could Leverage Contract Manufacturers Like Foxconn or Magna to Assemble Apple Car

Apple Could Leverage Contract Manufacturers Like Foxconn or Magna to Assemble Apple Car

On the heels of its unsuccessful negotiations with existing carmakers, a new Bloomberg article says Apple may be considering using existing suppliers, such as Foxconn and Magna, for the production of the “Apple Car.”

Bloomberg’s Mark Gurman says Apple’s more traditional approach to launching new products could work in its favor. Apple has reportedly approached several traditional carmakers in the past few months, including Hyundai and Nissan. However, those talks have proven fruitless, as the automakers have proven reluctant to dip their toe into the pool.

While Apple has traditionally worked with contract manufacturers that are happy to assemble Apple products such as iPhones, iPads, and Macs in the background for sale under the Apple nameplate. However, carmakers have proven to not be so willing to become what amounts to being a contract manufacturer for the Apple Car.

In this scenario, Apple would develop an autonomous system for the vehicle, the interior and external design, and on-board technology, while leaving the final production to the carmaker. Such a deal would essentially ask an existing car company to shed its brand and become a contract assembler for a new rival.

A longtime manager at both Apple and Tesla Inc. said this would be like Apple asking bitter smartphone rival Samsung Electronics Co. to manufacture the iPhone. Apple wants to challenge the assumptions of how a car works — how the seats are made, how the body looks, the person said. A traditional automaker would be reluctant to help such a potentially disruptive competitor, said the person, who asked not to be identified discussing private matters.

While Apple generally focuses on product and development while outsourcing manufacturing, which allows it to avoid spending billions of dollars on constructing its own factories and paying for training and staff pay.

However, the auto industry runs on the model of carmakers building and running their own factories, and tightly controlling their supply chains at considerable expense.

This is why industry insiders expect Apple to likely go with a contract manufacturer like iPhone producer Foxconn, who recently unveiled an electric vehicle chassis and a software platform to help carmakers bring models to market faster.

Gruman says an Apple employee involved in manufacturing told him that Foxconn is used to having Apple engineers tell it what to do and that the company’s factories are already filled with Apple-designed equipment. The person asked not to be identified discussing sensitive matters.

Apple could also ally with contract manufacturer Magna. Apple first discussed Apple Car plans with Magna five years ago, when Apple first began putting out feelers about making an electric vehicle. Gurman notes that M<agna has experience in making cars, having done luxury car assembly for companies like BMW, Daimler AG, and Jaguar Land Rover.

“Magna is the most logical choice,” said Eric Noble, president of consulting firm the CarLab, speaking to Gurman. Noble says that an Apple-Magna partnership would prove far more stable than one where Apple worked with an existing carmaker, which would be more likely to invite power struggles.