Why Alphabet Inc (GOOGL) Should Follow Apple Inc (AAPL) And Change Its Car Strategy

  • Even though Alphabet started developing self-driving cars in 2009, the company has yet to offer them to the public.
  • Unlike Alphabet, Apple ditched the model of a full fledged autonomous car and focused on its tech platform.
  • Releasing the tech platform first and the full car later could prevent Alphabet from losing in this race.

Technology trends come and go rapidly. While some of these trends carry huge expectations, only a few successfully meet the expectations. Most of them over-promise and under-deliver. However, only after a new technology concept is introduced and massively adopted can we judge whether it met the expectations or not. One of the sizzling mega trends right now involves tech giants, ride-hailing startups, software companies, and automakers in the rising industry of autonomous cars.

Alphabet Inc (NASDAQ:GOOG) started its self-driving car project back in 2009 as an experiment, as part of its Alphabet X division. For years, it was the only major company seriously engaged in developing self-driving technologies and eco-systems. Alphabet tested its self-driving technologies over the years on both highways and city streets - mainly in California - and introduced its first prototype at the end of 2014.

Also Read: How To Value Alphabet Inc Stock Today

Back then, there was a feeling that self-driving cars were around the corner, and Alphabet was inches away from releasing its self-driving car to the public. However, almost three years have gone by, and there is not much progress in that area while key executives have left the ambitious project. Many questions are starting to come up about whether Alphabet will ever complete this amazingly long development process with a real product in hand.

As has happened many times before, the second to enter the market has an advantage over the first one as it is able to learn from the mistakes and improve upon them in a relatively short amount of time—this is also true for Alphabet. The tech behemoth might have been the first to identify the potential of autonomous cars, but as the company stalled with the development, other equally powerful and ambitious players got into the race. Tech giants like Apple (NASDAQ:AAPL), Alibaba (NYSE:BABA), and Tesla (NASDAQ:TSLA) have progressed at an extremely rapid pace, partnering with ride-hailing companies like Uber, Lyft, Didi Chuxing and many small software firms like Mobileye (NYSE:MBLY) that wanted to penetrate this market from the very beginning.

While Alphabet tries to develop a comprehensive solution that includes hardware, software, vehicle development, and ecosystem, other competitors might use a different approach. For example, Apple, which is probably the biggest competitor to Alphabet outside the auto industry, decided to change its autonomous car strategy from a full-fledged autonomous car to only a technological backbone for such a car. This is an incredibly significant change that allows Apple to focus on its strengths and what it does best, and let other companies do what they do best.

The recent reports of Apple negotiating potential deals with McLaren and Lit Motors support the thesis that Apple understood that introducing a full-blown vehicle with autonomous driving capabilities is a bit too ambitious, a heavy-lifting project. This is a crucial decision for Apple that might save the company a lot of time in the race against Alphabet. Linking the Apple solution with the luxury of the McLaren brand is a brilliant marketing step targeted at establishing Apple autonomous car technology as a solution for luxury and high-end cars. Marketing its solution as a high-end platform for luxury cars could allow Apple to partner with Audi, Mercedes, BMW and others, to become their primary autonomous car tech provider.

Unlike Apple and the other competitors, Alphabet has gained an enormous amount of knowledge and experience in the autonomous vehicles field during its seven years of development, which includes more than 1.5 million miles covered by different types of self-driving cars. As Apple and Tesla breathe down Alphabet’s neck in the race for the autonomous car, I don’t see Alphabet going to mass production anytime soon. However, as the development project faces many challenges, it could be a smart move from Alphabet to start by releasing only the technological backbone for a car in the first phase and a fully autonomous car in the second phase. This 2-step strategy will allow Alphabet to get its foot in the door, gain substantial market share, and somehow block Apple right at the beginning. Later on, Alphabet will face intense competition from Tesla and Uber, but could leverage its existing brand in the field for successful penetration into the market.

Also Read: Higher Cloud Market Share Could Drive The Alphabet Inc Stock

Alphabet Inc. cannot take the risk of being the second player to arrive on the market with a finished product after so many years in development. To prevent this and to maintain its innovative, pioneering, and leading image in this specific field, Alphabet should try to introduce a technical backbone as soon as possible.

Lior Ronen Lior Ronen   on Amigobulls :
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