Apple Shifts Gear: Ditches Electric Car Plans, Embraces Generative AI

Apple’s ambitious decade-long endeavor to develop an electric car has come to an unexpected halt, according to insiders familiar with the matter. The decision marks a significant departure for the tech giant, which had invested heavily in the project aimed at revolutionizing the automotive industry.

Internally disclosed on Tuesday, the decision caught nearly 2,000 employees working on the project off guard. Chief Operating Officer Jeff Williams and Vice President Kevin Lynch, overseeing the initiative, conveyed the news to the team. As a result, Apple’s Special Projects Group, responsible for the car project, will transition its workforce to the artificial intelligence division led by executive John Giannandrea. This strategic move underscores Apple’s shifting focus towards generative AI, recognizing its growing importance in the company’s future endeavors.

The shift in strategy represents a significant reallocation of resources and talent within Apple. By integrating the car project team into the AI division, Apple aims to leverage its expertise to advance generative AI initiatives, aligning with the company’s evolving priorities. Despite abandoning its electric car aspirations, Apple’s renewed focus on AI underscores its commitment to innovation and underscores the dynamic nature of technological development within the company.

Most recently, Apple had imagined the car being priced at around $100,000. But executives were concerned about the vehicle being able to provide the profit margins that Apple typically enjoys on its products. The company’s board was also concerned about continuing to spend hundreds of millions of dollars a year on a project that may never see the light of day.

Apple continues to invest heavily in other areas. The company spent $113 billion on total research and development over the past five years, with an average annual growth rate of about 16%. The company also recently launched the Vision Pro headset — its first new product category in almost a decade — and has built up that business.The company has scrapped projects before, including a plan to make a TV set that was abandoned around 2015. But few endeavors have lasted this long, involved so many employees or racked up billions of dollars in expenses.

So far, Apple’s biggest push into the auto industry was its CarPlay software, which lets drivers access iPhone features like maps and Siri. It’s being redesigned to integrate more deeply with vehicle controls and entertainment systems. By not competing with automakers, Apple could give a boost to that software, helping spread it to more models.

Ultimately, focusing on AI may be a better bet, Bloomberg Intelligence analysts Anurag Rana and Andrew Girard said in a note. “Apple’s decision to abandon electric cars and shift resources toward generative AI is a good strategic move, we believe, given the long-term profitability potential of AI revenue streams versus cars.”