NEW YORK – Silicon Valley may think it can build a better car. But should it?
As tech giants like Google and Apple look to automobiles as the next frontier for innovation, they face a looming reality: Cars are a lot harder to manufacture and sell than smartphones.
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.
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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.”
He added that tech companies would pay the same high prices for expensive components such as electric car batteries, likely pushing retail prices of their vehicles out of reach for the average driver.
“It will be a huge money loser,” Lutz predicted.
To be sure, Google and Apple have plenty of cash to burn, with about $270 billion in the bank combined. But the challenges of the car industry may be steering them to find ways to revolutionize automotive technology without becoming actual automakers.