Musk: Follow Apple's path and leave Apple with nowhere to go

Author: Zhang Lingxiao

Source: Auto Market Story

Elon Musk's love-hate relationship with Apple is like a long soap opera. Tesla's chief designer Franz von Holzhausen recently commented on Apple's products in an interview, saying "there is nothing to look forward to." Tesla CEO Musk, needless to say, has been making fun of and bashing Apple since 2015, whether in public interviews or on social networks.

Last December, Apple CEO Timothy D. Cook, who has always been tight-lipped about the car business, said in a brief interview that Apple is focusing on three main areas: AR, AI, and autonomous driving. Although Apple's car-making plan has not really surfaced, it seems that Apple and Tesla will have a battle in the field of autonomous driving in the near future .

Meanwhile, Tesla is not content with its own niche. According to foreign media reports, Tesla is developing an app store that will allow users to download and use programs through the Tesla app store. This also reminds people of Musk's previous decision to shut out Android's app store and Apple's APP store, and repeatedly targeting Apple's closed-source operating system, accusing Apple's App Store commission of being a global Internet tax.

Tesla and Apple, one is the world's most valuable car company, and the other is the world's most valuable technology company. They are meeting on the same track in the wave of intelligence. Musk once teased Apple's car manufacturing: investment is a good thing, but cars are much more complicated than smartphones and smart watches. This sentence also applies to Tesla: building a software ecosystem is not as simple as opening up permissions to developers.

In 2008, the launch of the App Store revolutionized the way people think about mobile devices. Over the past decade, the App Store has grown rapidly amid criticisms of "monopoly" and "overpricing." Earlier this year, Apple revealed that since the launch of the App Store, developers around the world have earned more than $260 billion by selling digital products and services on the App Store.

Financial report data shows that in 2020 alone, the APP Store contributed $20.3 billion in business revenue to Apple. At the same time, the APP Store has become the largest source of revenue for Apple's software services with a business share of 37%.

When it comes to new things, human imagination is always limited. Even Steve Jobs, who made the amazing prediction more than a decade ago that "future smartphones will be differentiated by software," did not expect the App Store to grow to such a scale. He once said in an interview in 2008, "This thing is too new. Maybe it will become a billion-dollar market at some point in the future, but who knows?"

Today, millions of applications, tens of millions of developers, and hundreds of millions of users rely on the App Store platform, making it a powerful part of Apple's iOS ecosystem. In the current era of software-defined cars, which car company would not be "envious" of this software ecosystem with strong user stickiness?

As the world's largest app store providers, APP Store and Google Play now have a mature business model, including the "Apple tax" that Musk has criticized the most.

"Apple's App Store fees are in fact a global tax on the Internet," Musk once said publicly on Twitter. In addition, he has repeatedly criticized Apple's strict control over applications in earnings conferences, saying, "Our goal is to support the advent of the sustainable energy era, not to build a walled garden and use it to attack our competitors, as some companies (Apple) do."

Perhaps it was because Tesla sought to be acquired by Apple at the darkest moment when it was having difficulties in mass production of Model 3, and was mercilessly mocked by Tim Cook that "Tesla is only worth 6% of its current value", which made Musk always feel resentful and unable to let it go, so much so that he turned a blind eye to the Google App Store, which also charges commissions.

In fact, whether it is the Apple APP store based on the closed-source operating system IOS or the Google (Android) app store based on the open-source operating system Android, commission fees are an important part of their income .

According to foreign media reports, Tesla is working on launching their own app store, allowing car owners to download new apps to their vehicles. More importantly, they can open it up to third-party developers and open up new revenue sources for the company in the process. It can be seen that this business model is not fundamentally different from Apple and Google's App Store.

With a mature business model in place, can the APP Store be directly replicated in cars?

Wang Ming (pseudonym), a product manager from the digital center of a domestic independent brand, said that most OEMs are now studying the APP Store, but it is far from being like the mobile phone ecosystem, which has entered a mature stage after so many years of development. " Automotive software services are still stuck in the traditional model of paying for goods. "

An executive of Weipai once said in an interview with Auto Market Story, "Although everyone is talking about software-defined cars, we don't really understand why we have to charge users for something that can be provided to them for free?" This statement reveals the confusion of traditional car companies about the new business model.

The customizable icon bar that appears at the bottom of the Tesla car system touch screen interface

Wang Ming further explained that to support an app store, there must first be enough software for users to choose from. At this stage, the software capabilities of car companies themselves are still relatively weak, and many of them have to rely on Internet companies to provide services, such as Baidu, Tencent, Alibaba, Douyin, Kuaishou, etc.

In this process, the OEM needs to pay the developer development fee and license fees. " But from the consumer side, the current software experience on the car computer is difficult to support car companies to charge users continuously. For developers, it is difficult to find a sustainable profit point like on the mobile phone side. " From car companies to developers and then to the user side, this business model cannot form a closed loop at present, Wang Ming added.

Li Wei (pseudonym), an Internet of Vehicles engineer for an American brand, revealed to Cheshiwushi that the establishment of a software ecosystem model is essentially a struggle for the right to speak between car companies and developers.

"Although car companies rely on developers to provide services, many car models restrict users from using software IDs and force users to log in to the car company's ID because car companies are unwilling to use their platforms to help developers. By the same token, even if users are unwilling to pay separately for the software in the car, car companies are reluctant to fully connect the mobile phone and car sides."

He pointed out that the game between car companies and developers is a game of energy. "It depends on who is the dumplings and who is the vinegar, and the core of the game is scale."

"It's like the in-car WeChat app. Many users find it very useful, but car companies can't provide it themselves. So the developer Wutong Autolink talks to an ordinary car company, maybe charging a symbolic fee to help the car company develop, and finally the car company will accept the results. If it's a car company like Tesla, the situation may be completely different. Even if the developer pays, they probably want to access their system."

WeChat in Car

At present, Tesla has more than 1 million vehicles in the world, which also represents 1 million active users. From the user base alone, the number of active iPhone users in 2020 has exceeded 1 billion, which is obviously not in the same order of magnitude. But it is undeniable that the automotive ecosystem, especially the new scenario of smart electric vehicles, has become the next battlefield for major Internet giants to compete.

Last October, Musk announced at the shareholders' meeting that Tesla would sell 20 million vehicles by 2030. Regardless of whether this boast can be achieved, Tesla's development momentum in recent years has proved its growth potential.

"Automotive software is also a brand new thing for developers, and they also hope to have the opportunity to 'practice' so that they can occupy a place in the smart electric vehicle era when it truly arrives. Tesla's scale and development space are a good opportunity for them," Levi explained.

Like Apple, Tesla also has its own proprietary operating system developed based on Linux, which is different from most OEMs based on Android systems. In the future, if Tesla's App Store can control the channels for listing and distributing third-party apps, it will be easier to form a closed-loop software ecosystem similar to Apple's App Store.

Levi lamented that Tesla is a minority after all. In this game, developers or Internet giants have a lot of say .

"Including Tesla, car companies now have problems with their app stores, such as few service forms and varieties, insufficient external software, and unclear payment business models." Yan Yu (pseudonym) from Porsche Digital Technology Center pointed out that the usage scenarios of cars and mobile phones are very different. Not only is it difficult to match mobile phones in terms of base, it is also impossible to achieve the same frequency of updates and replacements as mobile phones.

Despite this, Musk still believes that the App Store has broad development prospects. In the 2020 quarterly earnings conference, Musk also expressed his desire to develop an App Store. He said, "When cars truly achieve autonomous driving, users now want to have entertainment and efficiency options in the car, and hope that Tesla can launch an 'App Store or something else' to allow people to play games and work in the car."

Software in the application center of Hongmeng system in Huawei AITO M5

Photo by Car Market Story

"Tesla will develop towards the App Store model in the future. Tesla will follow the Apple App Store and start to build an application store (Tesla App), which will gradually develop from relatively closed services such as software upgrades and charging to diversified services such as entertainment software imports and paid upgrades." Ren Zeping, a well-known economist, once pointed out that Tesla's development model is gradually advancing from the three layers of "hardware-software-service". From the perspective of development model, this process is similar to Apple .

Tesla has not disclosed more details about the App Store. But it is not difficult to find that from hardware to ecosystem, Tesla is walking on the path that Apple has already taken. In China and even the global market, Apple's hardware, system, and content have formed a complete ecological closed loop. And the complete ecological closed loop has supported Apple to become a $2 trillion business empire.

This model is exactly what Wang Ming said car companies have not yet achieved, and Tesla hopes to build a closed loop of travel ecology through self-developed chips + algorithms + in-vehicle operating systems. On the other hand , Apple also hopes to replicate its software advantages in the field of smart electric vehicles, but in this field, Tesla has taken many more steps than Apple .

Tesla and Apple both want to plant their flags in each other's territory. Despite all the ridicule, Musk still admits that Apple is Tesla's biggest competitor. "The only way to defeat martial arts is to be fast." Perhaps Musk knows it best. In building a closed loop of automotive software ecology, if Tesla does not take the lead, it will have to hand over the opportunity to Apple.