"I think that this is similar to the large screen television that Apple built but never launched albeit on a larger scale," said Richard Windsor, a tech analyst at Edison Investment Research.
While Apple reportedly scrapped plans for a 55-inch to 65-inch television after failing to find any must-have features that set it apart from the competition, according to The Wall Street Journal, the car is facing much bigger problems, said Windsor.
Apple is "finding it much harder than expected" to build a car, as it pivots into an area of business with huge barriers to entry, mountains of regulatory red tape and no clear path to profitability, he said.
Apple hired a number of auto-industry veterans over the last few years, such as Doug Betts, previously of Fiat Chrysler Automobiles NV, and has reportedly hired hundreds of people to focus on the internal car project, code-named Titan. But Windsor said hiring talent to build a car only takes a company so far without a clear path to the product category’s profitability.
Apple may have billions of dollars of spendable cash, but being a newcomer in the auto industry is never easy, as Tesla Motors has shown with its 11 straight quarterly losses. The pricey parts of automobile also tend to weigh on margins more than Apple’s more traditional consumer electronics. Apple, which reported a 35 percent year-over-year increase in profit to US$ 53.4 billion in fiscal 2015, tends to have 40 percent or better profit margins on its phones, tablets and computers, while Windsor said 40 percent gross margins on cars are "hopelessly unobtainable."
"I think that this would be catastrophic for the valuation of the company," he said.
The analyst doesn't doubt the importance of the autonomous car market, and why the technology needed to support the industry’s growth and the treasure trove of data that will ultimately be produced from them is so attractive to Apple and other tech companies, such as Alphabet. But from an economic standpoint, he thinks it makes more sense for Apple to focus on an infotainment unit, which it could sell as a service with more reliable returns, rather than building another piece of hardware. Other analysts have also recently expressed the importance of software for Apple long term, as the smartphone market grows increasingly saturated.