Apple, Inc. Confirms Self-Driving Car Investments

By Evan Niu, CFA Markets Fool.com

Tim Cook. Image source: Apple.

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It's been over a year and a half since The Wall Street Journal first reported on Apple's (NASDAQ: AAPL) car ambitions, code-named Project Titan. Since then, rumors have swirled about whether or not Apple was moving forward, and if so, what direction the Mac maker would take the mythical automobile. The current thinking is that Apple is actually pursing a decidedly un-Apple-like approach of focusing primarily on the software, shifting away from hardware and manufacturing.

Of course, Apple does its best to avoid talking about what it has up its sleeve, although CEO Tim Cook coyly shrugging and grinning when asked point blank about Apple's car plans on 60 Minutes last December was pretty telling that he's hiding something.

Dear NHTSA

In the most official evidence that Apple is developing autonomous vehicle technology, the company has now sent a letter to NHTSA to offer some commentary on the proposed Federal Automated Vehicles Policy. Here's a particularly relevant snippet:

Apple uses machine learning to make its products and services smarter, more intuitive, and more personal. The company is investing heavily in the study of machine learning and automation, and is excited about the potential of automated systems in many areas, including transportation.

Executed properly under NHTSA's guidance, automated vehicles have the potential to greatly enhance the human experienceto prevent millions of car crashes and thousands of fatalities each year and to give mobility to those without. It is vital that those developing and deploying automated vehicles follow rigorous safety principles in design and production. Such principles should not, however, inhibit companies from making consequential progress; there is no need to compromise safety or innovation.

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As part of the automated vehicle policy, NHTSA provides exemptions to existing Federal Motor Vehicle Safety Standards (FMVSS) so that manufacturers can develop and test new transportation technologies:

For vehicles uses other than sale, NHTSA may exempt motor vehicles and items of motor vehicle equipment from compliance with certain standards if the Agency determines that doing so is necessary for research, investigations, demonstrations, training, competitive racing events, show, or display.

This is one of the key tools in the regulatory agency's toolbox, and NHTSA says it is committed to expediting exemption requests for highly automated vehicles (HAVs). Apple underscores the importance of expediting these requests, particularly as it relates to "new entrants":

Both Congress and NHTSA have long recognized that manufacturers need to conduct limited and controlled testing on public roads. In fact, Congress recently enacted a provision in the FAST Act explicitly allowing established manufacturers to test on public roads without pursuing exemptions from FMVSS. But the FAST Act does not provide the same opportunity to new entrants.

To maximize the safety benefits of automated vehicles, encourage innovation, and promote fair competition, established manufacturers and new entrants should be treated equally. Instead of applying for exemptions, all companies should be given an opportunity to implement internal safety processes summarized in a Safety Assessment. This is the most efficient and effective way to ensure that development vehicles are designed and operated with a level of safety equivalent to best practices and FMVSS and will not be used by the general public.

In other words, Apple wants to make it easier to develop and test on public roads without having to go through the exemption process, or at the very least that the exemption process needs to be faster.

The Mac maker also highlights three important ethical areas that must be considered: 1. implications of algorithmic driving decisions on safety, mobility, and legality, 2. ensuring privacy and security, and 3. the impact of HAVs on the public good, such as implications for employment and public spaces.

Apple supports broad sharing among companies for autonomous driving data, particularly around collisions and near-misses, but does not believe that sharing data should compromise privacy. This makes sense in the context of Apple's privacy crusade over the past couple of years.

How many gobs of money has Apple invested so far?

This letter serves as the clearest indication that Apple is indeed researching and investing in self-driving cars, as if it wasn't clear enough already. What's less clear is the extent of this exploration, as Apple generally explores tons of ideas and considers saying "no" a key strength.

We also know that Tim Cook doesn't necessarily consider hiring boatloads of auto engineers a commitment; only once Apple spends "gobs of money" on tooling and infrastructure does Apple become committed. Those hires might cost a few million or tens of millions of dollars, but automotive-related capital expenditures are easily in the billions. Apple is still seriously considering a car, but it's not fully committed yet.

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Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.