The Silicon Valley rumor mill is in overdrive that Apple is acquiring top talent from Tesla in order to make a car of their very own.

Auto executives are taking seriously the prospect that Apple Inc. and Google Inc. will emerge as competitors even as they consider partnering with the two.

"If these two companies intend to solely produce electric vehicles, it could go fast,” Volkswagen CEO Martin Winterkorn said at the Geneva auto show. “We are also very interested in the technologies of Google and Apple, and I think that we, as the Volkswagen company, can bring together the digital and mobile world."

Apple has been working on an electric auto and is pushing to begin production as early as 2020, people with knowledge of the matter said last month. Google said in January it aims to have a self-driving car on the road within five years.

The timeframe -- automakers typically need at least five years to develop a car -- underscores the aggressive goals of the two technology companies and could set the stage for a battle for customers. Tesla Motors Inc. and General Motors Co. are both targeting a 2017 release of an electric vehicle that can go more than 200 miles on a single charge and cost less than $40,000.

“The competition certainly needs to be taken seriously,” said Stefan Bratzel, director of the Center of Automotive Management at the University of Applied Sciences in Bergisch Gladbach, Germany. “The closer we get to autonomous driving, the weaker the connection becomes between the customer and the car. And Google and Apple aren’t burdened with old technology but can start fresh.”

Barriers falling

Tesla’s success in creating a startup car company has also shown that the traditional barriers of entry into the auto industry aren’t as difficult to overcome as some thought. At the same time, automakers have struggled to bring technical leaps to car development, something that Silicon Valley is also seeking to accomplish. For example, Google Inc. has invested in developing an autonomous vehicle since 2010.

“We never underestimate any competition,” said Ian Robertson, BMW's sales chief. “The entry barriers, which were in the past maybe more substantial, are now slightly lower. But at the same time, the complexities of the car industry are still there as well.”

An experienced automaker typically spends five-to-seven years developing a new vehicle from scratch, with just the testing phase needed to get regulatory approval often taking three years. Analysts estimate for a company from outside the industry to build a car could take a decade.

Record profit

“It’s exactly what this industry needed: a disruptive interloper,” said Sergio Marchionne, CEO of Fiat Chrysler Automobiles. “It’s a good thing but when you are one of the guys whose life is being disrupted then you are not necessarily looking forward to the event.”

Apple, which posted record profit of $18 billion during the past quarter, in any case has the funds to do it. The company has $178 billion in cash and CEO Tim Cook has been pushing the iPhone maker to enter new market segments to further envelop users’ digital lives with Apple’s products and services.

“The traditional thinking in the automotive industry isn’t suited to exploit the opportunities in the Internet community,” Wolfgang Ziebart, Jaguar Land Rover’s head of engineering, said in an interview. “If you need committees and so on to make decisions, then you’ve lost before you started.”

Win-Win

Apple’s foray into cars follows a path it’s taken to break into other industries. The company wasn’t the first to make a digital-music player or smartphone, and only entered those markets once it had a compelling product. Google says it’s seeking partners to help realize co-founder Sergey Brin’s vision of safer and more efficient mobility.

“The key element is to make sure that when we’re working with them -- and we’re totally open to work with any of them -- it’s a real win-win,” said Didier Leroy, Toyota Motor Corp.’s European chief.

“The carmakers don’t want just to become a kind of commodity, where somebody will only deliver an empty box and somebody will put in the box something which will be the real added value.”

BMW said its talks with Apple do not involve the subject of developing or building a car for Apple based on the BMW i3, denying a German magazine report.

BMW and Apple are in intensive discussions that could lead to the i3 battery-powered city being developed into an Apple car, Auto Motor und Sport said in a report in its latest issue.

Apple thinks BMW's development of its new high-tech "i" subbrand was a courageous move, the magazine said.

BMW said: "We are in regular talks with companies from the IT and telecommunications sector, including Apple, concerning topics like connected vehicles. Developing or building a car is not a topic of these discussions."

An Apple spokesman said the company did not comment on rumor or speculation.

Auto Motor und Sport said Apple cars could be sold in Apple stores and serviced at BMW dealerships.

Among the issues that were discussed was whether BMW would allow Apple to develop an operating system for its i3 model, a step that would require BMW to reveal details of its own vehicle software to the technology giant, the magazine said.

Last month, sources said Apple was looking beyond mobile devices to learn how to make a self-driving electric car, and was talking to experts at carmakers and automotive suppliers.

Rumors have been building for months that Apple is building a car. If the inventors of iTunes, the iPhone, and iPad add an automobile to its list of game changers, what would it look like? How would it drive? Would it fundamentally change our lives the way groundbreaking Apple products have in the past? And what might this mean for Tesla – the other automotive disruptor from Silicon Valley? We dreamed up what we think a Apple Car could be – perhaps should be - and then pulled together this special episode of Wide Open Throttle to analyze our finished product. From the world renowned Art Center College of Design, we called upon Professor Tim Huntzinger and graduate Garrett Debry to chat with Motor Trend editors Kim Reynolds and Edward Loh, Tim Stevens of Roadshow by CNET and Mikey Campbell of AppleInsider. What could be in store for an Apple Car and the future of mobility? Find out on this special episode of Wide Open Throttle!

Apple Inc. has drastically scaled back its automotive ambitions, leading to hundreds of job cuts and a new direction that, for now, no longer includes building its own car, according to people familiar with the project.

Hundreds of members of the car team, which comprises about 1,000 people, have been reassigned, let go, or have left of their own volition in recent months, the people said, asking not to be identified because the moves aren’t public.

New leadership of the initiative, known internally as Project Titan, has re-focused on developing an autonomous driving system that gives Apple flexibility to either partner with existing carmakers, or return to designing its own vehicle in the future, the people also said. Apple has kept staff numbers in the team steady by hiring people to help with the new focus, according to another person.

Apple executives have given the car team a deadline of late next year to prove the feasibility of the self-driving system and decide on a final direction, two of the people said. Apple spokesman Tom Neumayr declined to comment.

The new shift and deadline come after months of strategy disagreements, leadership flux and supply chain challenges inside Apple’s unmarked car labs in Sunnyvale, California, a short drive from its Cupertino headquarters.

Apple isn’t the first to realize mastery of mobile gadgets and software updates is no guarantee of automotive success. Alphabet Inc.’s Google learned the challenges of building its own vehicles and has sought partners. Its car project has also suffered departures. Tech investors are dubious too. They’re used to fat profit margins, while carmakers survive on net margins well below 10 percent.

“For a quality Apple-branded car they could probably get a healthy margin,” said Eric Paul Dennis, an analyst at the Center for Automotive Research. “They probably weren’t willing to compromise on quality issues" because that could hurt the perception of its other products, he added.

Apple started Titan in 2014 with grand ambitions to make a dent in an auto industry that consultant McKinsey & Co. estimates will be worth $6.7 trillion by 2030. The iPhone maker embarked upon an aggressive hiring spree, and an Apple-designed vehicle was targeted by the early 2020s. The hope was to revolutionize cars in the way the iPhone upended the mobile industry in 2007.

By the end of 2015, the project was blighted by internal strife. Managers battled about the project’s direction, according to people with knowledge of the operations. “It was an incredible failure of leadership,” one of the people said. In early 2016, project head Steve Zadesky, a former Ford Motor Co. engineer and early iPod designer, left Titan. Zadesky, who remains at Apple, declined to comment.

Zadesky handed the reins to his boss, Dan Riccio, adding to responsibilities that already included engineering annual iPhone, iPad, and Mac refreshes. Bob Mansfield, a highly regarded manager who helped develop the original iPad, returned in April from a part-time role at Apple to lead the team.

About a month later, Mansfield took the stage in a Silicon Valley auditorium packed with hundreds of Titan employees to announce the strategy shift, according to people who attended the meeting. Mansfield explained that he had examined the project and determined that Apple should move from building an outright competitor to Tesla Motors Inc. to an underlying self-driving platform.

Departures

In the following months, engineers started leaving. Some chose to quit amid doubts over job security and skepticism that an Apple car product would ever come to market. Others were cut. In August, a first wave of employees was let go, followed by a second round in September.

More than 120 software engineers working on a car operating system and testing procedures were cut. Several hundred hardware engineers working on car chassis, suspensions, and undercarriages also left, the people said. The New York Times reported in September that Apple had cut dozens of employees from Titan.

John Wright, a veteran Apple manager who led the software teams, has left the project, according to people familiar with the matter. Dan Dodge, creator of BlackBerry Ltd.’s QNX car software, took a larger role developing Apple’s auto platform architecture, some of those people said.

Remaining software engineers are working on autonomous programs, vision sensors, and simulators for testing the platform in real-world environments. The team also has regulatory specialists to navigate the heavily regulated auto industry, one of the people said.

Far Cry

It’s a far cry from early plans that excited Apple executives. "The car is the ultimate mobile device, isn’t it?" Chief Operating Officer Jeff Williams said in 2015.

Soon after, Chief Executive Officer Tim Cook said the auto industry was "at an inflection point for massive change."

Apple executives had imagined an electric car that could recognize its driver by fingerprint and autonomously navigate with the press of a button. One plan sought a partially autonomous car that still had a steering wheel and pedals, while later plans migrated toward a fully autonomous vehicle.

Regardless of Apple’s struggles, established carmakers have recognized the threat posed by new entrants and have embarked on a hiring and acquisition splurge to beef up their software capabilities. They are wary of allowing technology companies to own the lucrative software component of new cars.

Apple meanwhile struggled to tackle complex automotive supply chains, according to another person familiar with the situation. In smartphones, Apple wields extensive influence and often secures exclusive rights to certain parts from suppliers. For cars, the heavy investment required to make automotive parts means suppliers are less willing to commit their products to a vehicle like Apple’s which may have initially shipped in small quantities.

"When they started digging into the details of what that would entail it likely became an intractable problem," the Center for Automotive Research’s Dennis said.