Apple signs deal with Volkswagen to manufacture driverless cars

SAN FRANCISCO—Apple once had grand aspirations to build its own electric self-driving car and lead the next generation of transportation. Over time, the tech giant’s ambitions ran into the reality.

So Apple curtailed its original vision, first by focusing on software for self-driving cars and then by working solely on an autonomous shuttle for its own use with employees. Now, the tech giant has settled for an auto partner that was not its first choice.

For the past several years, Apple sought partnerships with the luxury carmakers BMW and Mercedes-Benz to develop an all-electric self-driving vehicle, according to five people familiar with the negotiations who asked not to be identified because they were not authorized to discuss the matter publicly. But on-again, offagain talks with those companies ended after each rebuffed Apple’s requirements to hand over control of the data and design, some of the people said.

Instead, Apple has signed a deal with Volkswagen to turn some of the carmaker’s new T6 Transporter vans into Apple’s self-driving shuttles for employees—a project that is behind schedule and consuming nearly all of the Apple car team’s attention, said three people familiar with the project.

Apple’s deal with Volkswagen, which has not been previously reported, and the failure of its talks with other automakers reflect the continuing travails and diminished scope of the company’s 4-year-old car program.

The project has suffered from repeated changes in direction that have hurt morale and led to hundreds of departures from its peak of more than 1,000 members two years ago, five former Apple employees said. They added that the project lacked a clear plan beyond the vans, including any near-term commercial goals.

The fits and starts have most likely put Apple even further behind in the race toward the self-driving future. Waymo, the self-driving business spun out of Google, as well as startups and some carmakers have been testing various autonomous vehicles on public roads for years. Some of the programs have hit hurdles—Uber on Wednesday said it was shutting down its self-driving operations in Arizona and laying off about 300 employees in the area—but many have already gathered extensive data on autonomous driving patterns to improve their technology. Apple declined to comment.

Buffeted by a scandal around cheating emissions tests—and lagging some rivals in development of self-driving cars—Volkswagen jumped at the chance to work with Apple, former Apple employees said. Volkswagen’s code-name at Apple is Jetstream, one said.

Now, at a lab near Turin, Italy, run by a Volkswagen subsidiary called Italdesign, the companies plan to remake Volkswagen’s T6 vans as electric self-driving shuttles, these people said.

The frame, wheels and chassis of the T6 vans will remain, but Apple is replacing many components, including the dashboard and seats, said two people familiar with the project. Apple is also adding other computers, sensors and a large electric car battery, they said. The shuttles will ferry employees between two of Apple’s Silicon Valley campuses, and will include a driver behind the wheel to take control if needed, as well as an operator in the passenger’s seat tracking the van’s performance.

Executives leading Apple’s car project had told CEO Tim Cook that the shuttle would be completed by the end of 2018, but that deadline will be missed, one former employee said. It is unclear whether Apple’s partnership with Volkswagen will extend beyond the shuttle.