For a long time, many people were speculating that Apple was developing a full-fledged car under the Project Titan. However, Apple CEO Tim Cook recently said in an interview with Bloomberg that the Project Titan was about developing the autonomous car driving systems rather than building Apple-branded cars. Now Hertz has joined hands with the Cupertino company in testing the so-called Apple autonomous car.

Apple Autonomous Car Prototype
Image Credit: MacRumors / YouTube video (screenshot)

Hertz leased Lexus vehicles to Apple for testing

In April, the California Department of Motor Vehicles granted Apple the permission to test its self-driving systems on public roads. Apple began testing the systems using three 2015 Lexus RX450h and six drivers. The test vehicles have been spotted in and around the Silicon Valley multiple times. Apple did not purchase the test vehicles directly from Lexus. Instead, the company leased them from Hertz.

Citing documents from the California DMV, Bloomberg reports that Apple leased the Lexus hybrids from Hertz’s fleet management subsidiary Donlen. The DMV documents listed Apple as the lessee and Hertz’s Donlen as the lessor. After the report, Hertz shares rallied more than 14% on Monday. Sources told CNBC that Hertz has supplied six Lexus vehicles for the Apple autonomous car testing.

Car rental companies to enter the fleet management business?

The report came the same day Google’s Waymo announced a similar partnership with Avis Budget Group to manage its fleet of self-driving cars. Avis has agreed to give Waymo access to a fleet of 600 vehicles that can be retrofitted with autonomous driving systems. The multi-year partnership calls for Avis to maintain and store Waymo’s autonomous car fleet. Waymo is currently running a pilot program in Phoenix.

Waymo chief executive John Krafcik said in a statement that its self-driving vehicles need “standard maintenance and cleaning” so they are always ready for customers. Such deals would give car rental services a first-hand experience in the rapidly growing autonomous car industry. Waymo also has a partnership with Lyft.

Goldman Sachs analyst Stefan Burgstaller predicted last month that car rental companies such as Hertz could venture into the fleet management business with the growth of autonomous driving technology. They have years of experience in buying, selling, and financing large numbers of cars. They also have a wide network of locations across the country to clean, maintain, and run fleets of autonomous cars.

Carl Icahn holds a large stake in Hertz

Billionaire investor Carl Icahn, who sold all his Apple shares last year, has been betting big on the car rental industry. According to FactSet, he owns nearly 35% of Hertz’s outstanding stock. Hertz shares have declined more than 75% since last year. At this stage, Hertz’s involvement in the Apple autonomous car testing isn’t a huge deal, but it’s a clear indication that rental companies have found a space for themselves in the modern world of autonomous driving technology.

The Apple autonomous car project has had its share of ups and down in the last few years. After the departure of several senior project executives, Tim Cook appointed Bob Mansfield as the head of Project Titan. Mansfield reduced the headcount in his team and shifted the focus from building a full-fledged car to developing the underlying autonomous driving technology.

Apple autonomous car is a combination of three things

Earlier this month, Apple CEO Tim Cook said in an interview with Bloomberg that the company was developing a “system” for autonomous driving cars instead of building a complete car. The Cupertino company could sell the self-driving systems to third-party automakers. Cook described autonomous driving cars as the “mother of all AI (artificial intelligence) projects.”

He described the Apple autonomous car project as a combination of three things: ride-hailing, electric vehicles, and self-driving technology. Apple needs tons of data on traffic, road safety, driver behavior, and other aspects of transportation to build the self-driving systems. Data was one of the reasons Apple invested $1 billion in the Chinese ride-hailing company Didi Chuxing last year.

Will Apple build its own cars?

It is not yet clear whether Apple would design its own cars after it has developed the self-driving technology. Cook said the company was currently focused only on developing the autonomous driving technology. However, Morgan Stanley analyst Adam Jonas believes that Apple would eventually move beyond the self-driving systems into designing full-fledged cars.

Jonas told investors recently that Apple is most successful “when it vertically integrates in a market.” The tech giant has always focused on product quality and user experience. For its current products, Apple controls both the hardware and software to deliver the best user experience. The company is expected to build its own hardware (cars) to go with the autonomous driving systems in the future.