Apple CarPlay could be a Trojan horse in the automotive industry

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Apple is using the popularity of the iPhone to get into the automotive industry. Automakers aren’t sure what they think about it.

Apple announced the next generation of its CarPlay automotive software in June. It supports the user interface on all interior displays, replacing fuel gauges and speed dials with a digital version powered by the driver’s iPhone. He suggested that CarPlay helps automakers sell vehicles.

Emily Schubert, head of engineering at Apple, said 98% of new cars in the US come with CarPlay. She delivered a shocking statistic: 79% of US buyers would only buy a car if it supported CarPlay.

“It’s a must-have feature when buying a new vehicle,” Schubert said during a presentation of the new features.

The automotive industry is faced with an unattractive choice: offer CarPlay and forgo potential revenue and the chance to effect a major industry shift, or spend heavily to develop its own infotainment software and respond to a potentially shrinking audience of car buyers who will purchase a new vehicle. without CarPlay.

Apple wants a seat at the table

Automakers sell additional services and features to vehicle owners on a regular and recurring basis as cars connect to the Internet, gain self-driving capabilities, and switch from gasoline to electric and batteries.

The automotive software market will grow 9% per year through 2030, faster than the entire automotive industry, according to a McKinsey report. Automotive software could account for $50 billion in sales by 2030, McKinsey analysts predict.

Apple wants a slice of the pie.

GM, which was not on Apple’s slide, already earns $2 billion a year in in-vehicle subscriptions and expects it to reach $25 billion a year by 2030. Tesla, which does not support CarPlay, has recently turned to selling its “FSD” driver assistance features, including automatic parking and lane keeping, as a subscription that costs up to at $199 per month.

Automakers in China are starting to create electric vehicles that integrate deeply with their apps, allowing drivers to get repairs, connect with other owners, or even have their rental batteries replaced.

“We believe this could eventually lead to Apple providing services that leverage car sensor platforms,” Goldman Sachs analyst Rod Hall wrote in June of the next generation of CarPlay.

The next generation of CarPlay will require significant buy-in from automakers to give Apple’s software access to core systems. Apple has suggested getting cooperation from several major automakers.

“Automakers around the world are excited to bring this new version of CarPlay to customers,” Schubert added before showing a slide featuring 14 automaker brands, including Ford, Mercedes-Benz and Audi.

Industry watchers believe automakers must embrace software services — and view Apple’s offering with skepticism — or risk being left behind.

“It’s a really tough time in the industry, where automakers think they’re still building cars. They’re not. They’re building software on wheels, and they don’t know it, and they’re building it. are trading,” said Conrad Layson, principal analyst at AutoForecast Solutions.

CarPlay could generate new revenue

The new version of CarPlay could be a huge emerging revenue driver for Apple.

First, if a user likes the CarPlay interface of the iPhone, they are less likely to switch to an Android phone. It’s a strategic priority for Apple, which generates the majority of its revenue from hardware sales.

Second, while the company doesn’t yet charge fees to automakers or vendors, it could sell services for vehicles the same way it distributes iPhone software.

In June, Apple revealed that it had explored features that bring commerce into the cockpit of the car. A new feature announced this summer would allow CarPlay users to navigate to a gas pump and pay for fuel from the car’s dashboard, according to Reuters.

Apple already generates tens of billions from the App Store and should increase that if it ever decides to charge for services in cars.

In 2021, for example, Apple made between $70 billion and $85 billion in total sales on its App Store — of which it takes between 15% and 30%, depending on the app. Apple does not currently take a percentage of purchases made on iPhone apps for physical goods or services.

The new CarPlay also allows Apple to collect high-level insights and data on how people use their vehicles. It’s valuable information if he ends up releasing his own car, which has been under top-secret development for years. (Apple’s automotive group and its CarPlay team are organized into separate divisions.)

For example, when people use Apple’s Maps app, the company gets an overview of the most popular routes and when traffic is highest. It is also able to see which CarPlay apps are gaining traction and downloads.

In a note earlier this year, Morgan Stanley analysts speculated that advances in self-driving could free up trillions of hours a year that Apple could process with new services and products — a potentially huge market.

“What’s an hour of human time in a car doing nothing worth? It depends who you ask… but (and that’s just our view) 1.2 trillion hours times anything, that’s a VERY LARGE NUMBER,” Morgan Stanley analysts wrote earlier this month. year.

Automakers seem skeptical

Apple says heavyweights like Honda, Nissan and Renault are “thrilled” to support the new CarPlay. The 14 brands represented on Apple’s slide delivered more than 17 million vehicles in 2021.

But automakers might not be as enthusiastic as Apple suggested. Few have announced models that will support the new CarPlay and most are non-binding.

Land Rover, which was featured on Apple’s slide, is “working with Apple” to see how it could “become part of” its infotainment system, a spokesperson said. “It is too early to comment on future product offerings,” the Land Rover and Jaguar spokesperson added.

Mercedes-Benz described its commitment to CarPlay as “discussions” with Apple.

“In general, we evaluate all potentially relevant new technologies and functions internally,” a Mercedes Benz spokesperson said.

The lack of Automakers’ commitment may be a matter of timing and product cycle: Apple says vehicles will start being announced “late next year.” But the cool reaction could also be because the new CarPlay represents a major shift in Apple’s relationship with cars.

The new CarPlay will require the car’s real-time systems to transmit this information to the user’s iPhone, where it will be analyzed and integrated into Apple’s own software and rendered on the car’s screens. Apple’s interface will also include vehicle controls. Users can press an Apple-designed touchscreen button to turn on the air conditioning, according to Apple’s promotional video.

“Gaining control of these root functions is remarkable because it effectively transfers the in-car experience from the hands of the automaker to Apple,” Loup Funds founder Gene Munster wrote in a research note.

Whether automakers will give up this control over the in-car experience could be strategically critical for the automotive industry. Early digital savvy electric car makers such as Tesla and Rivian shunned Apple CarPlay, despite protests from their users, likely for strategic reasons (although Apple CEO Tim Cook reportedly took a ride in a Rivian truck earlier this month).

If computers and in-vehicle displays end up displaying mostly Apple’s interface, automakers will be less able to sell those services to their customers. And they could lose the ability to define their customer relationship with online services and applications.

“The goal of the game has to be for OEMs: ‘I have to have a seat at the table somewhere so that when those services come in I have a finger in the cake,'” said Radio Free analyst Richard Windsor. Mobile. “To do this, the user’s smartphone must remain in his pocket when he gets into the vehicle. As soon as he turns on CarPlay, or Android Auto, or Android Automotive, or whatever, the manufacturer automobile is really in trouble.”

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