Apple uses the popularity of the iPhone to break into the auto industry. Automakers are a little unsure how to feel about this.
Apple announced the next generation of its CarPlay software in June. It takes over the user interface on all interior screens, replacing fuel gauges and speed dials with a digital version powered by the driver’s iPhone. It suggested that CarPlay helps automakers sell vehicles.
Emily Schubert, Apple’s chief technology officer, said 98% of new cars in the US come with CarPlay. She provided a shocking statistic: 79% of US buyers would only buy a car if it supports CarPlay.
“It’s a must-have feature when buying a new vehicle,” Schubert said during a presentation of the new features.
The auto industry faces an unattractive choice: offer CarPlay and forego potential revenue and the chance to be part of a major industry shift, or spend big to develop their own infotainment software and serve a growing audience of car buyers who will not buy a new vehicle without CarPlay.
Automakers regularly and periodically sell additional services and features to car owners as cars connect to the Internet, gain self-driving capabilities, and transition from gasoline to electric and battery power.
According to a McKinsey report, the auto software market will grow at 9% per year through 2030, faster than the entire auto industry. Auto software could account for $50 billion in sales by 2030, McKinsey analysts predict.
Apple wants a piece of the pie.
GMwhich wasn’t listed on Apple’s slide, already makes $2 billion a year in in-car subscription revenue and expects that to grow to $25 billion a year by 2030. Teslawhich doesn’t support CarPlay, has recently moved to selling its “FSD” driver assistance features, including automatic parking and lane keeping, as a subscription that costs up to $199 a month.
Automakers in China are starting to develop electric vehicles integrate deeply into their appsso drivers can make repairs, connect with other owners, or even have their rented batteries replaced.
“We think this could eventually lead to Apple offering services that leverage car sensor platforms,” wrote Goldman Sachs analyst Rod Hall in June of next-gen CarPlay.
The next generation of CarPlay will require significant involvement from automakers to give Apple’s software access to core systems. Apple proposed to secure the cooperation of several major automakers.
“Automakers around the world are excited to bring this new version of CarPlay to customers,” Schubert added, before showing a slide showing 14 automakers among them fordMercedes 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 with automakers believing they’re still building cars. You are not. They build software on wheels, and they don’t know it, and they sell it,” said Conrad Layson, senior analyst at AutoForecast Solutions.
The new version of CarPlay could be a huge new revenue engine for Apple.
Firstly, if a user loves the iPhone’s CarPlay interface, then they are less likely to switch to an Android phone. That’s a strategic priority for Apple, which generates the majority of its revenue from hardware sales.
Second, while the company doesn’t still charge a fee from car manufacturers or suppliersit could sell vehicle services like it sells iPhone software.
In June, Apple announced that it was investigating features that would integrate trading into the car’s cockpit. A new feature announced this summer would allow CarPlay users to navigate to a gas pump and pay for gas from the car’s dashboard. according to Reuters.
Apple is already making tens of billions from the App Store and will make even more if it ever decides to charge for in-car services.
For example, in 2021, Apple’s App Store generated total revenue of between $70 billion and $85 billion – of which Apple accounted for between 15% and 30%, depending on the app. Apple does not currently collect a percentage of purchases made through iPhone apps for physical goods or services.
The new CarPlay also allows Apple to gather high-level knowledge and data on how people use their cars. That’s valuable information if it ever ends bring out your own carwhich was under very mysterious development for years. (Apple’s car group and the CarPlay team are organized into separate departments.)
For example, when users use Apple’s Maps app, the company gains insight into which routes are the most popular and when traffic is at its peak. It’s also able to see which CarPlay apps are gaining traction and downloads.
In a note earlier this year, Morgan Stanley analysts suggested that advances in autonomous driving could free up trillions of hours a year that Apple could target with new services and products — a potentially huge market.
“What is an hour of human time worth in a car with nothing to do? Depends on who you ask…but (and this is just our view) 1.2 trillion hours times everything is A VERY BIG NUMBER,” Morgan Stanley analysts wrote a year earlier.
According to Apple, heavyweights like Honda, Nissan and Renault are “excited” to support the new CarPlay. The 14 brands represented on Apple’s slide delivered over 17 million vehicles in 2021.
But auto companies may not be as enthusiastic as Apple has hinted. Few of them have announced models that will support the new CarPlay and most are tentative.
Land Rover, which appeared on Apple’s slide, is “working with Apple” to see how they could become “part” of its infotainment system, a spokesman said. “It is too early to comment on future product offerings,” added the Land Rover and Jaguar spokesman.
Mercedes-Benz described its commitment to CarPlay as “talking” with Apple.
“In general, we evaluate all potentially relevant new technologies and functions internally,” said a Mercedes-Benz spokesman.
The lack of The automakers’ commitment could be a matter of timing and product cycle: Apple says vehicles will be announced “late next year.” But the cool reaction could also be because the new CarPlay marks a big shift in Apple’s relationship with cars.
The new CarPlay requires the car’s real-time systems to feed this information back to the user’s iPhone, where it is analyzed and integrated into Apple’s own software and rendered on the car’s screens. Apple’s user interface will also include vehicle controls. Users can tap an Apple-designed touchscreen button to turn up the air conditioner, according to Apple’s promotional video.
“Gaining control over these core functions is remarkable because it effectively moves the in-car experience out of the automaker’s hands and into Apple,” wrote Gene Munster, founder of Loup Funds, in a research note.
Whether automakers give up this control over the in-car experience could be strategic for the auto industry. Savvy digital-first electric car manufacturers such as Tesla and Rivian have rejected Apple CarPlay due to protests from their users, most likely for strategic reasons (although Apple CEO Tim Cook reportedly drove with in a Rivian truck earlier this month.)
If in-car computers and screens primarily display Apple’s user interface, automakers will have fewer opportunities to sell those services to their customers. And they could lose the ability to define their customer relationship with online services and apps.
“The goal of the game for OEMs has to be, ‘I need to be somewhere at the table so that when these services come, I have a hand in the game,'” said Richard Windsor, analyst at Radio Free Mobile. “To do this, the user’s smartphone must remain in their pocket when they get into the vehicle. As soon as they turn on CarPlay or Android Auto or Android Automotive or anything else, the automaker is in real trouble.”