How Apple’s Car Software Is Putting Automakers in a Bind
The iPhone Factor
The next generation of Apple’s (AAPL) car software CarPlay was unveiled last month. The software essentially takes the place of all interior screens, including digital versions of gas gauges and speed dials. Apple argues the software helps car companies sell their vehicles. The tech giant says 98% of all new cars have the current version of CarPlay installed. Moreover, Apple says research shows 79% of US buyers won’t consider a car that doesn’t have the software.
Analysts note this is a potential win for Apple on multiple levels. If a user prefers CarPlay they might not consider an Android phone, and Apple could eventually decide to charge automakers for the use of their software. Meanwhile, the additional revenue that could result from the sale of services through CarPlay is significant. For example, Apple recorded at least $70 billion in sales on its App Store last year, of which it receives a percentage. Some on Wall Street think the company might be able to pull off the same feat via CarPlay.
Auto Industry’s Dilemma
For now, Apple’s CarPlay software is provided to the auto industry free of charge. The company notes it has secured cooperation agreements from several major automakers concerning its next generation of CarPlay. Industry observers say if Apple’s operating system is adopted by a significant portion of automakers, CarPlay has significant long-term earning potential.
There is also the possibility more car companies will choose to develop their own software. GM (GM) reported around $2 billion in sales through its On-Star system in 2021 and expects to grow subscription sales to $25 billion by 2030. Tesla (TSLA) does not support CarPlay and recently expanded the services offered through its connected app.
Customers may soon see Apple’s CarPlay take on a bigger role in the auto industry. In announcing the next generation of the software, Apple said 14 car brands are on board, including Honda (HMC) and Nissan (NSANY).
Still, there hasn’t been much buzz concerning new models that will incorporate the new CarPlay software. Both Land Rover (TTM) and Mercedes-Benz (DMLRY) say they’ve had discussions with Apple.
A report from McKinsey suggests the car software market will grow 9% every year through 2030. The iPhone maker undoubtedly wants to influence the “in car” experience, but automakers may be hesitant to give up that level of control.
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