Apple’s car software could be a trojan horse into the automotive industry
Apple is using the iPhone’s popularity to push itself into the auto industry. Apple announced the next generation of its car software CarPlay in June. It takes over the user interface on all interior screens, replacing gas gauges and speed dials with a digital version powered by the driver’s iPhone.
The auto industry faces an unappealing choice: Offer CarPlay and give up potential revenue and the chance to ride a major industry shift, or spend heavily to develop their own infotainment software and cater to an potentially shrinking audience of car buyers who will purchase a new vehicle without CarPlay.
Apple engineering manager Emily Schubert said 98% of new cars in the U.S. come with CarPlay installed. She delivered a shocking stat: 79% of U.S. buyers would only buy a car if it supported CarPlay.Apple suggested it secured cooperation from several major carmakers.“Automakers around the world are excited to bring this new version of CarPlay to customers,” Schubert added before displaying a slide with 14 carmaker brands, including Ford, Mercedes-Benz and Audi.
The car software market will grow 9% per year through 2030, faster than the overall auto industry, according to a McKinsey report. Car software could account for $50 billion in sales by 2030, McKinsey analysts predict. Apple wants a piece of the pie.Carmakers sell additional services and features to vehicle owners on a regular, recurring basis as cars connect to the internet, gain self-driving features, and move from being powered by gasoline to powered by electricity and batteries.
“It’s a must-have feature when shopping for a new vehicle,” Schubert said during a presentation of the new features.
GM, which wasn’t listed on Apple’s slide, already gets revenue of $2 billion per year from in-car subscriptions and expects it to grow to $25 billion per year by 2030. Tesla, which doesn’t support CarPlay, recently shifted into selling its “FSD” driver-assistance features, including auto-parking and lane-keeping, as a subscription that costs as much $199 per month. The new version of CarPlay could be a huge emerging revenue engine for Apple.
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 get their rented batteries replaced.
“It’s a really difficult time in the industry, where the car companies think they’re still building cars. They’re not. They’re building software on wheels, and they don’t know it, and they’re trading it away,” said Conrad Layson, senior analyst at AutoForecast Solutions.
In June, Apple revealed that it has explored features that integrate commerce into the car’s cockpit. One new feature announced this summer would allow CarPlay users to navigate to a gas pump and pay for the fuel from the dashboard of the car, according to Reuters. Apple already generates tens of billions from the App Store, and stands to boost that if it ever decides to charge for services in cars.
In 2021, for example, Apple grossed between $70 billion and $85 billion in total sales from its App Store — of which it takes between 15% and 30%, depending on the app. Apple doesn’t 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 knowledge and data about how people use their vehicles. That’s valuable information if it ever ends up releasing its own car, which has been under highly secretive development for years. (Apple’s car group and its CarPlay team are organized in separate divisions.)
For example, when people use Apple’s Maps app, the company gains insight into which routes are most popular and when traffic is highest. It’s also in a position to see which CarPlay apps are gaining traction and downloads.
“What’s an hour of human time worth in a car with nothing to do? Depends who you ask… but (and this is just our view) 1.2 trillion hours times anything is A VERY LARGE NUMBER,” Morgan Stanley analysts wrote earlier this year.
Apple says heavy hitters like Honda, Nissan and Renault are “excited” to support the new CarPlay. The 14 brands represented on Apple’s slide delivered more than 17 million vehicles in 2021.
But car companies might not be as excited as Apple suggested. Few of them have announced models that will support the new CarPlay and most are noncommittal.
Land Rover, which appeared on Apple’s slide, is “working with Apple” to see how it could be “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.
The new CarPlay will require the car’s real-time systems to pass that information back 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 tap an Apple-designed touch-screen button to turn up the air conditioning, according to Apple’s promotional video.
“Gaining control of these root functions is notable because it effectively shifts the in-car experience from the hands of the carmaker over to Apple,” Loup Funds founder Gene Munster wrote in a research note.
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