Apple’s ‘iOS in the Car’ Is Far From a Sure Bet

by Brad Moon | July 2, 2013 9:25 am

Apple’s ‘iOS in the Car’ Is Far From a Sure Bet

Over the past few months, I’ve talked quite a bit about the many challenges Apple (AAPL[1]) faces. The latest potential problem? “iOS in the Car.”

While the recently debuted feature seems to have a decent amount of support and even more potential, there’s also the risk that it will be yet another strike out for the struggling company.

Apple’s iOS in the Car was one of the big talking points at its WWDC 2013[2]. Essentially, the scheme is to have Apple’s iPhone integrated into a car’s infotainment system. Siri is the hands-free technology driving much of it, while a wide range of iPhone content can be physically displayed on an in-car screen.

BlackBerry (BBRY[3]) — through its QNX division — and Microsoft (MSFT[4]) are already players in the auto market, but Apple would dearly like to take advantage of its current mobile popularity to muscle in before Google’s (GOOG[5]) Android is able to leverage numbers and force automakers to look its way.

So far, the plan looks pretty good. At the conference, Apple listed a dozen automakers that plan to incorporate iOS in the Car in their 2014 model vehicles. The main selling point is that it’s easier for manufacturers to implement Apple’s feature than to develop and maintain proprietary system.

Plus, connected cars are expected to take off in a big way. Over 60 million new cars were sold globally 2012; even without increases, that means nearly 11 million vehicles per year could be in play for smartphone makers by 2018 and the numbers accelerate after that. Plus, consider a recent report from mobile industry trade group GMSA: It forecasts that 18% of cars sold in 2018 will be equipped with smartphone integration[6]. Combine that with cars wirelessly connected by their own SIM card, and you have technology that will be worth $50 billion globally in services by 2018.

But while iOS in the Car sounds big, it also sounds familiar. Roll back to WWDC 2012 and Apple was touting a new automobile integration feature starring Siri as the “Eyes Free” virtual assistant. Back then, the company listed nine auto makers as being on board. BMW (BAMXY[7]), Daimler’s (DDAIF[8]) Mercedes-Benz, Audi, General Motors (GM[9]), Toyota (TM[10]), Honda (HMC[11]), Chrysler, along with Tata Motors’ (TTM[12]) Jaguar and Land Rover divisions, all splashed their logos on the stage and committed to Siri Eyes Free integration in their upcoming models.

Wired’s Autotopia tracked down[13] those Siri Eyes Free partners just two months before WWDC 2013 … and only one of them (GM) had actually released a car with the feature. Honda had a model in beta testing with plans for release this summer, while Mercedes-Benz was making it available as an add-on kit (which is now available in the company’s E-Class cars[14]). Wired tried contacting the other automakers who had committed to Siri Eyes Free and received a series of “no comment” responses … and Apple didn’t respond to questions either.

Further investigation uncovered a reality of competing voice control systems within existing multimedia systems. BMW has announced Siri Eyes Free will be offered in its 2014 model lineup, for example, but so will Android competitor[15] Samsung’s (SSNLF[16]) S-Voice technology, along with BMW’s own voice recognition system. Owners will simply choose which system they direct their voice commands to via steering wheel buttons.

Plus, apparently Apple’s product has no real expertise within an automotive application and there are additional challenges posed by the long development life cycles of cars. A GM rep told Wired that 2014 autos were designed five years ago, for example.

Which brings us back to iOS in the Car. Some names have changed from last year: BMW has dropped off the list, but Hyundai (HYMLF[17]) and Kia (KIMTF[18]) are on it — notable because the South Korean automakers had been using Microsoft’s in-car entertainment software[19]. And overall, more automakers have signed up for iOS in the Car than for Siri Eyes Free last year.

If iOS in the Car actually gains traction, it could represent a real win for Apple. It makes the prospect of owning an iPhone much more compelling than an Android smartphone for new car buyers, and gets the logo right in front of their faces. Plus, auto manufacturers could even get into the iPhone-pushing game by including an iPhone as an accessory for some models the way many do now with satellite radio receivers[20] — something that could result could be a serious boost to iPhone sales.

But iOS in the Car adds significantly more complexity to the equation, with new features like iTunes Radio and visual information such as maps and messages physically displayed on the vehicle’s infotainment system screen.

And a cold dose of reality comes in remembering the lackluster uptake on Siri Eyes Free. If iOS in the Car is an option on just a few Chevy models and maybe a Ferrari[21] next year, the feature will be perceived as more of a hobby — like early AppleTV efforts.

From an investment perspective, that could be added as yet another example of failing to execute on something potentially big — hardly what the onetime tech darling needs right now.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

Endnotes:
  1. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  2. WWDC 2013: http://investorplace.com/2013/06/apple-unveils-ios-7-new-macbooks-more/
  3. BBRY: http://studio-5.financialcontent.com/investplace/quote?Symbol=BBRY
  4. MSFT: http://studio-5.financialcontent.com/investplace/quote?Symbol=MSFT
  5. GOOG: http://studio-5.financialcontent.com/investplace/quote?Symbol=GOOG
  6. 18% of cars sold in 2018 will be equipped with smartphone integration: http://www.gsma.com/connectedliving/wp-content/uploads/2013/06/cl_ma_forecast_06_13.pdf
  7. BAMXY: http://studio-5.financialcontent.com/investplace/quote?Symbol=BAMXY
  8. DDAIF: http://studio-5.financialcontent.com/investplace/quote?Symbol=DDAIF
  9. GM: http://studio-5.financialcontent.com/investplace/quote?Symbol=GM
  10. TM: http://studio-5.financialcontent.com/investplace/quote?Symbol=TM
  11. HMC: http://studio-5.financialcontent.com/investplace/quote?Symbol=HMC
  12. TTM: http://studio-5.financialcontent.com/investplace/quote?Symbol=TTM
  13. Wired’s Autotopia tracked down: http://www.wired.com/autopia/2013/04/siri-eyes-free-roadblock/
  14. now available in the company’s E-Class cars: http://www5.mercedes-benz.com/en/tv/siri-in-the-e-class-mb-reporter-iphone-digital-drive-kit-plus/
  15. but so will Android competitor: http://www.bmwusanews.com/newsrelease.do;jsessionid=3AC02BA0DA61BA602232F85B02D9C3E0?&id=1713&mid=
  16. SSNLF: http://studio-5.financialcontent.com/investplace/quote?Symbol=SSNLF
  17. HYMLF: http://studio-5.financialcontent.com/investplace/quote?Symbol=HYMLF
  18. KIMTF: http://studio-5.financialcontent.com/investplace/quote?Symbol=KIMTF
  19. in-car entertainment software: http://jalopnik.com/387558/microsoft-shills-its-sync-to-hyundai-kia
  20. many do now with satellite radio receivers: http://livepage.apple.com/
  21. maybe a Ferrari: http://9to5mac.com/2013/03/05/ferrari-in-talks-with-apple-to-broaden-in-car-entertainment-partnership-unveils-ipad-mini-equipped-laferrari/

Source URL: http://investorplace.com/2013/07/apples-ios-in-the-car-is-far-from-a-sure-bet/
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