Can Apple Corner the Connected Car Market?

Google (NASDAQ: GOOGL  ) has another high-tech rival to contend with in the race to integrate its mobile platform into the connected car. Apple (NASDAQ: AAPL  ) officially entered the ring this month after unveiling its CarPlay technology at the International Motor Show in Geneva. However, it can be difficult sorting the winners from the losers in this increasingly crowded space. That's why we are taking an under-the-hood look at what investors and car fanatics need to know about the future of connected driving.

Source: Apple CarPlay.

Why Apple is a backseat driver
It's no secret that cars are quickly becoming networked devices. From remotely servicing your car using over-the-air updates to Internet connectivity in the driver's seat, the future of driving has arrived. In fact, the connected car market is expected to hit $131.9 billion in the next five years, according to Transparency Market Research. Therefore, it isn't surprising that everyone from auto giants such as General Motors (NYSE: GM  ) to tech titans like Google and Apple want a piece of the action.

Apple is hoping to dominate the connected driving experience with its new CarPlay feature, which seamlessly integrates everything on your iPhone with your car's dashboard. The in-car software platform uses a Lightning connector to link the iPhone to a car's infotainment system, this allows drivers to access iTunes, Maps, Messages, and Siri controls through their car. Drivers will also be able to use third-party apps such as Spotify and iHeartRadio through CarPlay.

Ferrari, Mercedes-Benz, and Volvo vehicles will be the first to get Apple's CarPlay later this year. However, the California-based company says it has the support of leading car manufacturers such as General Motors' Chevrolet brand, Toyota, Hyundai, Nissan, Kia, Honda, and others as well. Yet, even with top automakers integrating Apple's CarPlay feature into their vehicles, the Mac maker is still a backseat driver when it comes to connected cars.

Ultimately, the automakers control the driving experience, as well as the look and feel of the car's dashboard interface. Looking down the road, investors will want to keep an eye on who will own the driver data from these systems. "The most important challenge this industry has in front of it is organizing systems and defining roles in Big Data from the connected car," according to Mark Boyadjis of IHS Automotive.

Source: Apple CarPlay.

Competitive challenges abound
Apple also faces tough competition in this space, not only from tech rival Google but Ford (NYSE: F  ) as well. The American auto manufacturer's hands-free SYNC technology has been gaining ground in the connected car market for years now. Ford first launched SYNC in 2007 with the help of Microsoft (NASDAQ: MSFT  ) , and the software darling's Windows Embedded Automotive operating system currently powers SYNC in Ford cars.

Nevertheless, Ford's existing partnership with Microsoft won't stop it from adding Apple's CarPlay to its connected cars. Ford says it will include CarPlay in future Ford models, but that it will also continue working with Microsoft and other companies including Google. In fact, many of the same carmakers that plan to integrate CarPlay are also in bed with Apple's mobile rivals.

General Motors, for example, is making its cars compatible with both Apple's CarPlay technology and Google's Andriod mobile platform. Google's Android-based Open Automotive Alliance aims to challenge Apple in the race to dominate vehicle dashboards. The tech giant so far has the support of automakers including GM, Audi, Honda, and Hyundai -- a much shorter list of participants than Apple but a list nonetheless.

Ultimately, Apple and Google are both hoping to expand their mobile platforms beyond the smartphone market and into the connected car space. For now, we'll need to wait to see CarPlay in action when it's rolled out later this year in select Volvo, Mercedes, and Ferrari models. However, at this point automakers like Ford and GM hold the power when it comes to the latest connected vehicle technologies because it's still up to them how these platforms are integrated into their car's dashboards and infotainment systems.

How you can cash in on the Internet of cars
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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 19, 2014, at 10:33 PM, techy46 wrote:

    Auto makers will have to give consumers a choice. I'm not buying a car that makes me adopt Apple's technology if I'm an Android or Windows user. That's pretty simple. Likewise, there's lots of Apple fans that would want a Ford with Windows Inside.

  • Report this Comment On March 20, 2014, at 1:26 AM, deasystems wrote:

    @techy46: CarPlay doesn't work that way. You're not forced to use anything—if you don't plug in, the car's native system is used.

  • Report this Comment On March 20, 2014, at 1:45 AM, dlwatib wrote:

    Investors need a much more in-depth article to understand how all these systems will interrelate. Ford, for example, just ejected Microsoft as its infotainment provider in favor of Blackberry's QNX. Since problems with the infotainment units has been a major complaint on Ford and Lincoln products, this was probably a good move. However, this doesn't answer the question of how Android and iOS fit into the FoMoCo picture. In addition to the Google sponsored Open Automotive Alliance and the Apple sponsored CarPlay and Blackberry's QNX and Microsoft's Windows Embedded Automotive operating system there is also the auto maker sponsored GENIVI Alliance. Will all these systems interoperate? If so, how?

    As a consumer, I'm going to want to use whatever smartphone I've got with whatever car I've got, and I'd really like the car to work better if I buy a better phone, without taking the car back to the dealer to yank out the infotainment system and replace it with a new one.

  • Report this Comment On March 20, 2014, at 5:17 AM, Pimust wrote:

    The only sure winner in connected car is Nokia with NSN providing the wireless network infra and services and HERE providing the location services.

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Tamara Rutter

I've been an analytical writer for The Motley Fool since 2011. I cover the sectors of Consumer Goods, Technology, and Industrials. Connect with me on Twitter using the handle, @TamaraRutter -- I'd love to hear from you!

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