Many top automakers have invested heavily in new technologies for connected cars over the past few years. That's because the percentage of new cars that are shipped already connected to the internet is expected to rise from 13% in 2015 to 75% in 2020, according to BI Intelligence. PWC expects the total value of that market to grow from $34 billion to $124 billion during that period.
One of the pioneers in this market is Ford (NYSE:F), which has signed numerous connected car partnerships in recent years. Let's look back at the five most significant deals.
In the past, Ford's infotainment and navigation systems were powered by Microsoft's Windows Embedded Automotive OS. However, reports of frozen screens, unresponsive touch controls, and random reboots prompted Ford to replace Microsoft's OS with BlackBerry's (NYSE:BB) QNX in its new Sync 3 platform last year. Ford expects its number of Sync-equipped vehicles worldwide to rise from about 15 million today to 43 million by 2020.
QNX is the most popular embedded OS in the connected car market, according to IHS Automotive, and powers over 50 million vehicles worldwide with a market share of over 50%. Blackberry purchased QNX back in 2010, and it's become one of the main pillars of its software division, which generated nearly a quarter of its sales last year. Robust sales of connected cars will likely strengthen that business, which generates most of its revenue from BES (BlackBerry Enterprise Service), an enterprise "control panel" for monitoring employee's mobile devices.
Apple and Alphabet
Ford recently added Apple's (NASDAQ:AAPL) CarPlay and Alphabet's (NASDAQ:GOOG) (NASDAQ:GOOGL) Android Auto to the Sync 3 platform on its 2017 vehicles. CarPlay and Android Auto aren't embedded operating systems like QNX -- they simply "mirror" an iPhone or Android device's display to the dashboard in a vehicle-optimized view. Only apps which have vehicle modes that can be safely used while driving can be activated.
Ford's addition of these features indicates that connected cars are becoming extensions of smartphones, and that cars are becoming tethered to the Internet of Things (IoT) ecosystem, which also includes smart homes, wearables, and other connected devices. Ford also started working with Alphabet's Google on driverless cars earlier this year.
To integrate its vehicles more deeply into the IoT, Ford partnered with Amazon (NASDAQ:AMZN) to integrate its new Sync Connect connectivity platform with Alexa, the voice-recognition service that powers its Echo smart speakers. The partnership will enable drivers to control Alexa-compatible lights, thermostats, or other home automation devices from inside the car. From inside the home, drivers can use Alexa to remotely start their car, turn on the air conditioner, and check fuel, battery, and tire pressure levels.
This system tethers Ford vehicles to Amazon's growing network of connected devices, which already include Echo, DRS-enabled appliances, Dash buttons, Kindle tablets, and Fire TV set-top boxes. These devices reinforce the company's importance in the daily life of its users, and widen its moat against potential challengers like Google and Apple.
Lastly, Ford's plans for a connected future require the backing of a top telco like AT&T (NYSE:T). Back in January, AT&T announced that its 4G LTE network would link up "more than 10 million" Ford Sync Connect vehicles across North America by 2020.
Expanding to connected cars is a key growth strategy for AT&T, since demand for new smartphone plans is peaking. This means that AT&T and other telcos must sell more wireless plans for non-mobile markets -- like connected cars, drones, and IoT devices -- to maintain their wireless growth.
The key takeaway
The automotive market used to be considered an unexciting cyclical market. But the growth of the connected car market is now pushing automakers to innovate and forge new technological alliances. Ford is certainly one of the top automakers to watch in this space, but investors should also pay attention to how its growth plans could strengthen other companies like BlackBerry, Apple, Alphabet, Amazon, and AT&T.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Leo Sun owns shares of Amazon.com, AT and T, and Ford. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon.com, Apple, and Ford. The Motley Fool owns shares of Microsoft and has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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