Apple's (NASDAQ:AAPL) March announcement of the car dashboard software CarPlay has been swiftly met by a Microsoft (NASDAQ:MSFT) demo at the April Build conference, currently called "Windows in the Car." The two big tech companies (three, if you count Google's rumored infotainment system) are now open rivals in the auto tech industry. But it is unlikely that consumers will be forced to choose between systems for long -- automakers stand to gain by offering consumers an option between systems.
Leapfrogging toward vehicle tech
Apple, with year-over-year revenue growth at 5.7% in the first quarter, is currently hovering above the industry average of 4.7% growth. Deutsche Bank recently set a $650 price target for the company, expecting further growth from Apple's latest product offerings, including CarPlay.
CarPlay seeks to put iPhone apps and interfaces on the dashboard, in either large touchscreens or more traditional buttons and knobs, based on the carmaker involved. Currently, Apple has deals with Ferrari, Honda, Hyundai, Mercedes-Benz, and Volvo to bring CarPlay to market in the 2014 models of their cars, most due for sale by year's end. Equipped with this software and an iPhone 5 or later model, drivers will be able to launch Apple's music, driving, information and communication apps while in front of the steering wheel.
Microsoft's latest entry in the dashboard sector, while only a demo, looks similar. Using a dashboard touchscreen, users can access Microsoft apps like Maps and Xbox Radio in an interface familiar to those who have used Microsoft's panel-like layout before. Like CarPlay, "Windows in the Car" will also be able to play third-party apps like Pandora and Spotify (look out, traditional radio). The software uses the Mirrorlink connectivity standard, which has already won the support of Volkswagen, Honda, Toyota, and Citroen.
However, Microsoft has some baggage in this area in the form of the Sync system developed by Ford with Windows software. According to rumors back in February, Ford is dropping Windows in favor of BlackBerry's QNX programming to save money. That would have left Microsoft out of the dashboard game, but the "Windows in the Car" announcement indicates the company still intends to offer Apple future competition, albeit in a different format.
Investors appeared uncertain by this back-and-forth development. After rising 6.4% thus far in 2014, Microsoft's share price fell 0.18% on the news, down to $39.80, and then eased down to hover around $39.40 in early April.
Spoiled for choice
While developers are busy snapping up separate car brands for their first market movements, the future of dashboard software is likely to be all-inclusive. Ford's global technologist John Ellis acknowledged this when he told The New York Times, "Ford sells cars... and it would not be in our best interest to limit ourselves."
As Fool Daniel Kline noted, Microsoft, Apple, and perhaps Google are invested in the auto sector because they see it as a way to win long-term customers. If you buy a car with CarPlay, you are committing to using Apple phones for years down the road. Automakers approach the scenario from the opposite direction: It is in their interest to offer buyers as many choices as possible. As car tech evolves, brands will probably move from picking sides to offering customers a choice to install Apple, Microsoft, or Google software. It makes sense, encourages dashboard competition, and gives the buyer more power. Automakers who try to form an exclusive relationship with a tech company may regret the move in a couple of years.
Tyler Lacoma has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Microsoft. 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.