Toyota (NYSE:TM) said last week that it had reached an agreement with Ford (NYSE:F) to "to explore collaboration with Livio, a Ford subsidiary, for the implementation of SmartDeviceLink (SDL) technology in future Toyota and Lexus vehicles."
What's that mean?
It's a strange-sounding announcement if you don't understand the context. Why is Toyota announcing a deal to "explore" working with Ford on this technology?
The honest answer is that it's not yet clear what Toyota (and Ford) have in mind here. But it probably has a lot to do with two Silicon Valley giants, Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOGL), and their efforts to gain a bigger presence in your car -- through the dashboard.
But before we talk about Google and Apple, I should probably explain what this technology is and why it's important.
What is SmartDeviceLink and why is it important?
SDL -- SmartDeviceLink -- is an open-source version of a proprietary Ford technology called AppLink. AppLink is part of Ford's SYNC system, its in-car "infotainment" system. Simply put, it allows SYNC to operate certain apps on your iPhone or Android device. A driver of a SYNC-equipped Ford or Lincoln can use voice commands and buttons on the steering wheel to control smartphone apps that incorporate the AppLink technology.
SDL and AppLink include technology developed by Livio, a start-up that Ford acquired in 2013 that has since taken the lead on Ford's connectivity efforts. But Ford's move to make SDL open-source predates its acquisition of Livio.
Why did Ford make SDL open-source? There were two big reasons. First, Ford wanted to make it as easy as possible for developers to make their smartphone apps work with the system. Second, Ford was hoping to create an industry standard. If other automakers adopted the technology, then app developers would have a larger addressable market -- and that would make them more likely to create apps that can be used with systems like SYNC.
It was a good plan. But it hasn't worked out quite the way Ford hoped. There are only a few dozen iOS and Android apps that incorporate the technology. And until last week's announcement, no other automaker had jumped on the SDL bandwagon. (But some key providers of services have: Chinese e-commerce giant Alibaba (NYSE:BABA) has integrated SDL into a navigation app, and Ford said earlier this year that it is working to expand the relationship.)
But now giant Toyota is moving in Ford's direction. Why?
What Google and Apple want from your car
Here's why: Because Google and Apple are coming.
Google's Android Auto and Apple's CarPlay are somewhat similar to SDL, in that they integrate smartphone apps with in-car systems. But they're far more elaborate -- in ways that don't necessarily please the automakers.
After spending years (and huge amounts of money) developing their proprietary in-car "infotainment" systems, automakers are understandably reluctant to turn them over to Silicon Valley giants who see cars as just another "device" to colonize with software -- and another way to gather information about their users.
What's more, the automakers are just beginning to explore ways to turn their in-car systems into additional revenue streams, with data subscriptions and add-on apps and the like. They aren't ready to give up control of that part of the car.
But at the same time, the Google and Apple offerings are likely to be popular with consumers -- in part, because the automakers' existing systems haven't been very good. That could turn out to be a sales advantage for the automakers that embrace them early.
Ford's original SYNC system won high praise when it was first rolled out last decade. But the touchscreen system built on it, called MyFord Touch, has been so troublesome that it has clobbered Ford's quality ratings. (One of the many complaints: AppLink doesn't work with MyFord Touch.)
Ford will launch a new, more robust system this fall. Early reviews suggest that the new system, called SYNC 3, is a huge improvement. It has much more robust hardware and a completely overhauled user interface, and it appears to do a good job of addressing consumers' complaints about MyFord Touch. (And it incorporates the latest version of AppLink.)
But many consumers have seen enough. They're frustrated with the systems that have been on the market for the last few years. They want the same well-designed, intuitive, "it just works" experience that they get with their other electronic devices. And who better to provide that than Apple or Google?
Who will win? Here's how to bet
Automakers haven't rushed to embrace SDL yet. But they haven't rushed to embrace the Silicon Valley heavyweights, either.
Apple and Google list many different automakers as partners that will offer their systems in the future, to date only Hyundai (NASDAQOTH:HYMTF) and General Motors (NYSE:GM) have announced that they will offer the systems in mainstream models.
That list could grow in time. (Both Ford and Toyota are listed as Apple CarPlay partners, and Ford is a partner of Android Auto.) But Ford, and now Toyota, are looking to hold on to that space on your dash a while longer.
How will all of this play out? Silicon Valley's experience suggests that the best user experience will win out, and that's where Google and (especially) Apple have a hard-to-beat advantage. We'll see.
John Rosevear owns shares of Apple, Ford, and General Motors. The Motley Fool recommends Apple, Ford, General Motors, Google (A shares), and Pandora Media. The Motley Fool owns shares of Apple, Ford, Google (A shares), and Pandora Media. 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.