Please ensure Javascript is enabled for purposes of website accessibility

Your Next Car Will Probably Have Apple Inc. Inside

By Sam Mattera – Jan 30, 2016 at 5:08PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

CarPlay and Android Auto continue to gain support among automotive manufacturers.

Carplay. Source: Apple

You don't need to buy a car from Apple (AAPL 0.99%) to take advantage of its automotive technology.

A growing number of the world's leading automotive manufacturers have signed on to support CarPlay, Apple's solution for the automotive infotainment system. Earlier this month at CES 2016, CarPlay scored two particularly notable victories, with both Ford and Fiat Chrysler pledging their support. If you plan to purchase a new car in the next year or two, there's an increasingly good chance it'll come equipped with CarPlay, or Alphabet's (GOOG -0.57%) (GOOGL -0.49%) alternative, Google's Android Auto.

The slow adoption of these systems should benefit their ecosystems, as easier automotive access makes their apps and services more alluring. It also poses a competitive threat to both Sirius XM Radio (SIRI 1.54%) and Garmin (GRMN 0.38%).

Almost 80% of the U.S. car market
The U.S. automotive market is dominated by just a few companies. In December, six automotive manufacturers combined to produce more than 77% of the cars sold. Of those manufacturers, five have pledged to deliver CarPlay- or Android Auto-equipped vehicles by 2017. Some have already begun to deliver: Almost all of General Motors' 2016 model year vehicles come equipped with CarPlay and Android Auto.

Toyota is a notable and significant holdout (it's the second-largest seller of cars in the U.S., behind only GM), and not all other manufacturers plan to roll out CarPlay or Android Auto to their entire fleets -- at least not initially. Still, these interfaces seem destined to become commonplace among a significant number of new cars in the near future.

Owners of older vehicles can, if they so choose, take advantage of a growing number of aftermarket car stereos that come equipped with CarPlay or Android Auto. A few made their debuts in 2015, and more arrived earlier this month at CES. Both Pioneer and JBL unveiled half a dozen new models, some of which retail for as little as $400.

Better access to your smartphone
CarPlay and Android Auto don't offer consumers anything that they can't already do with their existing smartphones -- they are merely interfaces. CarPlay and Android Auto serve as a way to more easily beam content from an iPhone or Android smartphone to the dashboard. But that can make certain applications much more accessible, and therefore useful. Not every app seems adaptable, but audio apps and navigation translate easily.

CarPlay includes deep integration with Apple Music and Apple Maps, as well as several third-party apps such as Audible and Spotify. Android Auto also includes third-party apps, in addition to Google Maps and Google Play Music. Drivers can interact with these apps using their cars' touchscreens (rather than their phones) or by issuing voice commands.

Drivers who have access to CarPlay and Android Auto may find themselves using their phones as replacements for their cars' stereos, which poses a challenge to firms that have built their business around the dashboard. The bulk of Sirius XM's business comes from automotive use, and while the satellite radio giant has exclusive content (notably Howard Stern), the steady expansion of CarPlay and Android Auto will put it into increasing competition with Apple Music, Google Play Music, audiobooks, and podcasts. 

Garmin faces a similar threat. The company's core automotive GPS business has contracted in recent years, but still generates more than one-third of Garmin's revenue. Garmin's management expects the business to continue contracting at a steady pace in future quarters, but the growth of Android Auto and CarPlay could accelerate that pace significantly. With Android Auto and CarPlay, it becomes much easier to ask Siri or Google to navigate you to a particular spot.

CarPlay and Android Auto aren't likely to benefit Apple or Alphabet much directly, but they should make consumers just a bit more reliant on their smartphones -- more tightly bound to Apple's and Alphabet's ecosystems.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Sam Mattera has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Apple. The Motley Fool recommends Ford and General Motors.

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.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.