Will Apple Inc.'s 'iOS in the Car' Upend the Entire Auto Industry?


The introduction of iOS 7 dominated the discussion of Apple Inc.'s ( AAPL ) 2013 Worldwide Developers Conference, but another announcement the company made that was just as significant was that of car connectivity.

Come 2014, the Cupertino, California-based company said at WWDC, Apple lovers will be able to get their hands on car-specific versions of iOS on the dashboards of up to a dozen automakers. Through the voice-activated Siri, drivers will be able to access features like voice calling, Apple Maps, iMessages, and music.

Automotive partners who are on board with the "iOS in the car" program include Honda ( HMC ), Mercedes (OTCMKTS:DDAIF), Nissan (OTCMKTS:NSANY), Ferrari, Chevrolet ( GM ), Kia (KRX:000270), Hyundai (KRX:005380), Volvo (HKG:0175), Jaguar ( TTM ), and Opel (a GM brand not sold in the US), though it's unclear which specific models will come with iOS integration.

Apple's car connectivity announcement at WWDC took up a mere 90 seconds, and with details hard to come by for now, dozens of questions quickly emerged afterward: What will happen to car companies who resist the siren song of Apple? Does this announcement spell the doom of auto companies' independent infotainment systems? Can Apple Maps be trusted to navigate roads? Will "iOS in the car" become a new growth avenue for Apple?

So far, major auto companies that have not signed on with Apple include Toyota Motor Corporation ( TM ) and Ford (F). BMW (ETR:BMW), too, has stated that it is still deciding whether or not to integrate iOS into the dashboards of its vehicles.

But Brian Geisel, the CEO of Geisel Software , a developer of mobile, Web, and embedded applications, thinks that even though they might resist now, the popularity of Apple could eventually compel automakers to partner with Apple or other major tech companies.

"I think we will eventually see a convergence in the market to one or a few competing operating systems, whether that's Apple's iOS, Google Inc's (GOOG) Android, or another competitor. We always see industries eventually converge on just a small number of competitors," said Geisel.

Similarly, Bill Howard at ExtremeTech opined, "Longer term, iOS 7 and a reinvigorated Siri could be a bad sign for automakers."

"It could mean the automakers are admitting they just can't keep up with mobile infotainment technology and they'll return to the nuts and bolts of car-building: safety, efficiency, comfort," he added.

Apple's new venture also presents a new threat to companies whose businesses revolve around the driving experience. It's unclear now if Apple will allow drivers access only to its proprietary Apple Maps - the decision it makes will have a big influence on the futures of GPS device makers like Garmin Ltd. (GRMN) and TomTom (OTCMKTS:TMOAF).

"If Apple pushes for proprietary systems, then the Apple Maps problem could be a huge barrier for the success of 'iOS in the car,'" opines Geisel. "However, if they continue with the app model, it could provide better access to manufactures like TomTom and Garmin for better integrating their own systems into these cars."

For Sirius XM Radio Inc (SIRI) stock holders, Apple's car connectivity announcement must also have triggered a slight panic.

"With the rise of 4G and LTE data networks, the integration of iOS could definitely be an issue for a network like Sirius XM. Apple's addition of iTunes Radio definitely offers strong competition in that market," comments Geisel.

Other iPhone apps like Pandora (P), MOG, Spotify, and iHeartRadio could also weaken the position of satellite radio and Sirius XM.

That said, there are still large swaths of the US where wireless data services are not available, and where satellite radio is the only option if you do not want to listen to terrestrial radio. Also, Sirius XM bulls will assert that the company's strength is in its unique content - drivers want more than just jukeboxes, as proven by the popularity of top Sirius celebrity brands like Howard Stern and Glenn Beck.

As for Apple itself, even if "iOS in the car" becomes the dominant system in the industry, don't expect it to provide a substantial boost to the tech giant's bottom line. As Asymco's Horace Dediu pointed out , people buy iPhones and iPads at far greater numbers than they do cars.

In 2011, Dediu calculated, the confirmed Apple auto partners produced some 30 million vehicles, which is about 50% of total global production. Even if iOS is integrated into 10 million of those vehicles, "total revenue from licensing the 'Made for iPhone' trademark to automakers [still] won't be significant," wrote Dediu.

Perhaps that is why Apple only dedicated 90 seconds to "iOS in the car" at WWDC.

See also:

Apple Inc. Is Actually Spending a Lot of Money, but on What?

Why Apple Inc. Can't Be Forgiven for iOS 7

The Future of Nintendo Co., Ltd: Is Mario Doomed?

Twitter: @sterlingwong

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Technology

Referenced Stocks: AAPL , GM , HMC , TM , TTM



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