cars and tech

Apple has its eyes on automakers

July 5, 2013: 8:53 AM ET

A new generation of consumers cares much more about megabytes of storage and clock speeds than horsepower or torque.

By Doron Levin

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FORTUNE -- Can the iPhone help automakers sell cars? Or will cars help Apple sell more gadgets?

Perhaps both. Apple (AAPL) recently said it is working with a number of automakers, including General Motors (GM), Mercedes-Benz, Nissan (NSANY), and Hyundai to integrate its new iOS 7 operating system into cars. The product is called, not shockingly, "iOS in the Car." The car's screen might look like an iPhone's, allowing Siri voice commands to control navigation, entertainment choices, phone, and functions such as heating and air conditioning.

Favorite apps might be projected from the phone to the screen. Combined with a 3G or 4G connection, the format could allow a driver or passenger to buy and download music -- or, perhaps, order merchandise via Amazon (AMZN). "We have been working with Apple on iOS 7," acknowledged David Reuter, a spokesman for Nissan Motor in Nashville, Tenn. He also said that Siri will be used in some Nissan and Infiniti models.

Digital features have become a more important consideration -- crucial for some -- when choosing a car to buy. What's unclear is whether broader digital and wireless capability in cars will add to driver distraction or, conversely, increase safety by letting drivers keep their eyes on the road while letting Siri read them texts and email.

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In any event, it's a sure thing that iPhone's most avid fans will be attracted to car models that emulate Apple's digital feel and experience. With some 600 million Apple devices in customer hands, automakers have a huge audience with which to connect. "The advantage of a common interface is self-evident," said one auto executive, who asked not to be identified because of industry competition. "You only have to learn one format for your car and smartphone, rather than two."

The auto industry has long realized the potential benefits of what it now refers to as "the connected car" -- that is, the car as a node in the digital world. But smartphones have largely transcended the screens on car dashboards, because they do more and are easier to use.

GM, which pioneered connection of its cars to the communication grid via OnStar, has achieved modest success with monthly subscriptions to the satellite service, though nothing near the industry standard it hoped to establish. Others like Ford (F) and BMW have struggled with infotainment systems that were buggy or hard to use, frustrating and alienating some car owners and seeing their overall quality ratings decline as a result.

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Ford, which collaborates with Microsoft (MSFT) on its infotainment systems, is one of the carmakers that so far hasn't been mentioned in the same breath as Apple. But if Apple proves helpful in the sales or pricing of a particular car model, especially one favored by younger buyers, Ford would likely consider how it might also offer the iPhone format.

But carmakers will exercise caution, since consumers are notoriously fickle and could embrace a new and different digital standard as enthusiastically as they embraced the iPhone. Sales of Android devices using Google's (GOOG) operating system are greater than Apple's.

A new generation cares much more about megabytes of storage and clock speeds than horsepower or torque. The automakers get this, which is why Apple will be playing a bigger role in cars.

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