Automotive Ecosystems – Play Suspended

Mercedes bails on Apple CarPlay 2.0.

• Mercedes Benz has confirmed that it has no plans to support the next generation of CarPlay as it has realised that letting Apple take over the infotainment domain will destroy its ability to monetise digital services in the vehicle.
• Ola Källenius was very clear on the Decoder podcast answering “the short answer is no.” when asked if Mercedes Benz would support the next generation of Apple CarPlay in its vehicles.
• This version of CarPlay was announced at WWDC in 2022 and marks Apple’s move from simply mirroring the smartphone on the vehicle infotainment screen to taking over the instrument cluster as well as other screens in the vehicle.
• The instrument cluster has to run at a much higher level of reliability than the media or navigation functions and as such cannot be safely run on a smartphone.
• This represents a titanic shift because it would mean that far more of Apple’s hardware and software would need to be built into the vehicle and could obviate the OEM’s digital user experience entirely.
• The obvious endgame here is that OEMs leave a hole in the dashboard which Apple then fills with its infotainment offering upon which it could make iPhone-like margins.
• This is a far more viable business model than making the vehicle in its entirety and is what I think Apple has been quietly aiming at for years.
• However, no OEM wishing to make any revenues from digital services will sign up for this as with Apple running all of the digital services in the vehicle, there is no route for the OEM to generate revenues.
• In short, the OEM will have become an app developer for its own vehicle and nothing more.
• In the long term this is a death sentence because as electrification and autonomy drastically reduce demand for automobiles, OEMs will need other revenue streams to survive.
• I have long argued that the best opportunity here is digital services and for this, the OEMs need to have their digital services in the vehicle.
• Mercedes is not going as far as GM in terms of removing CarPlay completely but by supporting smartphone mirroring only, Mercedes will offer far more functionality and integration with the vehicle that will help to entice the user to keep the smartphone in his or her pocket.
• This comes as very little surprise to me as when Apple announced the list of OEMs who were “excited to bring this new vision of CarPlay to customers”, most of those who were mentioned were surprised to be on the list and reacted more with horror than excitement.
• Although Mercedes Benz has a long way to go in terms of delighting users with digital services as opposed to beautiful vehicles, this is undoubtedly the right move and will allow Mercedes to earn revenues above and beyond the sale of the vehicle.
• So far only Aston Martin and Porsche have signed up to implement Apple CarPlay 2.0 which is ironic because neither of them was on the original list that Apple showed in June 2022.
• Both of these car makers rely less on digital for their brand value than the larger, mass-market OEMs and so arguably have less to lose should they end up ceding all of their digital real estate to Apple.
• However, even for these companies, I see this as a mistake as digital is only going to increase in terms of its relevance with time and once Apple is in the vehicle, it will be almost impossible to remove.
• This is evident as the presence or absence of CarPlay already impacts the vehicle buying decision of many consumers who own an iPhone.
• Furthermore, Apple will offer even less to OEMs than Google Automotive Services making it even more of a threat than Google.
• I suspect that many automakers and especially the high-volume makers will follow Mercedes Benz’s example.