Apple's announcement that CarPlay, formerly known as iOS in the Car, is coming to several car makers later this year is big news, but Wells Fargo analyst Maynard Um thinks there's a bigger play for the iPhone and iPad maker: Artificial intelligence.
CarPlay, iPhone, and artificial intelligence will help lock in Apple customers
CarPlay is Apple's iPhone in-car integration system. It lets drivers perform hands-free tasks, like making and answering calls, text messaging and playing music, and also anticipates your needs by plotting driving routes based on your schedule and normal routine.
Mr Um said,
While the technology should help to further "lock-in" existing consumers to the ecosystem and could convert non-iOS users, we believe the more significant announcement is in the details--namely Apple's artificial-intelligence-like or contextual awareness technology, which we view as the potential future key to its ecosystem differentiation versus other vendors.
Apple announced CarPlay partnerships on Monday with car makers including Ferrari, Mercedes-Benz, Volvo, BMW, Ford, General Motors, Honda, Hyundai, Jaguar Land Rover, Kia, Mitsubishi, Nissan, Peugeot Citroën, Subaru, and Toyota. Several have already committed to shipping models with CarPlay support before the end of 2014.
Apple does have competition from Google's Now technology that scours through user data to perform the same functions -- and in some cases more -- but the technology is still new enough that Mr. Um doesn't see any major hurdles to CarPlay or as an iPhone killer.
"We see this ability for contextual awareness in order to provide greater convenience as key to ecosystem differentiation well beyond the car and driving 'lock-in," he said. Considering the iPhone's existing popularity, and the deals Apple now has with car makers will help reenforce the iPhone lock-in with consumers.
CarPlay supports the iPhone 5, iPhone 5S, and iPhone 5C running iOS 7, which may also help drive new customers to the Apple ecosystem, and to push users with older iPhone models to upgrade.
The idea that our smartphones can anticipate our needs and respond accordingly is tantalizing, and using the same device in our cars means there's only one system to learn no matter where we go or what vehicle we're driving. For Mr. Um, that's the big news in CarPlay, and it's going to draw even more loyal consumers into Apple.
Mr. Um is maintaining his "Market Weight" rating and US$385 to $576 target range for Apple's stock. Apple is currently trading at $527.99, up 1.75 (0.33%).