Rivian Automotive (RIVN +2.37%) has plenty on its plate already. It's battling with slowing demand, refreshing its current R1 vehicles, preparing to launch its upcoming R2 crossover -- and eventually the R3 -- and if that wasn't enough, the company's next battle will be with tech companies.
Here's what's happening and why it's important for automakers.
Smartphone integration
A recent survey from McKinsey & Co. found that 30% of global electric vehicle (EV) buyers and 35% of global combustion engine consumers said a lack of smartphone integration is a deal breaker. The data was much the same for the U.S. specifically, with 25% of EV buyers and 38% of gasoline-powered consumers saying they would not purchase a vehicle without apps such as Apple CarPlay and Android Auto to mirror their smartphones.
The battle comes down to automakers wanting to develop their own systems and keep subscription services and revenue to themselves and away from tech companies. "If an OEM moves away from seamless smartphone integration, obviously that's a risk," said Kevin Laczkowski, global co-lead of McKinsey's automotive and assembly practice, according to Automotive News.
The reason it's such a big deal is because Rivian and Tesla don't support Apple CarPlay or Android Auto. Further, initial research by Rivian showed that 70% of its customers wanted CarPlay in their vehicles. Fortunately, for Rivian investors, that number drops to 30% after customers get accustomed to the native infotainment system, according to Bloomberg.
Only 35% of global respondents said they would switch to using a native system, and another 14% said they would switch to a different car brand entirely -- horrible news for an EV company already dealing with stalling demand. Another insight from McKinsey's survey was that more than 40% of U.S. EV owners said they're likely to swap back to an internal combustion engine vehicle for their next purchase.
Automakers so far seem split on what to do about this issue. Aston Martin and Porsche feature the new version of Apple CarPlay, while General Motors is following in the footsteps of Rivian and Tesla by developing its own system.
NASDAQ: RIVN
Key Data Points
What it all means
As more and more technology is packed into the vehicle interior, it will become more and more important to generate revenue from subscription services and infotainment systems. Rivian is taking a risk by developing its own system in an attempt to prevent tech companies from getting their hands on consumer revenue.
It'll be worth noting and watching to see if Rivian ever switches its strategy to include CarPlay or Android Auto, but until that happens, investors will have to hope the native system -- which, in general, has improved drastically for autos over the years -- will be good enough to satisfy consumers.
While this battle is one many didn't predict, with serious implications at stake, it'll be a key development for automakers going forward, especially considering Rivian's upcoming R2 crossover will be critical for the company's success. That means it needs to get its infotainment system right and prepare its consumers for the lack of tech company solutions.
