Alphabet’s (GOOGL - Free Report) division Google is leaving no stone unturned to bolster its presence in the car infotainment space on the back of its robust Android operating system (“OS”) and strategic partnerships with the automobile companies.
Reportedly, the company has teamed up with Toyota Motor (TM - Free Report) to deploy its Android Auto into Toyota’s vehicle dashboard. Previously, car drivers could indirectly connect Android Auto with their Toyota cars through a telematics system named SmartDeviceLink.
Following this move, android users can directly sync and connect Android Auto app with their Toyota cars. This is likely to drive the user base of android OS. Further, it will bolster the download base of Android Auto app.
All these will boost Google’s presence further in the operating system space.
Coming to the price performance, shares of Alphabet have returned 14.3% on a year-to-date basis against the industry’s decline of 7.8%.
Winning Automobile Deals
Google is aggressively looking into deals with automobile companies to rapidly penetrate the fast growing in-vehicle infotainment market which, as per the latest report from Research and Markets, is expected to grow at a CAGR of 14% between 2018 and 2022.
Apart from the latest deal, the company recently entered into a multi-year partnership, per which it will deploy its Android OS for infotainment purpose in the cars manufactured by the largest auto alliance comprising of Renault, Nissan and Mitsubishi.
This will enable people driving the car to access Google Maps, Google Assistant, Play Store and other important apps from the car’s dashboard.
Consequently, winning car infotainment deals are expected to aid the company’s momentum in this particular market.
According to a report from Statista, infotainment services in the worldwide connected car market are projected to yield revenues of $4.2 billion by 2022 at a CAGR of 30.4% between 2018 and 2022.
We believe Google is well poised to reap benefits from this potential market, thanks to the strong preference for its Android OS worldwide which can be attributed to its open ecosystem feature.
The immense growth opportunities in the vehicle infotainment market are alluring enough to attract major tech giants to make a foray.
Google’s rival companies like Amazon (AMZN - Free Report) and Apple (AAPL - Free Report) are also putting strong efforts to expand their footprint in this particular market.
Amazon’s recent launch of Alexa Automotive Core SDK or Auto SDK strives to help the car developers to incorporate Alexa into cars seamlessly. In fact, car companies like BMW, Toyota, Ford, Hyundai and General Motors are working with Amazon to integrate Alexa into their cars.
Moreover, Alexa skills have been already incorporated into many vehicles of Ford, Toyota and Mercedes Benz.
Further, Apple’s CarPlay which is a direct competitor of Android Auto, is also available in Toyota’s Entune 3.0 infotainment system.
However, Google’s recent deal strengthens its competitive position against these companies. Nevertheless, the existing partnership of Apple and Amazon with Toyota might hinder Google’s plan to gain significantly from its latest partnership. Further, an intensifying vehicle infotainment battle remains a concern for the search giant.
Currently, Alphabet carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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