Hi everyone,
I am having issues here as well with my new Apple Watch and my existing iPhone 6 (AT&T in the USA) in my car where the iPhone is connected to the car via the b/t interface that came with the car.
I have been using this connection for 3 years in this same car using an iPhone 5, 5s and 6 without any issues. When I got the 6, I was able to start using LTE for calls to other LTE users on AT&T and get crystal clear VOIP-like connections whether I'm talking on the iPhone or through the car speaker system.
Since I got my Apple Watch last week, when making calls in the car from the iPhone 6, it always seems to drop to regular 4G quality from LTE (hence the "worse" quality using the Apple Watch). (I am not making the calls from the Watch!) Also, the phone call audio connections "break up" frequently sometimes dropping the call or other times just going away for a few seconds and then they come back. It seems like the phone is intermittently dropping the b/t connection as the radio will come back on and then go off when the phone call comes back. I don't think the call is breaking up or dropping from the network.
When I power down the Watch, everything works as normal in my car with my iPhone 6.
It appears that the Bluetooth radio in the Watch is definitely causing issues. BTW, I have my iPad Air 2 with me many times in the car with it's bluetooth radio turned on (but like the Watch, NOT paired with the car), and I have never seen possible;e interference issues like what I think is occurring with the Watch.