Functionally, a watch that is designed for a particular purpose is bound to out-shine the "versatile" watch in situations that call for that particular purpose. Using your car analogy, it is even clearer: a car that is bred for the race-track or for conquering mountains will always beat the one that was designed for everyman, but only in those particular environments.
In a sense, however, the "versatile" product was also specially designed for the "everyday" and so eclipses the "specialized" product in "everyday usage". For pottering to the supermarket and filling with groceries without taking up too much space or burning too many fossil fuels, Joe Average's runabout is the most evolved and fit-to-purpose!
When it comes to aesthetics, it gets a lot muddier because it is largely subjective. It does not help that watch design is influenced in no small part by our desire to fantasize and "cosplay"... As long as there are SUVs that will never go off-road or "sports" cars that will never see action on the racetrack, there will also be "dive" watches that will never touch water and chronographs that will never time anything; not to mention tourbillons that are effortlessly beaten for accuracy by the average cellphone (",)
Where does this leave us? Well, consider that the most successful products are hybrids of the two: a Range Rover is always preferable to the out-and-out off-roader because it only looks like it was designed for the off-road but in fact caters to the everyday. Similarly, a Ferrari road car is preferable to a Ferrari F1 car precisely because of all the compromises made to equip it for everyday use. I think the same applies for watches.