Plunging Prices to Spur Wider Adoption of In-Dash Navigation
Europe Leads Push to Bring Technology to Economy Cars
Dramatic declines in pricing for car in-dash navigation systems will spur more widespread adoption starting in 2011, according to iSuppli Corp., amounting to an automotive revolution led by European companies.
The availability of in-dash navigation solutions priced at less than 1,000 euros, suitable for smaller and more fuel-efficient vehicles, is essential to spur additional revenue for struggling car manufacturers. If the only option available continues to be 2,000 euro navigation systems, consumers are likely to simply opt out of buying the feature altogether.
iSuppli believes the uptake of lower-priced in-dash navigation systems will begin to have a significant impact on the overall navigation market starting in 2011.
Looking back at the typical mix of in-dash navigation systems available in 2008 model year cars in Europe, iSuppli noted an average selling price profile of 1,780 euros. Most 2008 model year in-dash systems continued to employ the traditional storage options for navigation map media: CD and DVD.
However, in the 2009 model year, conditions changed dramatically. Navigation pricing, which long has been seen as the major stumbling block in the adoption of in-dash solutions, has fallen dramatically.
At the Paris Motor show in October, 2008, iSuppli’s research team noted a significant increase in the number of OEM vehicle manufacturers offering low-cost navigation systems as an option with their 2009 models. Furthermore, our team observed a striking number of changes when comparing ‘08 and ‘09 vehicles:
1.Map media storage, which has moved away from optical solutions—i.e. CD/DVD—and toward lowcost
removable flash media.
2.Manufacturers are embracing touch screens for interface control.
3.Pricing per unit sampled at the Paris show in 2008, which fell to an average of 870 euros.
With the inclusion of touch-screen and removable storage, there is an obvious similarity between the new generation of in-dash navigation systems and higher-end Portable Navigation Devices (PNDs).
The availability of factory-installed sub-1,000 euro navigation system options will continue the evolution of navigation technology, not so much as an application in and of itself, but rather as a location sensor that will facilitate other functions in the vehicle, such as location-based infotainment and commerce.
Once navigation has become a commodity, connected service, developers will be able to take advantage of this connectivity to offer features and services that extend the revenue opportunities for vehicle OEMs for the life of the vehicle. This will reduce the pressure on vehicle manufacturers to recoup all of their development costs from one-off sales of these devices and will allow them to look to the longer-term service opportunities, similar to the current phone service provider model, i.e. free handsets and paid-for services.
Based on the popularity of the lower-cost PND platform, it is fair to assume there will be strong demand for inexpensive in-dash navigation as most drivers are likely to favor embedded navigation over portable devices, if price is not an issue. Embedded systems will always be able to offer a greater range of vehicle-interactive features compared to portable devices, such as Advanced Driver Assist System (ADAS) functionality.
With a few minor exceptions, almost all car purchases are made using some sort of credit, either in the form of a lease or through financing schemes for outright purchase. Many of these finance institutions were established by the large vehicle manufacturers, and when times were good, this practice closed a very nice revenue loop. This approach ensured vehicle manufactures not only got paid for selling their hardware, but also garnered revenue from the finance to purchase their hardware. For example, BMW reported that approximately 50 percent of new vehicle sales in 2008 were financed to some degree using its own financial services arm.
However, the concern now is that car companies have gotten themselves into a vicious circle where they must prop up vehicle sales by increasingly using their in-house financing, as customers continue to struggle to secure finance from the traditional banks. Unfortunately, this will act as a double whammy in 2009 as the car companies effectively will be using their own credit lines to support their own highly discounted vehicles as a means to tempt buyers back to car showrooms.
So, while there is no doubt car companies at the start of the supply chain would benefit from the proposed stimulus packages being proposed by the UK, French, German and Italian governments, this is only part of the solution as consumers need to be given access to competitive independent credit without the requirement for substantial deposits. The alternative will be that vehicle manufactures will simply have to step up their finance and incentive schemes even further. This has not happened in this analyst’s lifetime in Europe, but perhaps this is what economists mean when they talk about negative inflation.
Dramatic declines in pricing for car in-dash navigation systems will spur more widespread adoption starting in 2011, according to iSuppli Corp., amounting to an automotive revolution led by European companies.
The availability of in-dash navigation solutions priced at less than 1,000 euros, suitable for smaller and more fuel-efficient vehicles, is essential to spur additional revenue for struggling car manufacturers. If the only option available continues to be 2,000 euro navigation systems, consumers are likely to simply opt out of buying the feature altogether.
iSuppli believes the uptake of lower-priced in-dash navigation systems will begin to have a significant impact on the overall navigation market starting in 2011.
Looking back at the typical mix of in-dash navigation systems available in 2008 model year cars in Europe, iSuppli noted an average selling price profile of 1,780 euros. Most 2008 model year in-dash systems continued to employ the traditional storage options for navigation map media: CD and DVD.
However, in the 2009 model year, conditions changed dramatically. Navigation pricing, which long has been seen as the major stumbling block in the adoption of in-dash solutions, has fallen dramatically.
At the Paris Motor show in October, 2008, iSuppli’s research team noted a significant increase in the number of OEM vehicle manufacturers offering low-cost navigation systems as an option with their 2009 models. Furthermore, our team observed a striking number of changes when comparing ‘08 and ‘09 vehicles:
1.Map media storage, which has moved away from optical solutions—i.e. CD/DVD—and toward lowcost
removable flash media.
2.Manufacturers are embracing touch screens for interface control.
3.Pricing per unit sampled at the Paris show in 2008, which fell to an average of 870 euros.
With the inclusion of touch-screen and removable storage, there is an obvious similarity between the new generation of in-dash navigation systems and higher-end Portable Navigation Devices (PNDs).
The availability of factory-installed sub-1,000 euro navigation system options will continue the evolution of navigation technology, not so much as an application in and of itself, but rather as a location sensor that will facilitate other functions in the vehicle, such as location-based infotainment and commerce.
Once navigation has become a commodity, connected service, developers will be able to take advantage of this connectivity to offer features and services that extend the revenue opportunities for vehicle OEMs for the life of the vehicle. This will reduce the pressure on vehicle manufacturers to recoup all of their development costs from one-off sales of these devices and will allow them to look to the longer-term service opportunities, similar to the current phone service provider model, i.e. free handsets and paid-for services.
Based on the popularity of the lower-cost PND platform, it is fair to assume there will be strong demand for inexpensive in-dash navigation as most drivers are likely to favor embedded navigation over portable devices, if price is not an issue. Embedded systems will always be able to offer a greater range of vehicle-interactive features compared to portable devices, such as Advanced Driver Assist System (ADAS) functionality.
With a few minor exceptions, almost all car purchases are made using some sort of credit, either in the form of a lease or through financing schemes for outright purchase. Many of these finance institutions were established by the large vehicle manufacturers, and when times were good, this practice closed a very nice revenue loop. This approach ensured vehicle manufactures not only got paid for selling their hardware, but also garnered revenue from the finance to purchase their hardware. For example, BMW reported that approximately 50 percent of new vehicle sales in 2008 were financed to some degree using its own financial services arm.
However, the concern now is that car companies have gotten themselves into a vicious circle where they must prop up vehicle sales by increasingly using their in-house financing, as customers continue to struggle to secure finance from the traditional banks. Unfortunately, this will act as a double whammy in 2009 as the car companies effectively will be using their own credit lines to support their own highly discounted vehicles as a means to tempt buyers back to car showrooms.
So, while there is no doubt car companies at the start of the supply chain would benefit from the proposed stimulus packages being proposed by the UK, French, German and Italian governments, this is only part of the solution as consumers need to be given access to competitive independent credit without the requirement for substantial deposits. The alternative will be that vehicle manufactures will simply have to step up their finance and incentive schemes even further. This has not happened in this analyst’s lifetime in Europe, but perhaps this is what economists mean when they talk about negative inflation.
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