Peering Into The Future Of The PND

By Amy Gilroy -- TWICE, 10/12/2009

NEW YORK — Despite the two-year window of growth ascribed to portable navigation devices (PNDs) before sales begin to decline, suppliers are still looking for ways to invigorate the category.

Garmin says it is looking into Wi-Fi as a possible add-on feature in the future, and both TomTom and Garmin are launching new cellular-connected PNDs with Internet search.

But with more consumers using smartphones for navigating, TomTom president Jocelyn Vigreux and others give the PND two to three years before unit sales decline.

Suppliers are quick to point out that PND penetration is still only in the teens. But this is true of per capita (per person) penetration, while household penetration may be closer to 35 percent, said iSuppli.

Also, if you look at all ways to get navigation in the car, including in-dash systems, and smartphones/cellphones using turn-by-turn GPS, iSuppli estimated total GPS household penetration is at 56 percent and will hit 70 percent next year, although Navigon said it believes iSuppli estimates are on the high side.

The tougher question, however, is where will the PND go from here? Attempts to keep average selling prices afloat with new features have proven difficult.

Real-time traffic, as a feature, is in demand but only without service fees.

Garmin mobile navigation sales director Jon Peckman noted, “What we see is consumers just don’t want to pay for traffic. They want it, and they just don’t want to pay for it,” he said referring to ongoing service fees. He claimed some of Garmin’s PNDs with ad-sponsored free traffic are “very high-volume SKUs.”

Navteq said it had 2 million subscribers to real-time traffic as of February and claimed its sales are dramatically increasing with each consecutive month.

TomTom also said it is examining an advanced traffic service in the U.S. “We’re in the process of developing with partners some not yet announced, traffic strategy for the future. We believe that being able to bring enhanced traffic to the [U.S.] market and change the current paradigm is something we’d like to do as we’ve done in Europe. I think there’s a need for it and users want access to traffic,” said Vigreux. TomTom currently offers a crowd-sourced HD Traffic service in Europe that uses two-way TomTom PNDs to monitor thousands of drivers on the road to create traffic updates.

Another big challenge is the cellular-connected PND, which has proven to be a slow mover even at midlevel price points.

ABI Research said TomTom’s first “connected PND”— the Go 740 Live ($399) that shipped in April — has had limited success. But the industry is not giving up.

TomTom will offer a lower-cost XL 340S Live this month at $299 plus $10/month service fees (see story on p. 34). Garmin also just announced a $499 Nuvi 1690 with free traffic for two years.

Magellan told TWICE, “Many manufacturers have attempted this exciting technology with less than exciting success. We will introduce our connected device when the technology and price model matches customer expectations.”

Car Toys merchandising senior VP Dan Jeancola said the market is ready for step-up PNDs but the industry has failed to market them properly to consumers.

“We believe the feature 'drivers’ of PNDs will be screen size, lane guidance, onboard traffic and new connected devices. The cycle of second-time PND owners having bought PNDs three to four years ago now are familiar enough with the category to want these upgrades. We believe the real issue is the PND industry has done a poor job introducing the benefits to the first-time buyer who might be willing to upgrade.”

Also of note, the PND market has shifted dramatically in favor of 4.3-inch screens over 3.5-inch models. Suppliers sid the larger size now accounts for 60 percent to 70 percent of sales, with much of that shift occurring since May.

TomTom said there’s still room for the 3.5-inch size while Nextar business development and operations VP Andy Frankel said 3.5-inch “is in its last death throes. It will still have a place in department stores and general merchandise stores but, increasingly, as the lowest price option, and 4.3-inch will drive most of the volume ... After December and January we think it will become an albatross and an inventory problem.”

GPS U.S. Household Penetration

Source: iSuppli © TWICE 2009
Household penetration, U.S.	2009	2010	2013
U.S. households	117.1M	118.6M	122.9Mh
In-vehicle navigation systems	8.1	9.1	13.6
Dedicated navigation devices	34.9	37.4	32.6
Smartphones/PDAs w/navigation	6.6	9.7	27
Handsets w/navigation	6.8	9.7	36.9
Total portable navigation systems	48.3	56.8	96.5
Total navigation systems	56.4	65.9	110.1
Per capita penetration, U.S.	2009	2010	2013
U.S. population	307.2M	310M	318.1M
In-vehicle navigation systems	3.1	3.5	5.3
Dedicated navigation devices	13.3	14.3	12.6
Smartphones/PDAs w/navigation	2.5	3.7	10.4
Handsets w/navigation	2.6	3.7	14.2
Total portable navigation systems	18.4	21.7	37.3
Total navigation systems	21.5	25.2	42.5

Top Five PND Models

Source: The NPD Group/Retail Tracking Service © TWICE 2009
1	Garmin Nuvi 255W 4.3-inch Color LCD Portable Internal Memory SD USB
2	Garmin Nuvi 205 3.5-inch Color LCD Portable Internal Memory microSD USB
3	Garmin Nuvi 205W 4.3-inch Color LCD Portable Internal Memory SD USB
4	TomTom One 130 Portable Navigation System 3.5-inch LCD USB
5	TomTom One 125 3.5-inch Color LCD Portable Internal Memory USB

Navigation U.S. Sales to Consumers
January-August 2009

	Unit volume Jan.-Aug. 2009	Unit percent change Jan.-Aug. 2009 vs. 2008	Dollar volume Jan.-Aug. 2009	Dollar percent change Jan.-Aug. 2009 vs. 2008
Source: The NPD Group/Retail Tracking Service © TWICE 2009
Portable	4.1 million	6%	$730.1 million	-21%
Fixed	& 100 thousand	31%	$67.6 million	-1%