Navigation Business Is Down But Not Out

Navigation sales are expected to remain flat or drop off this year as high prices and an uncertain economy stall the market, according to suppliers and retailers.

Sales are expected to hover below 30,000 units with no great catalyst in sight to boost the market, suppliers said. On a long-term basis, however, nearly every supplier continued to claim that navigation will eventually take off.

"The category is very slow, slower than last year. There seemed to have been a sell-in but then the [stock] market had problems, which affected the whole industry," Blaupunkt engineering director Jim Frazier said. "When people have that kind of money to spend on navigation, they are going to think twice now. A good system installed is still going to run you a couple of thousand dollars."

"The product is too expensive to get any kind of velocity," said Kenwood sales and marketing VP Bob Law. "We are very happy with the results of our product at the price, but it's not a significant business at this point."

Even high-tech retailers who have had success selling navigation in the past say sales are flat. "Navigation has really been pretty stale this year," said Tim Lavoie, owner of Tim's Car Tunes in Indian Orchard, Mass. "The whole road warrior mentality is in question because of the economy. No one feels safe in his or her position. Now they are counting their nickels."

Lavoie continued: "The Clarion JoyRide is an unbelievable head unit, but it's over three grand. If we were still riding the tech bubble we wouldn't be able to keep them in stock. It's just uncertain times."

But navigation is facing other problems, compared to mobile video, for example, which has maintained growth despite an economic downturn.

Consumers are not opting for the less expensive, mapless solution, which delivers directions by voice prompt and pictograph arrow display. Eclipse, Audiovox and Blaupunkt all admitted to less-than-anticipated results with these units as consumers expect to see a map when paying prices in the $1,499 range, they said. In addition, the product is unacceptable to early adopters. "We have one unit like that and frankly it hasn't been very successful, I believe, because you are still dealing with the early adopter and it's still a lot of the wow factor," said Fred Roetker, Audiovox national sales manager for Prestige Audio and Navigation.

But most consumers don't want to pay $2,000 for a screen-based solution either, said suppliers.

J.D. Powers, Troy, Mich., which publishes an annual report on navigation, claims that the market will take off when the price for a screen-based system hits $500. Said Frank Forkin, head of emerging technologies, "the magic price point has always been $500 for navigation and no one is close to that."

Because of the high price of LCD screens, Blaupunkt said reaching $500 could take three to five years. In addition, Frazier noted that by that time, navigation could go in any number of directions. It could take on an off-board, server-based format that delivers information wirelessly as you need it. Kenwood's Bob Law said that rental systems might be available in the future, which are server-based and which allow users to purchase only the maps needed for a certain area.

Not a single supplier dared to predict what form navigation would take in three to five years or as Eclipse marketing and sales VP Ray Windsor noted, "I don't think anyone can predict what will happen between now and 48 months."

There is also still some confusion as to whom the market is targeting. Alpine says the average age of its navigation customer is 38 and that navigation is often purchased in conjunction with a mobile video system. Sixty percent of its navigation units are sold as an attachment to the company's Mobile MultiMedia products, said product promotion manager Todd Van Zandt. Harman Kardon recently entered the market hoping to market to an older demographic, claiming that the type of customer most interested in navigation doesn't tend to frequent a 12-volt store (see TWICE, Oct.14, p. 28). And as Clarion manager of technical marketing Jeff Abrahms noted, "Not only is it price, but the aftermarket hasn't figured out how to market this."

Apparently, those who do purchase navigation are very happy with their systems and tend to use them every week, according to Audiovox. "You have to educate the consumer that they are going to use it. It's like remote start. People didn't think they'd use it that much. Once you have it, you even use it in the summer," said Roetker, adding that drivers frequently turn to the unit for rerouting around traffic.

The people who own a navigation unit "have a very high repurchase intent. Ninety percent would recommend it," claimed Forkin.

Help for the market might come from the car manufacturers who are slowly raising awareness of the product. J.D. Powers projects 300,000 onboard navigation systems (excluding systems such as OnStar) will sell from the factory this year compared to 175,000 in 2001. Navigation systems are now available on 70 vehicle models, compared to 45 last year, and this is expected to increase. "The Camry is offering it and eventually it will be on the Accord. So you are beginning to see it in a lot of high-volume vehicles. Once its on the Taurus and Accord, the penetration should go up substantially," said Forkin, although he notes that the high price of $1,800 to $2,400 is still prohibitive.

By 2010, if the price of the systems remains the same, Forkin predicts 12 percent of vehicles will include a navigation system compared to less than one percent today. If the price goes down to $500 then the penetration would be closer to 30 percent in new vehicles, he said.

Another boost for navigation could come from instant traffic information. "If you could turn on the navigation system in the morning and know which freeway to take, that would be a huge selling point for many people," Kenwood's Law noted. "The technology is there in Japan and it's been in use for a few years. It's just a question of getting the infrastructure in place in the U.S."

At present, it is possible to check traffic information in major cities on a home PC before entering the car. Although "the traffic could change by the time I get to my car," Law noted.

Cue Corporation, Irvine, Calif., which recently went out of business, was the only company offering a real-time traffic information integration service for navigation. The system was used in both Pioneer and Clarion.

With Cue's demise, there is no company offering real-time traffic information. However, Alpine, Panasonic and Pioneer recently demonstrated real-time traffic updates using XM satellite radio and a new Navigation Technologies system at the Intelligent Transport Systems (ITS) 9^th World Congress in Chicago.

Navigation Technologies announced last month that it has developed technology for a traffic update service using satellite radio. For the ITS demonstration, Navigation Technologies used traffic data from TrafficCast and configured it to be sent via XM satellite and received on navigation systems using Navtech maps. Traffic incidents then appeared as icons, color-coded streets and/or text information on certain driving routes in the Chicago area. A Navigation Technologies spokesman said the company hopes to market the product in the 2004 car model year, targeting OEM applications first, and then possibly, the aftermarket.

Navigation Technologies said that its technology could also work with Sirius Satellite Radio.

Pioneer said it hopes to begin offering real-time traffic information some time between the fourth quarter 2003 and fourth quarter 2004.

In the meantime, to compensate for the lack of Cue service, Pioneer said it offered purchasers of the Cue model a free software upgrade to the newer Pioneer AVIC-90 system, which is a value of $300.