NPD: Car Audio Gained in 2005, Declined in Jan/Feb

Despite declines in CD player sales, car stereo returned to growth last year, according to The NPD Group, Port Washington, N.Y.

Total after-market sales, including navigation and satellite radio, rose 3.8 percent in 2005 over the year earlier, after several years of annual declines. Unit sales fell 0.5 percent for the year.

But this year, sales are off to a slightly rocky start, down about 8 percent for January and February, reports NPD. Industry analysis director Ross Rubin, however, estimates sales for the year will be flat to slightly up.

The boost in sales last year came mainly from GPS navigation, which is expected to see continued gains, although prices are starting to fall.

Satellite radio is also expected to see lower prices this year. Rubin noted, “I think we'll see tremendous price compression as [XM and Sirius] continue on a subscriber blitz and the price of hardware goes down to practically nothing.”

In traditional car audio, suppliers estimated sales of amplifiers and speakers are holding their own this year. CD players, however, saw a 21 percent dollar decline in sales in February, according to an NPD report. CD players are expected to fall 11 percent annually through 2007, with continued declines thereafter, according to Venture Development, Natick, Mass.

NPD estimates that the aftermarket is currently in a “transition” phase. “There really hasn't been a universal medium to compensate for CD … there hasn't been a wholesale format change as we saw from cassette to CD. It doesn't look like MP3 or iPod integration is filling that void,” said Rubin.

But that could change as companies perfect and expand their iPod integration capabilities and as other OEM integration devices fall in price, he said. In the future, iPod and OEM integration could return autosound to healthy annual increases, he noted.

NPD considers satellite radio and navigation to be strong niches, but not the “wholesale format change” necessary to reinvent the aftermarket.

Car stereo may follow the same path as home audio, said Rubin, creating “home theater in a car.” “We're really moving toward one screen in the car that will be the GPS interface and service the audio and we expect the cost for that type of all-in-one device will go down over time. It's similar to the home market where there's been a convergence around the DVD player and set-top box and these have replaced separate CD players and cassette players.”

Suppliers note that in order to get a share of the market growth, retailers should carry the higher growth items such as portable navigation.