PNDs Seek Their Niche As Competing Devices Grow

By Amy Gilroy On Jul 20 2009 - 6:00am

Recession, falling prices and competition from smartphones are threatening to turn personal navigation devices (PNDs) into commodity items unless PND suppliers come up with new ways to add value to the devices, marketers and analysts said.

Although PNDs will enjoy a few more years of growth despite gains by smartphones and netbooks as navigation platforms, marketers said, PNDs face mounting long-term competition from them.

ABI Research, for example, forecasts the number of cellphone subscribers using GPS applications on their phones will jump to 14 million in North America in 2010, up from an estimated 9.5 million in 2009. That compares with estimated North American PND sales of 17 million in 2009, according to TomTom estimates.

Meantime, retail margins on PNDs with 3.5-inch screens now range from 20 percent to Black Friday margins of zero, and 4.3-inch models will soon suffer 20 percent margins, supplier Nextar said.

As for sell-through, year-to-date retail-level PND sales through May were up 8 percent in units but down 22 percent in dollars as average selling prices dropped to $177 for the period, from $243 during the first five months of 2008, The NPD Group reported.

“I still believe there is a future for PNDs, especially for the older age groups who are not iPhone wizards,” said ABI Research practice director Dominique Bonte. “PND hardware will indeed be cheap, so profits will have to come from connected services, map updates, etc.,” she explained.

Garmin said it expects the PND market “to continue to grow at a healthy rate for the next few years, while the handset navigation and subsidized-netbook markets are developing,” a spokeswoman said.

Even GPS smartphone supplier Networks in Motion (NIM) contended the PND will continue to grow. “PNDs are still the first choice in Europe,” said Steve Andler, NIM's marketing VP. But in the long term, he said, “The trend of having 'good enough' navigation on your mobile will ultimately cannibalize PND usage.”

Current GPS offerings on smartphones include turn-by-turn directions that can require a monthly fee amounting to $120/year, about the cost of a low-end PND, though carriers give consumers the option of purchasing day-long and week-long subscriptions. Some smartphones also feature map-only GPS apps that simply show a highlighted route and are free or relatively inexpensive.

Navigon already launched a turn-by-turn app for the Apple iPhone in Europe in June for $139 but offered it for introductory price of $99.

Navigon president Michael Roach said once a GPS app hits a flat fee of $99, it could be disruptive to the U.S. PND market. But, he noted, “Consumers may find that they enjoy navigation, so it might help PNDs grow and penetrate more consumers.”

This summer, Navigin and TomTom are expected to create a third category of navigation apps for smartphones. The apps would offer a one-time charge for turn-by-turn directions.

Despite the growing numbers of navigation apps expected for smartphones, PNDs still offer a major advantage: Smartphone navigation is subject to interruption when a call comes in or when users travel through a tunnel or other obstructed areas.