Navigation Tech Sales to Hit $62 Billion

When the South Korean carmaker Hyundai recently announced plans to introduce a Microsoft-based navigation and communications system into its cars, it underscored the dramatic transformation of today’s automobiles. While they may remain, at their most fundamental, mechanical devices, the modern car has become an electronic center, with digital technology controlling everything from the engine to the backseat entertainment system.

Indeed, the biggest area of growth is in information and entertainment technology, sometimes dubbed “infotainment” or, if you prefer, "telematics.” These days, many cars feature more high-tech features than your typical home or office, and the trend seems all but certain to continue.

That’s why a new study by ABI Research forecasts that just navigation devices and systems alone will generate sales of $62 billion by 2012. "Despite disappointing sales levels in the first quarter of 2008 and profit warnings issued by TomTom, Tele Atlas and SiRF, the navigation market still faces a bright future," Dominique Bonte, ABI Research principal analyst, told the trade publication, Telematics Update. "The current decrease in sales has to be seen as a logical reaction following the extraordinary sales growth during the fourth quarter of 2007, especially in the United States."

Good news for Hyundai, Toyota, BMW, and Ford (its new SYNC system, in a Lincoln Navigator, shown above)? Not necessarily. Millions of Americans are forgoing the built-in systems these manufacturers sell – often at prices running to $2,000 – in favor of portable navi units, some of which are available for less than $200. There are dedicated navigation systems, like TomTom's, and now even gaming devices and phones with built-in GPS hardware.

So what’s a carmaker to do? It could depend on two things, acknowledges Alan Hall, a spokesman for Ford Motor Co.: either drop prices or add significant functionality. (Or both, we’d add.) It’s a growing bit of conventional wisdom that factory-equipped navi systems will have to drop to perhaps $500 to $700 to keep consumers ticking off that box when they order a new car.

Ford’s SYNC is commanding around $1,900 in the 2009 Escape crossover, yet sales are booming. That’s because the Microsoft-programmed system features not just navigation, but a multifunction audio package, with a 10GB hard drive and an incredibly intuitive voice interface. Want to find the nearest burger joint while driving cross-country? Just say, “I’m hungry.”

But as analysts note, such technology isn’t the exclusive property of automakers like Ford, at least not for long. Traffic and even weather, as well as detailed points-of-interest lists and voice control, are all showing up on portable devices.

The pot of gold is huge. The question is, who will be able to claim it?