Frost & Sullivan's Analysis Of The European In-Car Infotainment Market; Infotainment Revolution In Top Gear

LONDON--Aug. 2, 20037, 2003--The automotive industry is bracing itself for an onslaught of major car manufacturers offering integrated infotainment functions, transforming the humble dashboard into the lively hub of next-generation car information, navigation and entertainment systems.

The drive towards the infotainment vision has already begun, with automakers such as Audi, BMW and Mercedes-Benz debuting the concept of the sophisticated cockpit-of-the-future by increasingly embedding multimedia functionality in their cars. The iDrive on BMW's 7 Series, for example, fulfills over 700 functions and is a prime example of innovative technology enhancing cabin comfort.

Frost & Sullivan, the international market consultancy, believes that the European market for in-car infotainment technologies, currently worth EUR 2.6 billion, continues to evolve as new offerings sustain momentum behind the spectacularly high innovation rate in this space and help propel products and services into the mainstream.

The fully networked car is associated with a certain degree of cost-prohibitiveness and high retail prices continue to hamper take-up of infotainment systems. Still, benefiting from the emerging crop of new technologies and services, the key to continued stellar growth, the infotainment industry is expected to fetch revenues worth EUR 9.2 billion in 2010.

Frost & Sullivan attributes the lion's share of 66.2 per cent of total European in-car infotainment revenues in 2003 to the original equipment (OE) market. Meanwhile, the aftermarket is expected to suffer a marginal decline over the forecast period as the OE sector continues to fortify its dominance.

The migration from analogue to digital technology paves the way for new infotainment features, further aiding market expansion. Frost & Sullivan expects the digital versatile disc to replace mini disc and compact disc technologies in the long term. The simplicity of use, superior image quality and extra features provided by DVDs, as well as the advantages associated with the universally applicable standard, appeal to consumers.

Perceived as a unique revenue-generating differentiator, players in the in-car infotainment market will witness dramatic take-up of infotainment technology and maintain high profit margins as increasingly discerning customers express willingness to pay a premium for higher quality of sound and information services.

Against a backdrop of ever-growing traffic density and motorists' desire for incident-free driving, Frost & Sullivan argues that demand for advanced route guidance features will rise steadily, eventually giving rise to greater ubiquity of off-board navigation. This technology uses cartographic data via UMTS for destination finding and is poised to significantly alter the landscape of the European navigation market.

"Due to the high systems prices, upper segment vehicles have traditionally been the main bastion of navigation systems. In 2002, the market for navigation systems represented 2.8 million units, equating to EUR 1.3 billion. However, the introduction of new systems targeted at the lower end of the market will stimulate a quadruplication of navigation system shipments by 2010," reports Christian Mueller, Industry Analyst at Frost & Sullivan.

In 2002, the total European multimedia player market, comprising compact discs, mini discs, digital versatile discs and hard disc drives, saw shipments of close to 13 million units, translating into revenues worth over EUR 850 million. The rising popularity of DVD and HDD drive technologies is responsible for the low compound annual growth rate (CAGR) projected for both units and revenues in the overall market sector.

"Vehicle manufacturers are likely to promote DVD systems due to their higher degree of functionality in data storage and capability to play back more than navigation content. The latter function could form the basis for a full systems integration as favored by premium vehicle manufacturers," Mr. Mueller explains.

Frost & Sullivan is cautiously optimistic about initial take-up rates in the market for satellite radio systems. Products are expected to start shipping in 2006 and companies active in this sector will realize more potential for S-DAB in commercial vehicles than in passenger cars. By 2010, Frost & Sullivan forecasts satellite radio to account for 1.8 per cent of the total European in-car infotainment market.

High unit costs and insufficient market coverage are inhibiting growth in the embryonic T-DAB market. However, the introduction of new vehicle models in 2005 will inject new vigor into this sector, propelling sales to just over EUR 108.8 million in 2006. Frost & Sullivan predicts year-on-year growth rates for T-DAB to peak in 2005 as most vehicle manufacturers are expected to have introduced T-DAB into their respective product ranges.

The European in-car infotainment market is comprised of a multitude of companies ranging from large systems integrators such as Siemens VDO Automotive to small suppliers of specialized equipment to the audiophile.

The OE market for infotainment systems consists of ten companies and evolves around systems integration. Upper segment vehicle manufacturers turn towards single, unique shape interfaces for controlling the vehicle's functions and integrate value-add infotainment features with, for example, heating, ventilation and air conditioning (HVAC) controls.

Becker, for instance, has expanded upon its navigation expertise to offer fully integrated solutions such as the Mercedes-Benz COMAND system. Becker currently enjoys a 40 per cent share of the German market for navigation systems.

The aftermarket is more fragmented that the OE market with a host of suppliers battling over their share of the market. Sony currently accounts for the largest slice of the European in-care infotainment aftermarket pie, valued at 17 per cent.

Frost & Sullivan recommends that a modular system's architecture, as introduced by Alpine, is a very flexible way of reacting to changing market and technology conditions and should subsequently be adopted by other suppliers. Modularity is believed to provide a strategic advantage as plug-and-play operation would allow technologies to be added at a later stage.

Mr. Mueller concludes: "We advise suppliers to focus on their respective areas of expertise and to either carve a niche in the market or to engage in collaboration. The agreement between Sony Corporation and Visteon to bring consumer electronics into the automotive OE environment represents a first step towards market consolidation in the European in-car infotainment market. Frost & Sullivan believes that consumer electronics suppliers should build upon the market expertise of traditional automotive suppliers and vice versa."

Companies under discussion in Frost & Sullivan's new study include Aiwa, Alpine, Blaupunkt (Bosch), Clarion, Delphi Automotive Systems, Delco Electronics, Eclipse (Fujitsu Ten), Grundig Car Intermedia System GmbH, Harmann-Kardon - Becker, JVC, Kenwood, Matsushita - Technics/Panasonic, Pioneer, Siemens VDO Automotive, Sony, Visteon, BMW, Daimler Chrysler, Fiat, Alfa Romeo, Ford, Aston Martin, Jaguar, Land Rover, Volvo, Opel, Saab, Porsche, Peugeot, Citroen, Renault, Audi, Seat, Skoda and Volkswagen.

Technologies under review include rear-seat entertainment, navigation, T-DAB, S-DAB, CD, MD, DVD, HDD, MP3, TV and screens.

Code: B175

Publication Date: August 2003