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Digital Media Pushes Growth in Stagnant European Car Audio Systems Market

December 18, 2007

Across Europe, car audio systems are close to becoming a standard,saturated product offering. As a result, vehicle manufacturers and suppliersare now looking at promising alternatives such as nomadic devices, Bluetooth,DAB, satellite radio, HDD and other important digital media playback as keyrevenue sectors.

To leverage emerging growth opportunities, original equipmentmanufacturers (OEMs) need to strike the right balance between offeringsophisticated features while ensuring cost-effectiveness. They must alsoensure that the systems match the needs of various vehicle segments.

Frost & Sullivan (http://www.transportation.frost.com) finds that the CarAudio Systems Market in Europe earned revenues of EUR1.49 billion in 2005 andestimates this to reach EUR2.37 billion in 2014. The key reasons for suchstrong expansion will be the explosive growth of MP3 head units.

“Consumers increasingly want to use the MP3s they burn at home insidetheir cars,” notes Frost & Sullivan Telematics and Infotainment Team Leader,N. Praveen Chandrasekhar. “MP3s are also available, physically separate fromthe CD, from many other sources. These factors are driving the demand for OEaudio systems to offer MP3 playback capabilities – a trend that is promotingfuture market growth.”

Currently, different compressed digital media such as MP3 andWMA are widely available. When consumers burn an original music CD at home,it gets ripped onto their home PC in WMA format, and they want to use this intheir cars as well. This is pushing the need for vehicle manufacturers andsuppliers to offer digital compressed media playback.

“This means that OEMs can make revenues out of a new product,”says Mr. Chandrasekhar. “In addition, the cost of implementing MP3 acrossdifferent vehicle platforms is also declining, a sign that clearly provesrising interest levels in MP3.”

However, the lifecycle mismatch is a highly relevant issue in the audiosystems market due to rapid technological developments such as, for instance,the launch of Bluetooth A2DP (audio distribution profile) for audio streamingfrom personal devices into the vehicle. Being in sync with fast-evolvingtechnologies presents a clear challenge to automakers and is becomingincreasingly important because of competition from low-cost aftermarketsystems.

“The typical time taken for the construction of a vehicle is three tofive years, whereas the typical lifetime for any consumer electronicsstandard is around a year and a half only,” explains Mr. Chandrasekhar. “Thismakes it difficult for vehicle manufacturers and their associated Tier 1suppliers to keep track of these rapid changes, and upgrade their vehicles toincorporate the latest audio technologies.”

Vehicle manufacturers and their associated Tier 1 suppliers need toincrease their product portfolio for audio systems. This means they not onlyhave to offer different solutions such as the single CD, MP3 and evenhigh-end DVD players, but must also ensure a wide variety of each of these.

“They must strive to strike the right balance between cost and featuressuited to a particular vehicle segment,” concludes Mr. Chandrasekhar. “Thisstrategy will help counteract competition from low-cost aftermarket systems.”

http://www.earthtimes.org/articles/show/news_press_release,35948.shtml

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2 comments

  1. Portable Media devices are definitely taking over the Car Audio Market. Most Consumers are to get away from using compact disc, due to storage and durability issues. With the ease of connectivity these new car stereo head units have. You can almost seamlessly connect your ipod or any other mp3 device directly to the unit. GM and other major auto makers, are starting to include aux line-in as a standard feature, just to keep customers from ripping out there decks.


  2. Great article! This article is true on many levels and this is not just a regional effect. All major car manufactures are including new standards for digital media and car audio because consumer devices are more advanced and people want these included in vehicles now. Even with all the new stardards however, after market systems still trump standard decks because of functionality and quality. Finding the right balance will be key.



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