In-Car Electronics Poised to Rebound

A spike in car sales due to GM's bankruptcy exit and the "Cash for Clunkers" program could provide a boost for in-car tech products

By Olga Kharif

Executives at Autonet Mobile felt firsthand the effects of the auto slump. As car sales dropped 18% last year, growth in orders for Autonet's in-car Web-access gear also trailed off.

But in recent months, order growth is up to a 30% monthly pace, vs. about 10% in late 2008. "We are seeing a larger number of reorders," says Sterling Pratz, co-founder of Autonet. "As the car manufacturers come back in strength, we expect our sales to start coming back."

Pratz is heartened by forecasts that suggest the slump in automotive sales may be nearing an end. Auto sales may rise in the fourth quarter before posting 5.7% growth in 2010, according to researcher iSuppli. That bodes well for a host of companies that, like Autonet, make high-tech electronics for cars. The group includes Delphi, Bosch, and Sirius XM (SIRI).

GM Stigma Easing

For some analysts, optimism for the auto industry surfaced July 10 when General Motors exited bankruptcy. "There's a number of consumers who have avoided GM cars because of the stigma" of the company's decision to seek Chapter 11 protection from creditors, says Efraim Levy, an auto analyst at Standard & Poor's, which like BusinessWeek, is part of The McGraw-Hill Companies (MHP). "Now the bankruptcy stigma should be easing."

Carmakers may get another boost after July 24, when the federal government is set to release details of its "Cash for Clunkers" program, which grants rebates to people who replace old cars with new, more fuel-efficient vehicles. The rebates may increase car sales by 250,000 units, says Egil Juliussen, an analyst who covers the auto industry for iSuppli. The number would probably rise if the government increases the program's available funds. "At least one more increase is certainly possible and maybe even likely," Juliussen says. In Germany, car sales are expected to rise to 3.6 million this year, from 3.3 million in 2008, largely thanks to a program similar to "Cash for Clunkers," iSuppli says.

A spike in car sales may result in a corresponding bounce in sales of in-car tech, particularly as car buyers clamor for vehicles outfitted with electronic devices and services. "We've seen that demand for our vehicles with technology [such as in-car Web access] exceeds demand for vehicles without it," says Ed Pleet, a product manager at Ford (F).

GPS Sales Climbing Again

Sales of in-car navigation systems, manufactured by the likes of Garmin (GRMN) and TomTom (TOM2), may climb 15.4% in 2010 after this year's 12.6% decline, iSuppli says. Unit sales of driver-assistance systems from companies including Bosch that aid in such tasks as parking and blind-spot detection may grow by 31.1% in 2010 after being flat this year, according to iSuppli.

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