Consumer Electronics

In-Car Electronics Poised to Rebound


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 . "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 . That bodes well for a host of companies that, like Autonet, make high-tech electronics for cars. The group includes , , and Sirius XM ( (SIRI)). GM Stigma Easing For some analysts, optimism for the auto industry surfaced July 10 when 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. Telematics systems, which call emergency services after an accident or provide driving directions, should see a revival in demand as well. After dropping 24% this year, unit sales of embedded telematics systems should rise 19% next year, according to iSuppli. , for one, expects to launch its first telematics products for consumers on and Mercedes-Benz ( (DAI)) cars in the fourth quarter, and to release an aftermarket product in early 2010. "All plans are still a go for the end of the year," says Kevin Link, co-founder of Hughes. Sirius XM, which lost customers in the first quarter largely due to poor auto sales, could return to growth with rising auto sales. "If the car market comes back, it's a good thing for Sirius," says David Kestenbaum, an analyst with . Many new cars come with Sirius XM radios built in and the auto industry brings in most of the company's new subscribers. Hands-Free Laws a Plus Meanwhile, state laws prohibiting driving and talking on the phone are expected to spur sales of hands-free systems. A handful of states, including California, Connecticut, and New York, already ban handheld cell-phone use while driving. And several more, including Oregon, are planning to implement similar bans within months. Manufacturer introduced a new, cheaper in-car Bluetooth speakerphone in June, and the sales have been "very strong," says Michael O'Keefe, a sales director at Jabra. "If there's one upside to this economy, it is people are really looking for value." Still, some analysts say they need more evidence of a rebound in auto sales before they grow more bullish on the makers of in-car electronics. "I am not going to rush out and change my model until the visibility becomes more clear," says Tuna Amobi, an analyst with S&P.
Olga_kharif1
Kharif is a reporter for Bloomberg News and Bloomberg Businessweek in Portland, Ore.

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  • SIRI
    (Sirius XM Holdings Inc)
    • $3.42 USD
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