In-Car Electronics Poised to Rebound

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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. Hughes Telematics, for one, expects to launch its first telematics products for consumers on Chrysler 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 Morgan Joseph Equity Research. 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 Jabra 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.

Kharif is a senior writer for BusinessWeek.com in Portland, Ore.

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