Frost: Digital Media Boosts Stagnant Euro Car Audio Systems Market
January 29, 2007 // Published as a news service by IHS
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Across Europe, car audio systems are close to becoming a standard, saturated product offering.
According to Frost & Sullivan, vehicle manufacturers and suppliers are now looking at promising alternatives such as nomadic devices, Bluetooth, digital audio broadcasting (DAB), satellite radio, hard disk drive (HDD) and other digital media playback as key revenue sectors.
To leverage emerging growth opportunities, original equipment manufacturers (OEMs) need to strike the right balance between offering sophisticated features while ensuring cost-effectiveness. Analysts said they must also ensure the systems match the needs of various vehicle segments.
Recent analysis from Frost & Sullivan found that the European car audio systems market earned revenues of €1.49 billion in 2005, with estimates to reach €2.37 billion in 2014. The key reasons for such strong expansion will be the explosive growth of MP3 head units.
"Consumers increasingly want to use the MP3s (moving picture experts group audio layer3) they burn at home inside their cars," said Frost & Sullivan analyst N. Praveen Chandrasekhar.
"MP3s are also available, physically separate from the CD, from many other sources. These factors are driving the demand for OE audio systems to offer MP3 playback capabilities - a trend that is promoting future market growth."
Analysts said different compressed digital media such as MP3 and Windows Media Audio (WMA) are widely available. When consumers burn an original music CD at home, it gets ripped onto their home personal computer (PC) in WMA format, and they want to use this in their cars as well. This is pushing the need for vehicle manufacturers and suppliers to offer digital compressed media playback.
"This means that OEMs can make revenues out of a new product," said Chandrasekhar. "In addition, the cost of implementing MP3 across different vehicle platforms is also declining, a sign that clearly proves rising interest levels in MP3."
The lifecycle mismatch is a highly relevant issue in the audio systems market due to rapid technological developments, such as the launch of Bluetooth Advanced Audio Distribution Profile (A2DP) for audio streaming from personal devices into the vehicle. Analysts said being in sync with fast-evolving technologies presents a clear challenge to automakers and is becoming increasingly important because of competition from low-cost aftermarket systems.
"The typical time taken for the construction of a vehicle is three to five years, whereas the typical lifetime for any consumer electronics standard is around a year and a half only," said Chandrasekhar. "This makes it difficult for vehicle manufacturers and their associated tier one suppliers to keep track of these rapid changes, and upgrade their vehicles to incorporate the latest audio technologies."
Vehicle manufacturers and their associated tier one suppliers need to increase their product portfolio for audio systems. Analysts said this means they not only have to offer different solutions, such as the single CD, MP3 and even high-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 features suited to a particular vehicle segment," said Chandrasekhar. "This strategy will help counteract competition from low-cost aftermarket systems."
Source: Frost & Sullivan.