Digital Media Pushes Growth in Stagnant European Car Audio Systems Market

31 December 2006

Across Europe, car audio systems are close to becoming a standard, saturated product offering. As a result, vehicle manufacturers and suppliers are now looking at promising alternatives such as nomadic devices, Bluetooth, DAB, satellite radio, HDD and other important 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. They must also ensure that the systems match the needs of various vehicle segments.

Frost & Sullivan (http://www.transportation.frost.com) finds that the Car Audio Systems Market in Europe earned revenues of EUR1.49 billion in 2005 and estimates this to reach EUR2.37 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 they burn at home inside their cars," notes Frost & Sullivan Telematics and Infotainment Team Leader, 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."

Currently, different compressed digital media such as MP3 and WMA 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 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," says Mr. 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."

However, the lifecycle mismatch is a highly relevant issue in the audio systems market due to rapid technological developments such as, for instance, the launch of Bluetooth A2DP (audio distribution profile) for audio streaming from personal devices into the vehicle. 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," explains Mr. Chandrasekhar. "This makes it difficult for vehicle manufacturers and their associated Tier 1 suppliers to keep track of these rapid changes, and upgrade their vehicles to incorporate the latest audio technologies."

Vehicle manufacturers and their associated Tier 1 suppliers need to increase their product portfolio for audio systems. 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," concludes Mr. Chandrasekhar. "This strategy will help counteract competition from low-cost aftermarket systems."

If you are interested in a virtual brochure, which provides manufacturers, end users, and other industry participants with an overview of the Strategic Analysis of European Original Equipment Market for Car Audio Systems, then send an e-mail to Michael Banks, Corporate Communications at michael.banks@frost.com with your full name, company name, title, telephone number, e-mail address, city, state, and country. We will send you the information by email upon receipt of the above information.

Strategic Analysis of European Original Equipment Market for Car Audio Systems is part of the Automotive & Transportation Subscription which also includes research in the following markets: Analysis of the European OE market for Telematics and Infotainment Systems - Market Size and Forecasts, Analysis of the European OE market for Telematics and Infotainment Systems Competitive Analysis, Analysis of the New Market Entrants in the European PND Aftermarket and Analysis of the European Market for Standard Software Platforms for Telematics and Infotainment Systems. All research included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants. Interviews with the press are available.

Frost & Sullivan, a global growth consulting company, has been partnering with clients to support the development of innovative strategies for more than 40 years. The company's industry expertise integrates growth consulting, growth partnership services, and corporate management training to identify and develop opportunities. Frost & Sullivan serves an extensive clientele that includes Global 1000 companies, emerging companies, and the investment community by providing comprehensive industry coverage that reflects a unique global perspective and combines ongoing analysis of markets, technologies, econometrics, and demographics. For more information, visit http://www.frost.com.

List of key words in this press release: car audio systems,digital media playback,MP3,WMA,Bluetooth A2DP

Contact:

Michael Banks

Corporate Communications - Europe

P: +44-20-7915-7876

F: +44-20-7730-3343

E: michael.banks@frost.com

Tori Foster

Corporate Communications - Americas

P: +1-210-477-8448

F: +1-210-348-1003

E: tori.foster@frost.com