New Technologies Driving Otherwise Sluggish U.S. Car Audio Market

2/28/2003 - A recent study by VDC found the U.S. car audio market, which experienced strong growth in the late 1990s, has become sluggish, and overall growth in this industry is likely to be slow to moderate through 2006. "The OEM and Aftermarket for 12 Volt Electronics, Volume 1: The U.S. Car Audio Market, 9th Edition" found that head unit consumption, estimated at more than $4.3 billion in 2002, is likely to grow to $4.9 billion by 2006. This growth will come in the face of an OEM market constrained by declining new automobile sales, and unit prices that continue to fall. The primary driver behind this projected growth is the introduction of new features and technologies, such as digital satellite radio, and digital AM/FM.

Digital Satellite Radio Is Encouraging Aftermarket Upgrades, Even as it Becomes an Option in an Increasing Number of New Vehicle Models
In less than a year after its initial launch, digital satellite radio, with the XM Satellite Radio and Sirius Satellite Radio services, has experienced very strong demand, in the form of both satellite-enabled head units and modules that add satellite radio capability to existing head units. These services are encouraging consumers to upgrade audio systems that they otherwise might not have replaced. In addition, the OEM head unit market will get a boost from satellite radio as the technology becomes a factory-installed option in an increasing number of vehicles.

The VDC study predicts that the rise in popularity of satellite radio and other emerging technologies will drive sales of other car audio categories, in particular speakers and electronics. Consumers who have invested in the new technologies that offer the potential for better-quality sound are more likely to upgrade their speaker and electronic systems, which will give the aftermarket for these products a boost. In addition, higher-quality speakers and amplifiers are likely to be paired with factory-installed satellite radio-enabled head units, boosting OEM sales.

Digital AM/FM Radio is Expected to Gradually Drive Car Audio Upgrades in Both the OEM and Aftermarket
Although digital AM/FM radio has not yet arrived, it is expected to by next year. Digital AM/FM broadcasts are expected to gradually replace the conventional AM/FM radio broadcast. As it does, this technology is likely to encourage consumers to upgrade their audio systems, creating a boost similar to the ones described for satellite radio.

The report, "The U.S. OEM and Aftermarket for 12-Volt Electronics, Ninth Edition," is a multiclient study designed to provide subscribers with relevant and up-to-date market intelligence to support strategic marketing and product planning decisions. Volume two of this report, "The U.S. OEM and Aftermarket for 12-Volt Multimedia and Communications," will cover the markets for mobile video, navigation, and telematics, as well as the forecast for future integrated products containing audio, video, and telematics functionality. This report is forthcoming.

About VDC
Founded in 1971, VDC is a technology market research and consulting firm that specializes in industrial and commercial electronics, computing, communications, software and power systems markets.

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