Published on May 27, 2010 11:00 PM

Has the SatNav Market Stalled?

With more and more mobile phones now featuring integrated navigation solutions, and on-board GPS cropping up in more and more vehicles as standard, the satnav is starting to look like an endangered species. So what new ways can manufacturers come up with to keep the market afloat and to keep their GPS units selling? We take a look at the current state of affairs and the future direction of the GPS market.

Cast a glance over fellow drivers' windscreens on the motorway at night and you'll soon agree that satnav ownership is high. And it's true that the GPS market has certainly seen successful sales over the past few years. With a huge choice of units available to suit all tastes and budgets, satnavs have invaded vehicles on mass, relegating our trusty old paper maps to the depths of the glove box. Ever since consumer GPS units first hit the market in 2004, stand-alone satnavs have been a staple product in the wider market for consumer electronics, with sales growing fast year on year.

In 2008, GPS sales peaked at 2.7 million units, before starting to slide in 2009. 'Potential buyers for the products on offer were already equipped with a GPS unit,' concludes TomTom Marketing Director Arnaud Pezeron. After a happy and lucrative sales period, stand-alone in-car navigation systems are now facing a new kind of competition: the deadly smartphone. With handheld digital devices integrating ever-more functions, the knock-on effect of this digital convergence seems to be impacting the satnav market. So what does the future hold for personal navigation devices?

Smartphones: the GPS killer?

Smartphones seem to be the real bad apple of consumer electronics, as they've already been accused of attempting to kill both digital cameras and MP3 players. But could these digital all-in-ones really spell curtains for satnavs? 'Saying the GPS is dead would be drawing a very hasty conclusion. The stand-alone GPS has a proven track record and will continue to meet the needs of the general public. This type of product is easy to use, and appeals to men, women and older users alike,' reasons Éric Bernard of Garmin, the world's leading satnav manufacturer. It's the same story at TomTom too, where Arnaud Pezeron went on to assure us that 'although on paper, the latest innovations in mobile phones or smartphone applications come close to a level of service seen in stand-alone devices, users looking for high-quality and genuinely effective navigation solutions will still choose a stand-alone GPS or a vehicle-integrated system. A smartphone is perfect for occasional use or use on foot.'

That's what the manufacturers say, but what about consumers? According to research institute GfK, GPS functionality in mobile phones took off in a big way last year, with 91% of smartphones now equipped, compared with 66% in 2008. Plus, 75% of those owning a mobile with an integrated navigation system say they use it, compared with just 55% in 2008. So, as GPS manufacturer Moi was keen to point out, the smartphone hasn't (yet) wiped out the market for stand-alone satnavs, which are still hanging on in there.

This year's most popular satnavs on DigitalVersus:

However, although the satnav may not be dead and buried just yet, the figures do point to a downward trend. In terms of unit PND sales, the drop is only very slight, but in terms of value, and thus price, it's a different story entirely. As the market becomes increasingly competitive, the average price of GPS units is being pushed further and further down. Éric Bernard predicts that 'in the coming months, the market will continue to shrink slowly, but it won't drastically collapse. This decline will naturally be spurred along by the growth of in-vehicle solutions and smartphones.' Interestingly though, even if traditional stand-alone satnavs are staring into something of an abyss, general consumer interest in route navigation and geo-positioning systems seems to be going from strength to strength. As a result, manufacturers are pursuing a strategy of market segmentation, to profit from the public's on-going love affair with navigation solutions by offering a wider range of products and services. That does, however, change the rules of the game in the satnav market. It's sink or swim, and the big manufacturers have been forced to look for new ways to diversify. Arnaud Pezeron at TomTom affirms that 'in today's market, we can no longer prioritise one kind of solution and totally ignore another. The best way forward is therefore to no longer rely on hardware, but to concentrate instead on offering services, tailored to the various different markets and devices.'

A smart-GPS or a GPS-phone?

So what's the way forward for the GPS? Garmin has launched head-first into a strategy aimed at plugging a gap in the market somewhere between the satnav and the smartphone. But what about free services like Google Maps? No, Garmin is aiming higher than that. As Éric Bernard explains 'the user experience with a smartphone and a satnav isn't the same. GPS functions in smartphones offer a solution for occasional use only, but there's a whole load of people out there who'd like a more advanced solution with a more integrated interface.' Cue the appearance of Garmin's Nüviphone in 2009, after a long and painful development process. The aim was to create a satnav that could also be used as a phone, rather than the other way round. After releasing a first and not entirely convincing handset, the brand isn't admitting defeat and is working or expanding the range, with Microsoft and Google both ready and waiting to provide an OS. Satnav manufacturer Mio has also confirmed its products will be migrating to Android, the Google OS.

This year's most popular non-TomTom satnavs on DigitalVersus:

The smartphone can therefore be seen as the satnav's saviour as well as a potential rival, as smartphones seem to be opening up new directions for future development that manufacturers should ignore at their peril. So while Garmin is concentrating efforts on its PND phone, TomTom seems to going down a more application-based route (see insert). TomTom has sold 280,000 of its iPhone apps (an image-based app resembling TomTom's satnavs), but for the moment it has no plans to release an Android app. It'll be interesting, then, to see to what extent the GPS and the smartphone eventually cross over.

Integrated navigation systems

The smartphone isn't the only competitor ready to run the stand-alone GPS off the road. Directly integrated on-board navigation systems have already proved successful in large saloon-type cars, are now starting to crop up in some manufacturers' mid-range models. In fact, on-board systems now come as standard in many vehicles, or are at least offered as an optional extra. The Renault Clio Carminat TomTom has, for example, proved more successful than either the French car maker or the Dutch satnav provider could have hoped.

But if you take a closer look at the Renault-TomTom relationship, it's clear who's calling the shots: 'Whereas top-of-the-range car manufacturers offer an on-board GPS for around €1,500 [£1,300], Renault wanted a system costing no more than €500 [£450] but which didn't compromise the quality of the product, so as not to have too great an impact on the final price of the vehicle,' explains Arnaud Pezeron. 'Renault is clearly looking to make the on-board GPS the new air conditioning, by offering an optional extra typically found at the higher end of the market in all its vehicles as standard, not even as an optional extra!'

TomTom sees the future of the GPS in on-board systems, predicting that all new cars will be equipped with integrated navigation systems within the next 10 years. Garmin too predicts the mass onset of on-board GPS in the coming years.

More features, more services

The stand-alone satnav, however, isn't ready to admit defeat just yet. With prices coming down, and ever-more new and improved functions and services, the GPS still has a few tricks up it sleeve.

Garmin, for example, now offers 3D navigation for a more visually pleasing on-screen view that recreates the surrounding environment more realistically.

TomTom, however, is yet to commit to 3D, as the technology currently 'needs further optimisation and consumes too much power.' So maybe multimedia is the shape of the future for the GPS? One section of the satnav market will more than likely turn towards multimedia, with new units including ever-more functions and connected services.

Aside from new technology, big satnav brands are now also making sure they're effectively targeting all potential customers. Women have been a notable target for manufacturers, who all seem to have released stylish, slim satnavs, jam-packed with POI (points of interest) for shopping, doing lunch or just making a pit-stop while out on the road.

Personal navigation devices are trying harder than ever to make themselves more appealing to customers, in the aim of encouraging those who first bought satnavs a few years ago to upgrade to a new device. TomTom is predicting high levels of consumers replacing older products this year, estimating that around 40% of satnav owners will upgrade their device, compared with just 15% last year. Why the sudden surge? Well, it's apparently down to satnavs' relatively long lifespan. In other words, the vast majority of this 40% is likely to be made up of users who initially bought a GPS between 2004 and 2006. Logically, then, if TomTom's predictions are correct, the rate of replacement should remain just as high over the next few years as we enter into the second phase of the market's life.

Finally, the satnav does have one clear advantage over a smartphone: it may only do one thing, but it's a device that's democratic in its appeal to consumers of all kinds. A multifunction smartphone, on the other hand, instantly excludes inexperienced or unfamiliar users, as well as anyone who's simply not interested in new technology and pocket gadgets. So even if other portable connected devices start integrating GPS chips, like Sony's latest ultra-portable Vaio P laptop foe example, there'll still a market for stand-alone satnavs.

So has the satnav stalled? Well, it may be gearing up for a rocky ride, but with so many new ways of transforming the product and moving the market forward, it's certainly not out of the race yet!

> Product Survey: GPS
A GPS app: the shape of the future?
As well as the standard navigation systems included in many smartphones equipped with a GPS chip, application stores are full of downloads offering more complete navigation solutions at varying costs. In fact, navigation apps are among the most popular (and most profitable) applications in the App Store.

We decided to test-drive the TomTom application, and it's immediately obvious that the maps and interface are nothing like those you'd find in a stand-alone satnav. Plus, network connectivity on the iPhone is less stable than with a dedicated GPS, and the connection often drops out. That means you'll have to keep waiting for the iPhone to recalculate its position, which can take quite a while, and which unfortunately happens quite frequently. High-quality GPS units don't suffer from this kind of problem, and they have much better battery lives than power-hungry smartphones too. For use in the car, you'll also need a special smartphone mount featuring an additional GPS chip to help improve satellite reception.

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