Japanese Makers of Car-Navigation Systems Look Abroad for Growth

After steering their way to success at home, Japan’s car-navigation system makers are mapping out routes to overseas markets in search of growth areas before domestic demand starts to wane.

Brisk sales of car-navigation systems in Japan have lined the pockets of Pioneer Corp. and Matsushita Electric Industrial Co., but the two companies are headed in different directions looking for the next growth market.

Pioneer, the world’s top maker of car electronics, forecasts the U.S. car-navigation market to triple to 1.3 million units in the business year ending March 31, 2007, while total demand in Europe is expected to increase by 33% during that period.

Matsushita, on the other hand, sees China as the next big growth market, fueled by the booming automobile sector.

“A wealthy contingent of Chinese consumers is buying new cars and adding on all possible functions, so to a certain degree, we could see some explosive growth,” said Kenichiro Mori, an analyst at Yano Research Institute.

Pioneer and Matsushita together control about 40% of the global car-navigation market, which is expected to double to 10 million units by 2008, according to industry data.

In recent years, the growing popularity of car-navigation systems has provided a boost to electronics makers’ revenues and profits.

That makes a successful move to overseas markets a huge priority as analysts see domestic sales leveling off.

For Pioneer, sales of car-navigation systems accounted for about 25% of its revenue from automobile electronics, which generate most of the company’s profit.

Car-navigation sales make up 40% to 50% of $4.2 billion of revenue at Matsushita’s car electronics unit, Panasonic Automotive Systems. The subsidiary accounts for 6% of Matsushita’s total group sales.

One hurdle to overseas markets, especially in the United States, is the lofty prices of car navigation systems.

“Car radios sell for around $100, and car-navigation systems sell for around $2,200. There is such a huge gap in price that I just don’t see them selling that well in the U.S.,” Masato Kimura, a group manager at Panasonic Automotive Systems, said.