Automotive Electronics is Recovering

The downturn in the car electronicsmarket hit bottom in the first quarter, paving the way for a returnto annual growth in 2010, according to iSuppli Corp.

“After a dismal 2008 and first quarter, auto sales recently haveperformed more strongly than expected in some regions, mostly dueto government-sponsored incentives,” said Egil Juliussen, principalanalyst and fellow, automotive, for iSuppli. “While 2009 will stillbe weak, the second half of the year will bring a significantimprovement in auto sales compared to the first. This will lead toan annual sales increase in 2010 for auto electronics categoriesincluding audio head units, navigation, Advanced Driver AssistSystems (ADAS), embedded telematics and Bluetooth.”

A Tale of Two Halves

A major culprit in the global car downturn has been the U.S. automarket, which continues to struggle. U.S. sales of cars and lighttrucks suffered an 18 percent decline in 2008, and fell by an evenworse 35 percent in the first half of 2009. Despite thesedepressing statistics, total 2009 U.S. auto sales are forecasted todecline by a relatively mild 17 percent.

One major factor leading to improved auto market conditions in theUnited States is the end of the uncertainty surrounding thebankruptcies of General Motors and Chrysler.

“Both General Motors and Chrysler emerged from theirrestructurings unbelievably quickly, lifting a major cloud from theU.S. auto industry,” Juliussen said.

Furthermore, the United States government now is offering acash-for-clunkers program that gives consumers incentives to tradein old cars for new models. This is expected to boost U.S. autosales by 250,000 in 2009. The total could be even higher if theprogram’s $1 billion budget is increased.

“The cash-for-clunkers program also is serving to spur moreconsumer visits to car dealerships,” Juliussen noted. “This rise inconsumer traffic is likely to have an even more positive impact oncar sales than the incentives themselves.”

A final reason for the improved results is strictly statistical:Year-to-year comparisons with 2008 will become much more favorablein the second half, since auto sales plunged in late 2008.

“The automotive electronics market is seeing the light at the endof the tunnel, but there are a few caution signs,” Juliussenwarned. “The incentive-driven sales surges in some countries couldmean that the light at the end of tunnel is actually the headlightsof a semi-truck, one that may slam head-on into 2010 auto sales.Germany’s incentive-based sales are not sustainable. China’s salesjump is also large, but since most of the sales are to new buyers,the impact may be much milder.”