As China's increasingly prosperous consumers take to the road, spending on in-car navigation, entertainment and other electronics will surge to almost $3.9bn by 2012, new research predicts.
"The Chinese productivity market, the roadside assistance market, and the rear-seat entertainment market are still in their introductory stages," said Frost & Sullivan research analyst Angielina Tay.
"In comparison, the navigation market is in its growth stage and holds significant promise, especially considering China's high vehicle occupancy rate. "
Drivers in China are often stymied by poor signage, chaotic road conditions and unintuitive road design.
The drivers themselves may have little driving experience, as it is only during the past decade that large numbers of Chinese citizens have taken to the road in their own vehicles.
In addition, the country's sheer scale means that drivers are generally more likely to find themselves in unfamiliar surroundings. All these factors are seen as promoting sales of in-car GPS navigation systems.
"Navigation is likely to become a daily requirement for people, regardless of whether they are driving or not, because a navigation system does not just simply help them to get from A to B, but provides them with value-added services such as points of interest," wrote Tay in a recent research report.
However, the researchers warned that Chinese consumers lack basic knowledge about the products available to them and are confused by the variety of choices.
In addition, the small size of the market means that prices are relatively high in China, particularly in view of local spending power.
The typical price-conscious Chinese consumer's penchant for buying the cheapest automotive navigation and entertainment products available is damaging the image of the whole industry, observers warn.
This is because these cheaper products are often of lower quality, have fewer functions, and tend to lack proper after sales service, compounding the poor customer experience.
"The non-availability of all functions in a single system is an added barrier to penetration, much like the current high prices of telematics and infotainment systems," said Tay.
"For example, the average price for an original equipment navigation system is about $1,463 in 2005 which is relatively high compared to the North American and Japanese markets.
"Given these challenges, distributors and manufacturers need to work together on campaigns to raise awareness and promote the use of telematics and infotainment systems.
"Moreover, to make these systems more affordable, vehicle manufacturers should explore methods of lowering product costs, such as sourcing from local suppliers instead of importing parts."
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