By Bill Howard
As portable GPS systems free-fall below $200, automakers stubbornly keep prices of onboard navigation at $1500 to $2000. There are a host of reasons why and they help explain but hardly excuse the bloated pricing of embedded navigation. Some auto analysts say $1000 is the most you can justify for first-class onboard navigation and sooner or later that may be the most, not least you’ll pay for the superiority of built-in navigation. There’s increasing sentiment within the industry that you are indeed getting ripped off today buying navigation systems.
Why is onboard navigation so expensive? Thilo Koslowski, a VP of the Gartner Industry Advisory Service Manufacturing group, says “[Onboard navigation] could be under $1000 and still be a healthy value proposition” for both automakers and buyers.
Signs that the end is near for overpriced onboard navigation include the proliferation of navigation-and-other-stuff packages that mask a lowered price for the navigation part yet makes it harder for buyers to compare acrosse brands; short-term get-navigation-free-if-you-buy-or-lease-this-month offers; and innovative packages such as Ford’s SD card Sync navigation priced at $795. (Ford requires the car already have a color LCD display, so it’s not really sub-$1000 navigation.) Navigation is treated as an accessory, and accessories and options carry a higher markup than the base car. Koslowski says a price drop in a car accessory is often preceded by inclusion in a package.
Chris Schreiner, director of the automotive consumer insights practice at Strategy Analytics explains the conventional wisdom (“navigation has to cost a lot”) this way: “The main factor is the general cost of integrating the navigation system with the rest of the infotainment unit and the vehicle controls. A portable navigation device can be cheaper because it’s a standalone unit. The [onboard] nav system needs to be integrated with the steering wheel controls… and any other connected services.”
Other factors the can explain some of embedded navigation costs include larger displays, typically 7 inches diagonal and up to 10 inches, higher fees for the mapping software for embedded navigation, and even the warranty: PNDs are usually warranted for a year while a new car warranty runs three and sometimes four or five years.
Install navigation in a new Infiniti G37 and it costs $1850. On a BMW 3 Series it’s $1900, on a BMW 5 Series in a package with Bluetooth, USB, and mayday calling Series it’s $2,150 but currently free on the all-wheel-drive 5 Series. The Lexus ES system costs $2675 and that includes a rear sunshade. On cheaper cars such as the Chevrolet Malibu, it’s not offered at all, since buyers don’t see much value in an option that approaches 10% of the list price. (The Malibu does offer rudimentary arrows-only, no-moving-map, navigation as part of the $30 a month OnStar telematics service.) On many cars $50,000 and up, navigation is more likely to be included.
Portable navigation devices may not be the real competition. “The benchmark for the auto industry isn’t a competiting automaker,” explains Gartner’s Koslowski, “It’s a smartphone like the iPhone…” And with prices for navigation that range from free to $10 a month.
Kowslowski believes the right place for car navigation is embedded into the car. In the car, the display is bigger, it’s not likely to be stolen, and it can take advantage of a cellular data connection either from your mobile phone or an embedded cellular data modem. As hardware prices come down, more cars will embed data modems. Then the car can offer always-up-to-date map data, information on restaurants and hotels, and the possible recurring revenue stream from helping make reservations.
A first step in making navigation more affordable is decoupling the center stack LCD display from the navigation system. The upcoming Hyundai Veloster sports coupe (think of a Honda CR-Z as the competition) has a 7-inch LCD in every car, whether or not you buy navigation. Previously Hyundai has the industry’s cheapest navigation system in the last-generation Hyundai Sonata at $1250, and that included an LCD display.
The next step is up to the automakers: getting real on pricing.
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