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. Ltd, but the two companies are headed in different directions looking for the next growth market.
"We expect to see the car navigation market in Europe and North America rise up drastically," Pioneer President Kaneo Ito told reporters and analysts at a briefing in June.
Pioneer, the world's top maker of car electronics, forecasts the US 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 grow 33 per cent during that period.
Matsushita, on the other hand, sees China as the next big growth market, fuelled by the booming automobile sector.
Some analysts agree. "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 per cent of the global car navigation market, which is expected to double in size to 10 million units by 2008, according to industry data.
While that is only a fraction of the world's 650 million registered automobiles, the market's potential is promising enough to lure in other Japanese manufacturers, such as Alpine Electronics Inc., Denso Corp., Kenwood Corp. and Clarion Co. Ltd.
"Car audio systems are now in about 70-80 per cent of the world's cars. If prices come down, it is possible for car navigation systems to reach that level," said Masato Kimura, a group manager at Panasonic Automotive Systems.
In recent years, the popularity of car navigation systems has provided a boost to electronics maker's revenues and profits. That makes a successful move to overseas markets a huge priority as analysts see domestic sales levelling off.
For Pioneer, car navigation system sales accounted for about 25 per cent of its revenues from automobile electronics, which generate most of the company's profits.
Car navigation sales comprise around 40-50 per cent of its 460 billion yen ($4.2 billion) worth of revenues at Matsushita's car electronics unit, Panasonic Automotive Systems. The subsidiary accounts for six percent 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 US," said Panasonic's Mr Kimura.
Map-type car navigation systems - which incorporate DVD drives and, more recently, hard disk drives to display maps - are the norm in Japan and they can cost as much as 400,000 yen.
In Europe, however, there is already a market for less expensive car navigation systems based on CD-Rom technology that deliver instructions to the driver by displaying arrows on the face of a car radio.
"We expect to see directional navigation systems fade out and begin to shift to map-type navigation. We're already starting to see this happen in Europe," said Masanori Kurosaki, a general manager at Pioneer's automotive electronics arm.
Japanese manufacturers need to outmaneuvre local European players Siemens VDO, Becker and Blaupunkt, a wholly-owned unit of German auto parts supplier Robert Bosch Corp.