Has the market for satellite navigation units reached the end of the road?

The entry of Google and the rise of smartphone technology have had a sizable impact upon players in the sat nav market. Companies may need to re-evaluate their prices to address this, and should look to markets that suit their natural advantages.

Confidence among existing satellite navigation retailers remains low since Google's high profile entry into the US market with free maps on phones in October 2009. Sat nav manufacturers Garmin and TomTom suffered the most as a result, with shares in the companies respectively falling by around 16% on the Nasdaq and 20% on the Dutch Stock Exchange upon the announcement. In April 2010, Google caused another stir by announcing that its Google Maps Navigation would be free on certain phones within the UK and Ireland.

The rise of smartphone applications has further confounded the market for sat nav devices. There is now less appeal in buying a unit for a three-figure sum, as the availability of cheaper or even free alternatives is growing.

The cost of such apps remains primarily dependent on the brand and the unit's functions. For example, TomTom's smartphone app costs GBP79, and includes extensive European network coverage and daily map updates, all at the touch of a button.

That said, sat nav units still have advantages that smartphones are yet to offer. They have enhanced features such as motorway junction lane guidance and points of interest. They also have stronger GPS receivers and do not drain as much battery, mainly because they are solely used for navigation.

However, the principal benefit of sat nav units is the fact that while they rely on having a signal, they do not depend on network and data connections. In contrast, free smartphone apps hold a limited amount of map information, meaning that they are mostly useless when there is no connection. Switching off the data roaming function on smartphones when abroad also causes this, whereas sat nav users with pre-paid packages such as TomTom's will have their own maps built into the software, so no connection is necessary.

There is evidently still a market for sat nav units, especially in countries where mobile phone networks are less developed. Regardless of location, however, producers of GPS devices will likely be forced to bring down their prices if they do not wish to fall off the map altogether.