After a few days of rumors about NAVIGON withdrawal from the North American market, NAVIGON’s CEO Egon Minar spoke this morning to GPS Business News: “Due to the difficult economic environment and the aggressive pricing we have decided to withdraw from the PND business in North America for the time being. We are however not closing down our Chicago office which will continue to serve our automotive and mobile phone businesses in North America.”
Egon Minar did not detail how many people are affected by this downsize, but it is a “significant number of people in our Chicago office”, he said. Only a few people will remain to take care of the existing PND customers: “we will continue to fulfill all obligations to our existing PND customers in terms of map update, etc.”, he added.
NAVIGON launched its first products on the North American market in September 2007. During the first quarter of 2008 the German company reached the fourth position on the US market with a share of 7.7%. To reach this share so quickly NAVIGON invested in advertising and was the first to introduce a lifetime traffic service bundled into the price of its product. The German company also had a local product team to localize its software to North American tastes.
It seems the NAVIGON presence on the U.S. market was sustainable as far as the A brands maintained a certain level of premium price. But with products such as the TomTom ONE selling at $99 during the last Christmas season and beyond, there was not much opportunity left to NAVIGON despite the good quality of their products.
Despite this downsize NAVIGON expects to increase its business in its mobile division in North America. Most recently the German company signed a deal with T-Mobile (in Germany) to equip many Smartphones with its onboard navigation software (read here; Egon Minar is now looking at extending this deal in North America. However, this might be a real challenge since European players (Wayfinder, Telmap) have had so far little success on the market. The Apple App store could be an opportunity, but here again price competition is likely to be fierce.
Important market concentration
A few weeks only after Mio decided a significant downsizing of its workforce in the US, this is another mid size PND manufacturer to be hit by the aggressive pricing policies currently taking place on the North American market. What is good news for market leaders Garmin and TomTom is certainly bad news for the rest of the value chain. This is the case for retailers which have now little options left when it comes to lining up PNDs on their shelves.