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Why can I buy a Kindle Fire for $200, but an OEM Nav system for my car costs $1000?

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by , 10-31-2011 at 06:59 PM (31080 Views)
Parag Garg is a passionate technologist with over 10 years of experience in consumer electronics. He’s done automotive work for car brands like BMW and Porsche in his own start up, later he worked in the Automotive team at Microsoft delivering the Ford Sync product, afterwards he worked in other teams like Embedded, Courier and XBOX. Parag is currently at Amazon in the Kindle group working on World Class Products. When not working on “gadgets”, Parag enjoys his time at home with his wife Linh and their 3 kids.



Why can I buy a Kindle Fire for $200, but an OEM Nav system for my car costs $1000?
You would think the obvious answer is that the Auto Makers want to hold a high premium for these features in their vehicles. From my experience this is not actually the case, after contemplating the pivots that increase the cost of a in car infotainment system, I’ve narrowed it down to these 5 reasons:

Business Licensing
As a consumer we think that Maps should be free, it’s a “give me” feature that we get on our PCs, Phones and Tablets without paying anyone. This is not true in the car, the automakers need to pay significant fees to Navteq or Teleatlas to licensing their road mapping data to use in a vehicle GPS system. A few years ago, the licensing terms used to even have clauses that charged differently if a GPS system used in a mobile device on in a vehicle.
The same holds true for licensing of other components such as Audio/Video codecs and 3rd Party Periphrials like iPod/Phone.
Licensing for Moble Devices is greatly different and cheaper.

R&D Development Costs

Typically the R&D development costs to build an infotainment system are fairly high. An carmaker may involve 3-7 suppliers to develop the complete end to end system. Automakers also like to “protect” any components that go into their vehicles, so that usually means proprietary protocols for communication between the different pieces of their infotainment system. The Auto industry also has a very long development cycle, something like an iPad gets refreshed every year, while vehicle models are refreshed every 5-7 years. The 5-7 years in my opinion hurts the development of technology in their vehicles as they feel like they have a lot of time to develop new features.
You typically get a new iPad or Kindle every year.

Auto Qualification of Components

One thing that consumers generally overlook is how robust the components in your vehicle have to be. Your car could be parked in -30F to 130F degree weather, regardless of the weather condition, you expect your vehicle to start up and the infotainment system to “just work”. To support this extended temperature range for components, Auto makers work closely with component suppliers to get parts that are Automotive Qualified. “AutoQual” certification of a part both costs money and time which adds to the overall development cost and final cost of the product.
Your Kindle Fire or iPad 2 does not need to operate in those weather extremes.

Consumer Liability

The automakers are extremely concerned of infotainment liability; all it takes is a way to blame the infotainment system as the cause of the accident and their liability could shoot through the roof.
The other consumer liability to worry about is warranty repairs, generally the Infotainment system is one of the more complicated parts in the vehicle, so the automaker needs to account for repairs and replacements of this system at it’s dealerships.
Unlike an Infotainment system in your vehicle, it’s assumed that you can use your Kindle Fire in MANY other places. The vehicle is not a primary use cases for most people.
Units sold to share development costs
The development of any Infotainment System has a lot of Non-Reoccurring Engineering Costs also known as NRE. These NRE costs are generally costs that the automakers likes to divvy up amounts all the sold Infotainment systems for accounting. While not 100% accurate, the NRE costs of a iPad or Kindle Fire are similar to those of an Automakers Infotainment system. The difference is that the Auto industry as a whole sold about 11 Million vehicles in the US. While the iPad 2 sold 11 Million tablets in Q3 2011 alone. ~44 Million a year.
Now of the 11 million vehicles sold in the US, that’s ALL brands with or without Infotainment systems. Even if you take a 20% slice, you need to divvy all Infotainment Development costs between ~550,000 Infotainment systems vs. 44 Million iPads.
http://online.wsj.com/mdc/public/pag...autosales.html
http://vnsmartphone.com/2011/11/17/a...report-claims/

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Nice article and right on the money. While the desire to make money by upselling optional equipment like auto infotainment units shouldn't be discounted, the fact remains that they represent a significant risk (and cost) to the auto maker. As I've discovered first-hand, the licensing costs of many products (nav, media , hardware) is simply out of the reach of most small companies. The amount of intellectual property that goes into a typical automotive infotainment unit is significant. And the liability risks are not to be ignored. Just because you've licensed a codec or driver from company A is no guarantee that it doesn't infringe on someone else's IP. The amount of legal due diligence can be staggering. The last thing you want to do is shove a product out the door into a couple of million vehicles, only to find out you have to renegotiate the licensing AFTER they already hit the street (See Samsung vs Apple).
Yeah, I wish this article was based on research and interviews and not just "contemplation".

The new Chevy OEM mylink is only a $200 option on the sonic lt, but it doesn't come with nav. You have to use your phone with a $50 nav app (that isn't even released yet). And the LT trim is already marked up $1500 over the base model
That article/post also forgets to mention that automotove manufacturers want to lock their audio system into your dash board and car electronics.

What use is that for folks who want a different audio system in their car especially if you have to mod the whole dashboard to do it.

Unless, their is economic gain to be made