Zacks_Analysts' Blog : Auto Electronics Poised for Growth - Analyst Blog

A recent iSuppli report painted a brighter picture for the auto industry, and the electronics segment of the industry in particular. Auto sales are expected to increase in the second half of the year, growing up to 5.7% in 2010. Electronic components, such as audio head units, personal navigation devices (PNDs), advanced driver assistance systems (ADAS), embedded telematics systems and Bluetooth are expected to benefit.

This should be good news for companies like SRS Labs (SRSL), Techwell (TWLL), Garmin (GRMN) and TomTom.

SRS management stated that its auto business fared better than the overall auto industry in the first quarter. The company’s customers in the auto market are Panasonic (PC), Kenwood, Pioneer and Fujitsu-Ten.

Comments made by car makers such as Ford (F) that demand for cars incorporating electronics exceeds demand for cars without them further validates this view. Techwell’s video decoding systems are targeted at navigation, entertainment and driver information systems, while Garmin and TomTom are the market leaders in navigation. All these companies are expected to benefit.

Investor sentiment around auto is also improving, with the General Motors bankruptcy ending sooner than expected. iSuppli expects that rebates on new fuel-efficient models under the Fed’s “Cash for Clunkers" program will result in additional sales of 250,000 cars. The program allows a customer to replace his road-ready, less-than-25-year-old, less than 18-miles-per-gallon car bought for less than $45,000. Depending on the new car being bought, the government will offer a rebate of $3,500-$4,500.