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3 of Every 4 New Cars Has a Sirius XM Holdings Radio. Could More Than That Mean Trouble?

SIRI Cost of Goods Sold (TTM) Chart
SIRI Cost of Goods Sold (TTM) Chart

SIRI Cost of Goods Sold (TTM) data by YCharts .

This is happening for a couple reasons.

First, its effort to have satellite technology installed on the manufacturing line, for the most part, started in earnest at the higher end of the market and worked its way down. It targeted luxury cars first for a simple reason: Their owners are more likely to pay for a monthly radio service.

But at 75% penetration in new cars, Sirius has very little room to expand its penetration outside of the lower end -- inexpensive compacts and subcompact cars. Sirius already has agreements with 36 car brands -- nearly all major brands sold in the U.S. -- as well as three recreational vehicle makers and Harley-Davidson .

Continued growth in this number won't be reason to cheer

No doubt, there are some people who drive cheaper cars who might enjoy satellite radio enough to pay. But the percentage of those car owners who are willing to ante up to listen to Howard Stern or have access to live sports broadcasts no matter where they are traveling is bound to be far smaller than it is at the higher end.

And that means Sirius is likely to get a smaller return on every radio installed in cheaper cars.

So, while it's been good to see that penetration rate on the rise over the years, we've reached a point when investors should be happy to see it top out.

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The article 3 of Every 4 New Cars Has a Sirius XM Holdings Radio. Could More Than That Mean Trouble? originally appeared on Fool.com.

John-Erik Koslosky has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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