Auto Executives Give their Outlook for the Next 5 years
This year's Global Auto Executive survey was conducted at the end of a historic year for the auto business.
Last year we surveyed an industry that had been plunged, very suddenly, into total uncertainty. As one of the large automakers interviewed as part of this year's report said, "a year ago we were in the middle of nowhere . anything was possible.”
As our 2010 survey records, we are appear to be on our way out of that period of the crisis. Confidence is higher, while growth and new investment are moving back on the agenda.
Now in its 11th year the KPMG annual Auto Exec survey researches 200 respondents from 24 countries on their views for the future of the industry in the coming 5 years. Highlights from this years survey include:
Growth prospects:
- Forecasts for auto industry revenues: Growth expectations largely geared to Asia (76%); Eastern Europe (47%) shows second biggest increase; biggest declines seen in North America (32%) and Japan (27%)
- The industry still believes that overcapacity in the established manufacturing "triad” remains very high; North America (88%) seen as most overbuilt
- Overcapacity not confined to 'triad'; Russia (12%) is seen as most overbuilt in the short run; Brazil (43%) is seen as most overbuilt in five year forecast.
Performance:
- Profitability expectations have fallen: EMEA profitability expectations lowest; across the whole value chain ASPAC expectations highest; the lowest expectation for Tier 3 suppliers
- Cost focus shifts away from restructuring; increasing number of companies believe supply chains are fully optimized; computer modelling rated sharply higher
- Expectations for M&A have risen: expectations of OEM M&A growth (74%) stay at last year's high levels; increasing expectation of M&A growth for Tier 2 (56%) and Tier 3 (49%) suppliers; only dealer M&A set to fall back
- High expectations of Eastern European (62%) and Asian (65%) M&A; less than one in ten companies expect M&A to decline anywhere
- Companies expect to find fewer cost-saving opportunities in existing businesses
Product innovation and consumer change
- Companies are shifting focus from quality improvement to new products; total affordability and pricing seen as less important than innovation; environment falls in rating for first time in three years
- Fuel efficiency (94%) and the environmental profile of products (81%) continue to be considered by companies the most significant consumer buying issues
- Chinese (79%) and Indian (73%) brands remain in the top three places in terms of expectation of market share gain
- Hybrids, alternative fuel and low cost vehicles lead in all regions; inefficient vehicles to lose most sales
- Strong global consensus on importance of hybrids and electric technologies; ASPAC companies rate solar power much higher than other regions
- Companies say they will direct most investment capital to technology and new model development; new plant building is accorded very low priority
Investing in new markets
- Companies are nearly unanimous in expecting emerging markets to build most automotive capacity and to provide the most growth in automotive revenues; Asia excluding Japan will build the most manufacturing capacity (74%)
- India and China seen as biggest growth markets: Strong improvement in China (42%) and India (30%)
- Majority beliefs that China and India will sell a significant number (1 million + a year) of cars in other markets within 5 years; for Brazil and Russia the expectations are beyond 5 years
- Majority sees an annual volume of 12-14m unit sales in China, 4-5m unit sales in Brazil and 3-4m unit sales in India in 2014
- Beyond the BRICs companies expect strong demand growth and auto investment in South East Asia and in Eastern Europe
- Top-rated destinations for auto investment beyond the BRICs are Mexico (71%), Thailand (35%) and Ukraine (33%)
Survey methodology:
200 respondents from 24 countries surveyed between September & November 2009. 11th year of this annual study. Geographic coverage: companies from the Americas, Asia Pacific, Europe, Africa and the Middle East. All survey questions relate to the coming five-year period, extending to 2014, unless specifically stated otherwise.
To discuss the findings in more detail or to talk about possible solutions to some of the issues highlighted please contact Mike Steventon.
Now in its 11th year the KPMG annual Auto Exec survey researches 200 respondents from 24 countries on their views for the future of the industry in the coming 5 years.