China continues to dominate the global auto sector as manufacturers here look to expand their overseas operations via joint ventures and alliances, according to KPMG’s thirteenth annual Global Automotive Executive Survey.
The survey, which interviewed 200 automotive executives globally, found that nine out of the top twenty manufacturers expected to increase global market share by 2016, are Chinese brands - including the likes of Geely, SAIC and Chery. They are setting their sights on the global car market with vehicles that are becoming technologically competitive, the survey notes.
Andrew Thomson, Co-Head of Automotive, KPMG China, said: "The survey indicates huge potential for both domestic and international auto manufacturers in China. Key drivers of success in this market include the Government’s ambitious plans for new energy vehicles, as well as rising levels of disposable income."
Additionally, Thomson sees a future in which increased cooperation between Chinese automakers and their joint venture partners will be critical. "Given the recently announced changes in investment policy in China, foreign OEMs will become increasingly reliant on their JV partners for market access and development. At the same time, Chinese OEMs have increasing aspirations to develop overseas. By coming closer together, Chinese and foreign OEMs can best pursue their mutual strategic interests", Thomson adds.
China is also set to be the main target for alliances or mergers and acquisitions, with 70 percent of respondents anticipating increased activity in this region. The next most popular regions are Eastern Europe and Russia.
This market also poses some challenges, the survey points out. Overcapacity and excess production remain key issues; over half of the respondents believe China’s automotive market will be the most overbuilt BRIC (Brazil, Russia, India and China) market in 2016.
Thomson points out: "Overcapacity in China does, however, need to be looked at through a slightly different lens, especially taking into account the huge potential for vehicles per head of population to increase".
In terms of emerging technologies, respondents from the BRIC countries believe fuel cell-powered vehicles will attract the most consumer demand, with the exception of China, where pure battery-powered vehicles are expected to come out on top.
"One striking statistic in our report is that 74 percent of respondents see customer service excellence as the key to successful car retailing. This is an area where there is some room for development in China," explains Thomson.
Despite the fact that 76 percent globally said that fuel efficiency is still the most important factor affecting consumer-buying decisions, followed this year by environmental friendliness (65 percent), two-thirds don’t expect electric vehicles to exceed 15 percent of annual global sales within the next 15 years. But that does not seem to be the case in China, Japan as well as other high-growth markets where electromobility is expected to take hold sooner, according to the survey findings.
"Our survey also revealed that 75 percent believe that mature and emerging markets are converging which will mean that the opportunities and the challenges will become the same for both over time," added Andrew Thomson. "This has big implications for OEMs from mature markets; they will have a wealth of new opportunities, but they can expect fierce competition from players in the BRIC countries for traditional and new technologies in their domestic markets."
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