Plug-in hybrids will lead the pack among e-vehicles in the race to produce cleaner, more efficient vehicles, according to KPMG International’s 2014 Global Automotive Executive Survey.
The rise of alternative powertrain technologies is one of several significant influences shaping the global automotive sector. Automakers are undergoing changes on many other fronts: a shift from partnerships and alliances to organic growth strategies, the continued emphasis of mobility solutions and technology as critical to OEM survival in the automotive value chain, and the increasing power of Brazil, Russia, India and China (BRIC). These issues are explored in-depth in KPMG’s 15th annual auto survey, Strategies for a Fast-Evolving Market.
“Continuing consumer concern with fuel efficiency and pollution is urging automakers to focus on plug-in hybrid and fuel cell technologies for the near future,” said Mathieu Meyer, Global Head of Automotive and a partner with KPMG in Germany. “Since the development of e-vehicle technology takes time, in parallel, automakers are also maintaining a strong grasp on downsizing the internal combustion engine to meet the needs of the current market place.”
Organic growth has overtaken joint ventures and partnerships as the most favored business strategy. In 2013, respondents placed joint ventures and alliances as the main approach, while organic growth now tops the list. This view is felt most strongly amongst OEMs from the TRIAD countries, with 84 percent listing organic growth as their main business strategy. This significant response may be a result of challenges that are being experienced in current partnerships such as effective integration and finding synergies.
Plug-in vehicles are expected to attract the greatest demand of any e-vehicle, for both the TRIAD and the BRIC markets. Fuel cell vehicles are also experiencing a rise in popularity with 69 percent of respondents considering this technology as critical to future growth.
Despite this confidence, the majority of investment from automakers will continue to be in downsizing the ICE, which could slow advances in e-vehicles, according to the survey. Seventy-six percent of respondents say that ICE downsizing and optimization is a key issue, compared to just 59 percent for battery-powered technologies.
TRIAD OEM’s are twice as likely to invest in ICE downsizing, whereas BRIC countries are more focused on the various forms of e-mobility, like plug-in hybrids and pure battery electrified vehicles.
As automakers consider ways to grow organically, technology leadership could be critical to the survival of a company.
“The demand for autonomous driving is leading automakers to become mobility solutions providers,” said Mr. Meyer. “There is a strong correlation between technological leadership and the ability to remain independent and we can see this from the importance that automakers are placing on technological advances to enhance their mobile solutions.”
With more software technology intrinsic to today’s vehicles, the self-driving car (PDF 1.93 MB) becomes a real possibility for the marketplace. However, only 14 percent of respondents feel that self-driving cars represent one of the key industry trends, although these figures differ widely by country. In the BRIC countries, the expectations for self-driving cars are higher (23 percent) than in the TRIADs (11 percent).
As the world’s population grows, patterns of vehicle use and ownership are changing and mobility solutions like car sharing are becoming increasingly popular.
Many of the major automotive brands are moving into this space, even though it doesn’t always necessarily involve a physical automobile, but a range of transportation options. Almost half of survey respondents feel that mobility solutions can deliver a profit within the next 5 years.
Respondents from the TRIAD countries are the most optimistic of the potential for mobility solutions, with almost half forecasting that up to a quarter of city inhabitants will use these services by 2029—a huge increase on the survey results from 2013.
“The growing trend of autonomous driving [the self-driving car] can have a further positive impact on the development of mobility solutions,” noted Mr. Meyer. “The ability to ‘order’ a car to ‘arrive’ when you want it, and go where you want to go may make it unnecessary to actually own the car. This could greatly contribute to the rise of mobility solutions models, perhaps eliminating the need to own a second family car.”
The top priority for today’s car buyers is a longer-lasting vehicle with low gasoline consumption— 92 percent of global executives surveyed say that this is a top priority for buyers. The latest safety innovations also remain a critical factor for consumers when choosing a vehicle, say 79 percent.
Consumer preferences for alternative fuel technologies have taken a lower priority in the quest to economize. Less than half of respondents feel that this factor is critical to buyers. However, having a vehicle with the latest in-car technologies is another important consideration to consumers.
The future of automotive dealerships is divided among respondents. Just over half of the respondents (53 percent) believe that the traditional models of automotive dealerships don’t work for the future market, with online retailing and multi-brand providers set to rise significantly.
The importance of the online model for retail automotive sales is growing to 71 percent in 2014. Interestingly, only 60 percent of dealers surveyed feel that the online route will thrive, suggesting a reluctance to acknowledge the shift to online sales.
A significant majority of respondents see emerging markets as a major growth engine for the auto industry: 85 percent say that growth in the BRICs and other potentially high-growth markets is the biggest single industry trend until 2025.
“As the BRIC countries take up a greater share of the global market, auto executives face tough choices on how to expand and who to partner with, and how to respond to growing competition,” said Mr. Meyer. “However, with these challenges comes massive opportunity for both manufacturers and dealers to tap into incredible long-term potential.”
In this year’s survey, respondents are increasingly optimistic about BRIC manufacturer increasing export volumes, with 44 percent confident that China will exceed 2 million vehicles within 2 years. Those that predict India will export 1 million cars within 2 years have also increased to 38 percent.
The greatest growth potential for BRIC OEMs is considered to be the biggest in South East Asia according to the survey, whereas. Western Europe and North America continue to be largely off-limits for BRIC manufacturers. Since KPMG 2013 auto, survey a greater proportion of respondents feel that BRIC auto companies have good growth opportunities in Africa and Middle East.
Nevertheless, that outlook may not materialize as quickly as some respondents predict. “While the survey respondents are optimistic, this scenario may not play out in some BRIC countries where the quality levels of domestic cars are not on par with the standards of Western counterparts. To export into more mature markets, the brand perceptions and distribution networks would have to improve significantly,” noted Mr. Meyer.
Sales are expected to surge in BRIC countries, as 7 out of the 10 top OEMs expected to grow in the next 5 years will come from BRICS countries. For example, 66 percent of respondents predict that Russian automaker Avtovaz, will be among the top three OEMs to gain market share, moving up from 21st place in the 2013 KPMG auto survey.
Strategies for a Fast-Evolving Market surveyed 200 senior executives including automaker, suppliers, dealers, financial service providers, rental companies and mobility service providers from 28 countries in July and August 2013. Forty one percent of the respondents are based across Europe, Middle East and Africa, 35 percent in the Asia Pacific region and 25 percent in the Americas. All of the participants represent companies with annual revenues greater than US$100 million, and 39 percent work for organizations with revenues of over US$10 billion.
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