“Compared to previous years’ results, the findings this year show that auto experts have no clear idea of the direction the industry is heading,” said Mathieu Meyer, KPMG’s Global Head of Automotive. “One thing is certain, electromobility is the most critical trend for the industry – how and when fully-electric cars will be a reality depends on a variety of complex and interrelated factors.”
“These uncertainties and challenges are also impacting South Africa, where the roll-out of Optimal Energy’s electric car (the Joule) is yet to receive support,” said Gavin Maile, KPMG Africa Automotive Leader.
While the industry continues to weigh the relative advantages of various electrified fuel technologies, it is clear that ownership of the e-components space (battery management, power electronics, e-motors, battery cells and packs, etc) will draw intense competition among original equipment manufacturers (OEMs) and suppliers. Of respondents, 54 percent said that electric component suppliers will gain a bigger role by 2025 and 40 percent of respondents predict that OEMs will lead in that area, in addition to traditional power train technologies.
“In light of the fact that respondents believe that OEMs will dominate this segment, the study shows that the underlying technologies of e-components, offer no major differentiation,” Meyer said. “Currently, OEMs are predicted to be the owner of almost all parts of the value chain.”
Despite the fact that 76 percent of respondents 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 do not expect electric vehicles to exceed 15 percent of annual global sales within the next 15 years. That does not seem to be the case in China, Japan and other high-growth markets, where electromobility is expected to take hold sooner.
In particular, respondents in Asia, China and Japan predict a higher penetration of fully-electric vehicles than the global average by 2025. Well over 50 percent of respondents from China expect that upwards of 11 to 25 percent (or four to nine million vehicles) will be new car registrations for e-cars, while 46 percent of respondents from Japan predict that e-car registrations will exceed 25 percent. That is in contrast to the United States (US), where nearly 50 percent believe new e-car registrations will account for only six to 10 percent by 2025.
“The infrastructure requirements and payment technologies relating to e-cars are substantial and impact the roll-out of e-cars in South Africa,” cautions Maile. “Technologies are available to charge e-cars in off-peak times, but both the charge time and the travel range need further improvements to increase viability.”
Chief among the issues manufacturers and suppliers seem uncertain about, is which fuel technology will emerge as the optimal and predominant method to power the electric car by 2025.
Globally, hybrid vehicles are expected to lead the market and attract the most investment in the interim, with full hybrids and plug-in versions expected to be the favoured technologies and fuel-cell vehicles coming in third. This year’s survey found that respondents see an improvement in battery and fuel cell technologies and there are signs that fuel cells may be viewed as the preferred option. Nevertheless, uncertainty still lingers.
This scenario is expected to play out differently in China and Japan, where 33 percent and 46 percent respectively of respondents, said that battery-electrified vehicles will be the most popular followed by fuel-cell vehicles.
Interestingly, nearly two-thirds of respondents globally said that optimisation of the Internal Combustion Engine (ICE) currently offers greater efficiency and the most potential for carbon emission reduction than the current electromobility technologies over the next five years.
“Internal combustion engines are not going away any time soon, especially as fuel efficiency and performance standards continue to improve,” said Gary Silberg, US Automotive Sector Leader. “However, OEMs continue to invest heavily in electric propulsion and will play a leadership role in the development of these emerging technologies going forward. While several technology platforms show promise, there is no clear winner in this race. The industry will see competition and collaboration among OEMs and suppliers increase, as companies fight to win in the marketplace.”
The survey results show that Asian and European OEMs are most likely to gain hugely in market share over the next five years, with seven out of the 10 fastest-growing auto manufacturers expected to be from Asia. A majority of respondents believe that China will lead in both sales and exports of vehicles by 2017 followed by the US. Brazil is in a close tie for third with India.
“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 be the same for both,” said Chang Soo Lee, KPMG’s Head of Automotive for Asia. “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 (Brazil, Russia, India and China) countries for traditional and new technologies in their domestic markets.”
As with KPMG’s 2010 Global Auto Survey, this year’s survey shows that overcapacity and excess production remain critical issues, with over half of respondents expecting China to be the most overbuilt by 2016. Yet, the survey’s findings reveal that still no real solutions have been identified and nearly a fifth of respondents do not see overcapacity as a serious threat in the BRIC markets. This is despite available industry data that indicates that unused capacity is a real threat in the region and is rapidly increasing.
Other issues that players vying to control the value chain should be tuning into in addition to fuel technology, the survey said, are urbanised mobility services, ‘connected-car’ solutions and seeking new alliances and partnerships to tap into innovation and unique competencies.
Urban mobility is a rapidly emerging issue, especially in the US and Japan, where over 60 percent of respondents believe urban planning will influence vehicle design and usage.
“In South Africa, this trend is highly unlikely in the short to medium term, but will gain more popularity in the longer term as the strategy to densify existing cities and increase the use of existing infrastructure continues,” said Maile.
Brazil is expected be a leading market for mobility services, with 42 percent of respondents predicting more than 25 percent of the country’s urban inhabitants will use those services by 2026. Overall, China has the greatest potential to lead the market for mobility services with an expected 90 million customers.
As younger urban drivers grow more interested in car sharing than in full ownership, OEMs have an opportunity to dominate the space, but respondents from around the world had mixed views about who would control this growing new mobility services market. Nearly 30 percent believe that joint alliances between OEMs and new mobility start-ups will be the way to go.
Over 60 percent of survey respondents said that full, integrated vehicle connectivity is long overdue. While traditionally controlled by OEMs, the very lucrative market for in-car connectivity seems to be open for the taking. Just 30 percent of respondents see OEMs controlling the revenue stream in 2025, followed by IT and communications companies.
“Given the increasing dominance of intelligent plug-in connectivity solutions, with IT companies the driving force behind them, it is doubtful that OEMs will continue to own the revenue stream down the road,” Meyer said. “In addition, the concept of modularisation, as already used in the connectivity environment, could also become a suitable model for the complete vehicle architecture. This would overcome the necessity of having a car fully equipped with the latest technologies. There is still a high technological uncertainty about what it will be and when it will be available.”
The KPMG Global Automotive Executive Survey 2012: Managing growth while navigating uncharted routes is based on a survey of 200 automotive executives, over half of whom are business unit heads or higher. The respondents come from all parts of the automotive value chain, including vehicle manufacturers, tier one, two and three suppliers, dealers as well as financial service companies and for the first time, mobility services providers.
A total of 47.5 percent of the executives are based across Europe, Middle East and Africa, 31 percent in the Asia-Pacific region and 21.5 percent in the Americas. Of the participants, 97.5 percent represent companies with annual revenues greater than US$100 million, and more than a fifth work for firms with revenues greater than US$10 billion.
The respondent interviews, which were held by phone, took place in August, September and October 2011.
 Mobility services is a term used in the autmotive industry to describe emerging business models in which a single or multiple providers offer consumers a comprehensive transportation solution that may employ the short-term rental of a car or various modes of transport, getting the consumer from ‘A’ to ‘B’ as efficiently and cost-effectively as possible.