United Kingdom


  • Industry: Automotive
  • Type: Press release
  • Date: 09/01/2013

Automakers shift investment from electric back to petrol engine cars 

  • Enthusiasm over electric cars wanes, with petrol engine cars and  hybrids set to dominate over next decade
  • Fuel efficiency is the number one priority for cash-conscious consumers
  • Brazil, Russia, India and China (BRICs) market share predicted to edge near 50 percent, with 4x4s the fastest growing segment
  • Car sharing or ‘pay on use’ could be the answer for growing urban areas, and an opportunity for new players
  • Emerging markets trend toward upscale vehicles; in mature markets: downsize
  • Traditional dealership model under threat as online activity grows

Consumer enthusiasm for electric cars has failed to ignite, as concerns around the cost of running and maintaining the vehicles prove too high a risk for cash-strapped buyers, says KPMG.


KPMG International's 14th Global Automotive Executive Survey, which surveyed 200 auto executives from 31 countries, found that the cost of batteries and recharging the vehicles was a major barrier to those considering purchasing electric vehicles.  62 percent said instead consumers wanted their vehicle to last for as long as possible, signalling a need for mature and sustainable technologies.


To meet consumer demand, automakers surveyed say they plan to optimise the petrol engine further and invest in hybrid plug in fuel systems over the next five years.


“There is an increasing realization that the petrol engine has further scope for optimization,” said John Leech, KPMG’s UK Head of Automotive.  “This a quite a turnaround in direction and a sign that some of the newer technologies are taking longer than expected to emerge.  This will benefit the UK which is the second largest manufacturer of petrol engine-powered cars in Europe and especially UK suppliers of turbochargers and direct injection petrol-engine components.”

The survey also warned new trends in globalization, rapid urbanization and changing consumer behaviour will cause a big shift in the automotive landscape over the next 5 years. The collective impact is expected to be felt across the entire automotive value chain, and calls for sweeping changes to automakers’ - and their suppliers’- business models.


“Together, these forces add considerable complexity to an automaker’s business model,” said Mr Leech. “Whereas in the past, automakers concentrated on just producing petrol engine cars, now they must cope with a range of propulsion technologies, new trends such as car sharing, internet connectivity as well as the growing significance of emerging markets. It is indeed a hugely transformative time for the global auto industry.”


Concerns around cost top consumers’ agendas


Ninety-two percent of respondents say that fuel efficiency for cost reasons is the primary factor in vehicle purchasing decisions. Environmental concerns such as reducing CO2 emissions remain important to the consumer, but slipped from second place in the KPMG 2012 global auto survey to fourth this year.


Twenty-nine percent of automakers and supplier executives surveyed say they will invest in downsizing and optimizing petrol engine technology. 


Investment in plug-in hybrid technology will be areas of investment for 24 percent of automaker and supplier respondents, while only an average of 8 percent say they will invest in pure battery technologies.


This reflects perceived consumer preferences for electric vehicle technology, with 36 percent of respondents expecting consumer demand to be highest for plug-in hybrids over the next 5 years, followed by non plug-in hybrids (20 percent) which ranked first in the 2012 survey; a distant fifth are pure battery-electrified vehicles (11 percent).


“The changing views on pure hybrids, plug-ins, fuel cell and battery-powered vehicles reflect the uncertainty as to which will be the dominant technology,” said Mr Leech. “In the short term, the individual driver is likely to prefer a hybrid, whereas urban fleets may opt for electric cars. However, it seems that pure electric vehicles will not prevail, at least in the next decade.”


Mr Leech commented further: “Another critical consideration that the industry and public sector must address is when and to what extent an affordable infrastructure will be in place to address the recharging requirements of large numbers of electric vehicles or refuelling requirements of hydrogen-powered cars in the future.” 


Demand from BRICs predicted to soar


Nearly 86 percent of respondents expect rising demand from BRIC countries and other emerging markets.  In fact, an average of nearly 6 out of 10 respondents say they will increase their investments in the BRICs, which are expected to account for nearly 50 percent of all global vehicle sales by 2018. China is the first choice for investment followed by India, Russia and Brazil.


BRIC automakers are also setting their sights on exporting to new markets in the next 3 to 5 years and believe the biggest growth opportunities to be in Eastern Europe and Southeast Asia.


In addition to exports, it is anticipated that BRICs will build production hubs close to Western markets. In the Americas, 39 percent expect Mexico to become a production hub and for the European market, 70 percent favour Eastern Europe.


“Given the opportunities of Eastern Europe as a hub combined with strong local growth potential, it can be expected that this region will increase in importance as an automotive player in the near future.  However the UK remains well-positioned to increase its share of total European production in the coming 5 years”, said Mr Leech.


Declining sales in Western Europe remain a concern


As the race to conquer the high-growth emerging markets picks up, sales and production declines remain a concern especially in Western Europe where a sizable proportion of respondents expect sales and production to decrease in Spain, Italy, and France. However, the US seems to have managed the turnaround as over 40 percent of respondents expect that vehicle sales will either remain steady or increase.


A majority of respondents predict an upward sales trend for the BRIC countries, as well as Indonesia, Malaysia, Mexico and South Africa.


To counter dips in sales and output, automakers are looking ahead to ways to manage capacity. Twenty-five percent see industry consolidation, joint ventures or alliances as an appropriate solution. However, approaches differ widely among various countries and region with no common solution identified to date. 


Of the Western automakers, Volkswagen and BMW are expected to fare well in market share over the 5 year period, with Volkswagen expected to be the top-ranking leader according to 81 percent of respondents. “Here in the UK, JLR is expected to benefit the most but the UK plants of Toyota, Nissan and Honda are also expected to benefit from the strong Yen,” said Mr Leech.  Four Chinese manufacturers are among the top 10.


Congestion in cities will change the way we own cars


The rapid growth and increasing congestion of urban areas coupled with changing consumer thinking on car ownership in cities is giving rise to a keen interest in new solutions to owning transport.


Over two-thirds of respondents envision new alternative solutions to single vehicle ownership such as vehicle-sharing or pay-per-use. Over half of respondents believe that on-demand vehicles will account for between 6 and 15 percent of market share over single vehicle ownership by 2025.


For traditional automakers, ‘Mobility-as-a-Service’ (MaaS) remains somewhat of a grey area; just under half of the respondents (46 percent) expect that the leading role for new mobility services will not be in the hands of the established automakers, but provide a great opportunity for new players. Success in MaaS will be a value proposition based on functionality and ease of use, and a majority says that brand will play a big role in this space.  “Here in the UK, Daimler’s Car2Go service is launching in parts of London and Birmingham offering access to a Smart car for single, non-round trips via a smartphone app at much cheaper rates than a taxi,” said Mr Leech.


Increased driving restrictions to manage traffic flow and protect cyclists and pedestrians in congested urban areas will dramatically impact vehicle design say 83 percent of respondents. Smaller vehicles mean lighter materials such as carbon fibre, aluminium, titanium and plastics. Forty-three percent of respondents expect that these types of materials will be in mass production within 5 to 10 years.


Emerging markets fuel demand for 4x4s


Interestingly, while the trend among cost-conscious consumers in mature markets is to downsize to smaller, more fuel-efficient vehicles, the reverse can be seen in emerging markets where buyers want larger, more upscale cars such as sport utility vehicles (SUVs), mid-size and multi-purpose vehicles (MPVs). Just 39 percent of respondents from mature markets, for example, expect market share for SUVs to increase; while 66 percent of respondents from the BRICs expect an increase in market share for this type of vehicle.


“JLR has benefited from China’s desire for 4x4s in recent years and although this trend is set to continue there is increasing competition from other carmakers who are planning launches in 2013.  This could pose a real threat to JLR and challenge their dominant position in the market,” said Mr Leech.


Online dealerships to emerge


The way consumers purchase their vehicles is also changing, particularly in the Americas where according to 83 percent of respondents, online activity and intermediaries will increase. Respondents from Asia, however, expect the traditional dealer model to remain strong in countries in that region.


Also altering the automotive landscape is the growing trend of ‘connected car’ technologies where 54 percent cited its importance compared to 22 percent in the KPMG 2012 survey. Technology companies are expected (42 percent) to have the lead over automakers and Tier 1 suppliers for control of in-car technology over the next 5 years.


“The combination of online vehicle purchasing and connected cars places the traditional dealership model under pressure as car manufacturers build up their CRM databases and increasingly exploit direct sales and marketing channels,” said Mr Leech. 




About the Survey Report
Managing a Multidimensional Business Model surveyed 200 auto executives including automakers, suppliers, dealers, financial service providers, rental companies and mobility service providers from 31 countries. Thirty-nine percent of respondents are based in the Europe, Middle East and Africa region, 37 percent from Asia-Pacific and 24 percent from the Americas.


For further information, contact:

Zoe Sheppard, PR Manager at KPMG
0117 905 4337 / Zoe.Sheppard@kpmg.co.uk


About KPMG International
KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 152 countries and have 145,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.



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