• Enthusiasm for pure electro-mobility technology wanes;
  • Cost keeps fuel efficiency prime factor in purchasing decisions;
  • Brazil, Russia, India and China (BRICs) market share predicted to edge near 50% by 2018, while BRIC automakers have the biggest growth potential in Eastern Europe;
  • Mobility solutions 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 fades as online activity grows.

An annual survey by management consultants KPMG suggests that fuel efficiency remains the top concern among a cost-conscious driving public. KPMG also says that global automakers plan to continue to optimise the internal-combustion engine alongside a greater investment in hybrid plug-in fuel systems through 2018. But the survey also suggests that consumer enthusiasm for pure electric vehicles remains low.

Consumer interest in fuel efficiency for cost reasons is the primary factor in vehicle purchasing decisions, according to 92% of survey respondents. Environmental concerns such as reducing CO2 emissions are still important but slipped from second place in the KPMG 2012 global auto survey to fourth this year.

Some 29% of OEM and supplier executives say they will invest in downsizing and optimising ICE technology. Chinese and Brazilian OEMs and suppliers also see a further window of opportunity for optimising the ICE: 40% from China and 37% from Brazil are investing in the traditional powertrain technology.

Just over half of respondents say that ICE optimisation will offer the greatest potential for clean, efficient engines for the next 6-10 years.

“There is an increasing realization that ICE has further scope for optimisation,” said Mathieu Meyer, KPMG’s Global 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.”

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

KPMG says that OEM and supplier investment plans are in close alignment with perceived consumer preferences for electric vehicle technology, with 36% of respondents expecting that consumer demand will be highest for plug-in hybrids over the next 5 years, followed by non plug-in hybrids (20%) which ranked first in the 2012 survey; a distant fifth are pure battery-electrified vehicles (11%).

“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 Meyer. “In the short term, the individual driver is likely to prefer a hybrid, whereas fleets may opt for electric cars. However, it seems that pure electric vehicles power will not prevail, at least in the next decade.”

“Another critical consideration that the industry and public sector must address as we plan a future of electro-mobility is when and to what extent an affordable infrastructure will be in place to address the recharging requirements of large numbers of electrified vehicles,” he added.

Meyer also maintains that business models for OEMs are facing unprecedented complexity. 

“Whereas in the past, automakers concentrated on just producing ICE 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.”

Globalisation: shift to BRICs continues

Market growth among BRIC countries and other emerging markets is also trend in the survey. 

KPMG said that 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% of all global vehicle sales by 2018. China is the first choice for investment followed by India, Russia and Brazil.

Not only are BRIC countries expected to see a surge in vehicle sales but BRIC automakers are setting their sights on exports to new markets in the next 3-5 years with the biggest growth opportunities being 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% expect Mexico to become a production hub and for the European market, 70% 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”, said Meyer.

Overcapacity in Western Europe

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

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

To counter dips in sales and output, automakers are looking ahead to ways to manage capacity. A quarter of respondents foresee industry consolidation, joint ventures or alliances as an appropriate solution. 

VW to be global leader

In terms of which automakers are expected to fare well in market share over the 5-year period, just two come from the West – Volkswagen and BMW, with VW expected to be the top-ranking leader according to 81% of respondents. Four Chinese manufacturers are among the top 10. US top automaker Ford has slid down the ranking from the KPMG 2012 global auto survey from 8th to 14th just above General Motors (GM), whose market share is expected to increase according to 44% of respondents.

Car sharing to grow in cities

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 mobility solutions as new forms of transport, KPMG says.

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 mobility will account for between 6% and 15% of market share over single vehicle ownership by 2025.

Increased driving restrictions to manage traffic flow and protect cyclists and pedestrians in congested urban areas will dramatically impact vehicle design say 83% of respondents. Smaller vehicles mean lighter materials such as carbon fibre, titanium and plastics. Some 43% of respondents expect that these types of materials will be in mass production within 5-10 years.

The changing consumer: bigger and upscale for emerging markets

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% of respondents from mature markets, for example, expect market share for SUVs to increase; while 66% of respondents from the BRICs expect an increase in market share for this type of vehicle.

Online purchasing activity to grow

The way consumers purchase their vehicles is also changing, the survey suggests, particularly in the Americas where according to 83% 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 growing trend of ‘connected car’ technologies where 54%  cited its importance compared to 22% in the KPMG 2012 survey. Technology companies are expected (42%) to have the lead over OEMs and Tier 1 suppliers for control of in-car technology over the next 5 years.

KPMG 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% from Asia-Pacific and 24% from the Americas.