Jeffrey Henning, global head of Ernst & Young consulting, has been in Brazil and revealed a study of the difficulties and challenges the auto industry will face.
This is the result of surveys by 20 consultants in permanent contact with automotive sector companies spread across the continents, nearly all with subsidiaries in Brazil, and therefore acquainted with local, regional and global scenarios.
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The high degree of competition is one of challenge to face, particularly in emerging markets where it tends to be fiercer. There is pressure to update the model line together with the need to shape the offer for local buyers. After all, E&Y data shows that more than 35% of total sales by the five largest automakers are now made in emerging markets.
Executives must be prepared to handle high volatility and a lack of actual vehicle demand predictability, ever subject to such external factors as inflation levels and cyclical credit restraints.
“Emerging markets like Brazil, China and Russia have been imposing their own industrial policies and are more affected. It’s law, it must be obeyed despite the complexity of understanding each country’s rules and of planning investments and operations globally”, said Henning in an interview with Automotive Business.
He also called for attention to the problem of finding qualified labour. According to the survey, 65% of companies interviewed said they were having trouble finding staff with specific abilities worldwide, especially engineers. This was notable in emerging markets – 84% of executives in China and India and 81% in Brazil mentioned this problem.
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By GlobalDataOf Brazil’s Inovar-Auto programme, Henning said it was similar to others adopted by several countries to stimulate local auto parts production.
“I believe it will not hurt competitiveness but it will push different segments of the production chain to draft new strategic visions that help leverage innovation.”
Wrestling for attention
Reflecting the fiercely competitive scenario, Ford unveiling a prototype of its new Brazilian Ka saloon on the eve of the national media launch of the ‘localised’ VW Up which is modified from the German original. Ford claimed this was to coincide with the reveal of the Figo saloon prototype at the New Delhi motor show a continent away in India.
Both models were designed jointly, yet the Brazilian version has a bolder rear section and a touch of sportiness, combined with a larger boot. Hatchback versions, however, will be almost identical. The new compacts will start selling almost simultaneously in both countries next July.
A similar Ka hatchback variant is expected for Europe, replacing the current model which is essentially a rebodied Fiat 500.
