KPMG’s Global Automotive Executive Survey

KPMG’s Global Automotive Executive Survey reveals opportunity in Africa

Today’s automotive leaders face a host of critical decisions as they attempt to satisfy the demands of tomorrow’s travellers. The rise of emerging economies and the ongoing challenge of overcapacity is on the agenda for a number of automotive company executives – each, in their own right, looking to make the right investment decision to ensure a profitable future for their respective companies.

The Global Automotive Executive Survey is KPMG International’s annual assessment of the current state and future prospects of the worldwide automotive industry. In this year’s survey, 200 senior executives from the world’s leading automotive companies were interviewed, including automakers, suppliers, dealers, financial service providers, rental companies and mobility service providers.

Rising demand in developing markets

From our survey results, it is evident that automakers around the world are pinning their hopes on rising demand in the developing nations. One of the key complexities that many of them face relates to the requirements of the developed market versus the aspirations of the emerging market, which happen to sit at polar opposites. Increasingly mature markets are moving toward downscaled, more fuel-efficient basic cars, while a sizeable proportion of consumers in emerging markets still aspire to own bigger cars, such as SUVs.

With demand for vehicles declining in most mature markets in the face of the global recession, high fuel costs and urban driving restrictions, the industry is turning its attention even more strongly towards the expanding middle classes in the new powerhouses of China, India, Brazil, Russia and other growing nations including much of Africa. 86% of respondents in this year’s global survey feel market growth in emerging nations is an important trend – a view shared by auto executives from both the TRIAD markets (Japan, Western Europe and North America) and the BRICs.

Opportunities for growth

The pace of convergence between established and developing markets has implications for all automakers, making it easier to produce cars that will be acceptable anywhere in the world. Over 61% of respondents believe that within 6 years, customers in the BRICs will be demanding the same levels of quality, safety and reliability as those in mature economies.

Not surprisingly, respondents from emerging markets anticipate far more growth in demand for vehicles than their counterparts in the United States (US), Europe, Japan and Australia. However, despite acknowledged fears over environmental issues and high fuel prices, many buyers in developing markets still crave larger, more upscale models such as SUVs, midsize, MPVs, vans and pickups. SUVs in particular stand out as the ‘must-have’ for many aspiring buyers eager to demonstrate their new-found wealth.

Of course, simple cost limitations mean that a sizeable proportion of consumers will still go for the more basic cars, but it seems that they are often just biding their time until they can afford a premium marque.

Looking forward

Established players in the automotive industry are impacted by the growing power of the emerging markets. This growth translates into promising opportunities for sales in new markets, but simultaneously presents the challenge of increased competition in their home markets from rising auto giants in China, India and elsewhere. Assessing business models and redefining core competencies will be key to navigating the ever-progressing, ever-changing terrain of the automotive industry.

David Okwara

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