Notable market growth among BRIC countries and other emerging markets is a predominant trend in this year's survey according to nearly 86 percent of respondents to a recent KPMG report, Managing a Multidimensional Business Model, which is based on a survey of 200 auto executives from 31 countries.

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. "South Africa has for the first time also been highlighted as an investment destination" said Gavin Maile, KPMG's Africa Head of Automotive. "This is a direct result of the government's commitment to retain, support and grow the existing manufacturers and component suppliers operating in the country via the new Automotive Production and Development Programme".

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 three to five years. The biggest growth opportunities are in Eastern Europe and Southeast Asia. "This situation is similar in South Africa, where there is an export focus as the number of vehicles manufactured cannot be absorbed within the local, or African, market," said Maile.

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", said Mathieu Meyer, KPMG's Global Head of Automotive and a partner of the German firm.

Countering Overcapacity

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 sizable 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 percent 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 at 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 regions with no common solution identified to date. 

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

Urbanisation: 'Mobility-as-a-Service' (MaaS) a Likelihood for 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.

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 six and 15 percent of market share over single vehicle ownership by 2025.

"The South African environment, especially in the larger cities, is starting to see an increased interest in alternative forms of transport and different MaaS options to connect to one's final destination, in light of increasing fuel prices and the potential for increased tolling," said Maile.

For traditional OEMs, MaaS remains somewhat of a gray area. Half of the respondents expect that the leading role for new mobility services will not be in the hands of the OEMs, but provide a great opportunity for new players, according to 46 percent of the respondents. 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.

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


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