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Sales Potential of the Basic and Small Car Segment is Set to Accelerate Over the Next 5 Years - KPMG's Global Automotive Executive Survey 2015

Jan 08, 2015   12:30 IST 
Mumbai, Maharashtra, India

-- Fuel efficiency and safety innovations are the most important criteria that a consumer considers  while purchasing a car, both globally as well as in India


-- 59 per cent of the total executives surveyed believe that market entry barriers or restrictions conditions in India will decrease


-- 93 per cent of Indian executives and 57 per cent  of total executives surveyed, are confident of an increase in investments in the Indian auto market


-- Respondents feel India will export more than one million vehicles in the next three to five years


Sales potential of the basic and small car segment is set to accelerate over the next five years, according to the latest annual KPMG Global Automotive Executive Survey.


The survey, now in its sixteenth consecutive year, also found out that for the next five years, respondents see consumers still fixated on traditional product issues that will drive their purchasing decisions.  In 2014 and 2013, the industry saw fuel efficiency as the most important consideration by consumers when buying a car, followed by enhanced vehicle lifespan, safety innovation and ergonomics/comfort (67 per cent, 53 per cent, 52 per cent and 49 per cent, respectively).


One factor that has gained importance is enhanced vehicle lifespan, which ranked eighth in 2013, but is now the second most important factor influencing the buying decision, globally. The use of alternative fuel technologies remains a low priority, suggesting strongly that, like last year’s survey, the consumer purchase decision is driven more by the wallet than the conscience. Concerns over vehicle quality have risen, following several high-profile product recalls, with more and more customers now seeking vehicles with longer lifespans. Original Equipment Manufacturers (OEMs) have to maintain a careful balance between product quality and cost optimisation.


Meanwhile, innovations in technology-enabled connectivity between the driver, car and its environment rank in the bottom four of 10 vehicle features that respondents think consumers will desire between now and 2020.


Despite the many new technology-based corporations looking to win a slice of the competitive automotive sector because of the newly emerging mobility culture, the established premium and mass market Original Equipment Manufacturers (OEMs) may continue to dominate the landscape over the next decade.


Thirty-four per cent of the total survey respondents feel the established premium market OEMs are extremely likely to dominate up to 2025, with a further 48 per cent believing this scenario is somewhat likely. Only slightly fewer than 32 per cent report that mass market OEMs are extremely likely to prevail, with 52 per cent confident that this group is somewhat likely to remain on top. However, coming in third place are the pure e-car brands/sub brands with 13 per cent saying extremely likely and 54 per cent saying somewhat likely to be a part of the new automotive ecosystem.


The automotive sector is feeling pressure from two sides: on the one side increasingly strict regulatory standards all over the world demand a strong focus on the optimisation of traditional powertrain technologies and heavy investments into alternative drive trains. On the other side consumers are becoming increasingly tech-savvy creating a completely new mobility culture where consumers not only expect, but demand, new and innovative services,” says Dieter Becker, KPMG’s Global Head of Automotive.The traditional players are feeling the warm breath of new competitors, with brands from the technology and communication industry now considered to be equally likely to matter in the mobility space. This really is the next big thing where all traditional automotive industry players will need to make sure they have a business model ready that views the customers’ whole lives beyond their role as drivers, building up a personal relationship to increase loyalty in order to stay on top of the customer interface.


Indians too consider fuel efficiency and safety innovations as the most important consumer considerations while purchasing a car. The survey re-emphasises the point that quality service experience during the purchase transaction is extremely important to Indian consumers. According to the survey report, Indian companies will be investing in two powertrain technologies over the next five years: 33 per cent in downsizing and optimisation of internal combustion engines and 27 per cent in fuel cell electrical vehicles. Brazil, Russia and India each are expected to export more than one million vehicles to other markets in the next three to five years.


Rajeev Singh, Head of Automotive sector, KPMG in India says, “The Indian Automotive industry is likely to face further pressure on two fronts: while on one front the regulatory norms are likely to get tougher on safety, emission norms, fuel efficiency, manufacturing defects and product recalls, on the other hand the product life cycles are getting shortened, there are frequent changes in product ownership and likely emergence of new product segments.


There is also going to be a phenomenal growth in the second hand car market in the country and it will be one of the key success factors for players who enable easy exchange to increase their market share. The industry is also likely to see huge investments in the next couple of years. It is one of those distinctive markets where there is a huge potential at both ends of the pyramid; the small cars and high end luxury cars. There is also a likelihood of increased prominence of women customers.” he further added.


59 per cent of the total participants believe that the market entry barriers or restrictions conditions in India will decrease. Governmental interventions in India will also decrease according to the executives surveyed. Indian auto companies are expected to invest in new plants and module/platform strategies while there are no plans for investing in battery (pack/cell) technologies.


The KPMG Global Automotive Executive Survey 2015 also points to the executives’ agendas up to 2025 where many innovative key trends are low in priority and majority of the executives still feel that growth of emerging markets is the number one key trend. Only a minority of total respondents consider alternative powertrain technologies, mobility services and vehicle connectivity as extremely important key trends until 2025.


Markets at all levels of maturity are seeing a growing demand for state-of the-art technology in vehicles. The relatively low priority assigned to connectivity does not seem to resonate with the growing consumer expectation of ubiquitous access to mobile online services. The high emphasis on fuel efficiency and enhanced vehicle lifespan shows the rising prevalence of the idea of total cost of ownership (TCO) for private consumers.


Within the next two years, global vehicle sales will pass the magical 100 million mark and continue to rise until the end of this decade, on the back of increasing demand in emerging markets like, China.


Despite the promise of new, cleaner technologies, automotive executives still believe downsizing the traditional internal combustion engine is likely to yield the best results in the short-to-medium-term.


When it comes to alternatives, fuel cells have moved ahead of battery electric systems to become the number two priority for investments until 2020.


While the survey respondents believe that plug-in hybrids will generate the most consumer demand by the end of this decade, projections show that this segment will make up just one per cent of total worldwide engine production in 2020.


The excitement over the potential of fuel cell electric cars is also likely to be overhyped; by 2020 a mere 0.01 per cent of cars are likely to be equipped with this type of propulsion, which equates to approximately 16,000 fuel cell drive units per annum.


Most available forecasts suggest that, by 2020, up to 10 per cent of all mass-produced vehicles will be driverless. In this respect, self-driving cars can be positioned as a safer form of motoring, reducing the risk of driver error. These vehicles are far more than just another way of getting around. They generate huge amounts of valuable data about travelers’ habits and characteristics, creating new business opportunities to target consumers with infotainment, education, healthcare and other services.


Not a single emerging market OEM is predicted to make the top 10 by the end of this decade in the mass market segment. German automakers are set to continue their domination on the premium car segment.


About KPMG’s Global Automotive Executive Survey 2015

Two hundred automotive executives participated in this year’s survey. The respondent interviews were conducted over the phone between July and August 2014.


Respondents by job title

  • Business Unit Manager: 45 per cent


  • Business Unit Head: 42 per cent


  • C-level executive: 7 per cent


  • Head of Department: 5 per cent


  • CEO/President: 2 per cent



Respondents by company type

  • Tier one, two and three suppliers: 40 per cent


  • Vehicle manufacturers: 30 per cent


  • Dealers: 10 per cent


  • Financial services; 10 per cent


  • Mobility service provider: 10 per cent



Respondents by company revenue

  • Over USD10 billion: 39 per cent


  • USD1  to 10 billion: 33 per cent


  • USD500 million to USD1 billion: 10 per cent


  • Below USD500 million: 20 per cent



Respondents by region

  • China and Mature Asia (Japan, South Korea): 25 per cent


  • Western Europe (Belgium, France, Germany, Italy, Luxembourg, Netherlands, Norway, Spain, Sweden, Switzerland, the U.K.): 22 per cent
  • Eastern Europe (Czech Republic, Hungary, Poland, Romania, Russia, Turkey, Ukraine): 15 per cent


  • Americas (Canada, Mexico, the U.S.): 13 per cent


  • South America (Argentina, Brazil, Colombia): 13 per cent


  • India and ASEAN (Indonesia, Thailand): 10 per cent


  • Other (Australia, Egypt, South Africa): 4 per cent



(NB – percentages may not add up to 100 due to rounding).


About KPMG International:

KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 155 countries and have more than 162,000 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.


About KPMG in India:

KPMG in India is the Indian member firm of KPMG International and was established in September 1993. It strives to provide rapid, performance-based, industry-focussed and technology-enabled services, which reflect a shared knowledge of global and local industries and our experience of the Indian business environment. KPMG provides services to over 4,500 international and national clients in India and has offices in Mumbai, Delhi, Bengaluru, Chennai, Hyderabad, Kolkata, Chandigarh, Ahmedabad, Pune and Kochi.


For more information, the full survey report and an interactive regional comparison tool, please visit

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