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KPMG INTERNATIONAL


      KPMG’s Global
Automotive Executive
        Survey 2011
    Creating a future roadmap for the
  ...
II | KPMG’s Global Automotive Executive Survey 2011




Acknowledgements
The Global Automotive Executive Survey is KPMG In...
KPMG’s Global Automotive Executive Survey 2011 | III




                                                                 ...
IV | KPMG’s Global Automotive Executive Survey 2011




© 2011 KPMG International Cooperative (“KPMG International”), a Sw...
Contents
                                                                                                                 ...
2 | KPMG’s Global Automotive Executive Survey 2011




Executive summary
Influencing the roadmap


                       ...
KPMG’s Global Automotive Executive Survey 2011 | 3




                                                     Technology roa...
4 | KPMG’s Global Automotive Executive Survey 2011




Consumer trends
Vehicles are now adapting
to the environment,
not v...
KPMG’s Global Automotive Executive Survey 2011 | 5




    Is vehicle design driven by urban planning?                    ...
6 | KPMG’s Global Automotive Executive Survey 2011




“In China, a number of cities, such as Shanghai, restrict          ...
KPMG’s Global Automotive Executive Survey 2011 | 7




Consumers demanding fuel efficiency                                ...
8 | KPMG’s Global Automotive Executive Survey 2011




KPMG comment: New technology
brings new risks
Car safety has been a...
KPMG’s Global Automotive Executive Survey 2011 | 9




Hybrid and electric vehicles are growing fast                      ...
10 | KPMG’s Global Automotive Executive Survey 2011




The responses to this year’s survey                               ...
KPMG’s Global Automotive Executive Survey 2011 | 11




KPMG comment: Responding to the
changing landscape
The trend towar...
12 | KPMG’s Global Automotive Executive Survey 2011




Future business models
Changing roles for automakers
and suppliers...
KPMG’s Global Automotive Executive Survey 2011 | 13




New products and technologies are the
primary focus for manufactur...
14 | KPMG’s Global Automotive Executive Survey 2011




The drive to innovate spurs process and                           ...
KPMG’s Global Automotive Executive Survey 2011 | 15




“To be competitive at a global level, Russian carmakers           ...
16 | KPMG’s Global Automotive Executive Survey 2011




Changing roles and new players within
the automotive value chain
 ...
KPMG’s Global Automotive Executive Survey 2011 | 17




  Will the auto supply chain realign?

                           ...
18 | KPMG’s Global Automotive Executive Survey 2011




Government subsidies necessary for                                ...
KPMG’s Global Automotive Executive Survey 2011 | 19




Many respondents believe electric                                 ...
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Transcript of "Kpmg automotive survey-2011"

  1. 1. KPMG INTERNATIONAL KPMG’s Global Automotive Executive Survey 2011 Creating a future roadmap for the automotive industry kpmg.com/automotive
  2. 2. II | KPMG’s Global Automotive Executive Survey 2011 Acknowledgements 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 and dealers. The responses make for compelling reading and we would like to thank all those who participated for giving us their valuable time. We would also like to acknowledge and thank the following senior executives who participated in in-depth interviews to provide further insight: (Listed alphabetically by organization name) Bernhard Soltermann Managing Director AMAG Import Switzerland Oleg Lobanov Executive Vice President of Finance and Corporate Development Chief Financial Officer AVTOVAZ Jan Nahum Executive Director Karsan Otomotiv Sanayii ve Tic. A.S ¸. Jayant Davar Managing Director Sandhar Technologies (also President of the Automotive Component Manufacturers Association of India for 2009-2010) Dr. Carl Friedrich Eckhardt Head of Business Development Vattenfall Europe Innovation GmbH Bernd Pichler Managing Director (Commercial) Volkswagen (China) Import Co. Ltd © 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  3. 3. KPMG’s Global Automotive Executive Survey 2011 | III Foreword After the seismic shock of the global economic crisis and the subsequent operational and financial restructuring of automotive businesses, recent sales figures are pointing to renewed growth worldwide but with no certainty about how long it will last. New technology and changing business renewed focus as relatively untested models are bringing fresh entrants technologies emerge. How such into the sector, resulting in greater development is funded, and who will convergence with industries such gain the upper hand, are two questions as energy, electronics and IT, with that will ultimately determine the future borders becoming increasingly blurred. dynamics of the industry. Managing such interdependencies is In this, KPMG’s twelfth annual Global likely to be a key success factor in the Automotive Executive Survey, we future. Pressure from consumers and take a look at the current condition of regulators has made fuel efficiency an the sector and explore some of the ever-growing priority, to reduce both issues that could shape strategy in the the environmental impact and the cost coming years. of running vehicles. And from a market perspective, the rise of economies such The survey involved interviews with as China and India is creating a new 200 senior executives from the world’s competitive world order. leading automotive companies, including automakers, suppliers and In many ways there is a two-tier global dealers. The responses from those at market in play. The more mature the heart of the industry give valuable countries are struggling to cope with insight into its current challenges and the problem of congestion and changing future opportunities. I’m confident that vehicle needs, while in up-and-coming you’ll find this a stimulating and thought- regions there is a push to deliver provoking read. low-cost cars to populations eager for greater mobility. One factor is common worldwide: the need to continue to develop the technology that will produce efficient, affordable electric vehicles. Even though the industry is still in recovery mode, the pace of R&D is accelerating as the race for technical leadership intensifies. Issues such as safety – once thought to Dieter Becker be largely resolved – are now receiving Global Head of Automotive © 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  4. 4. IV | KPMG’s Global Automotive Executive Survey 2011 © 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  5. 5. Contents Executive summary Influencing the roadmap 2 Consumer trends Vehicles are now adapting to the environment, not vice versa! 4 Future business models Changing roles for automakers and suppliers? 12 Looking back Major automotive industry issues over the last seven years 22 Performance and profitability Attaining a balanced global footprint 24 Emerging market trends China dominates but India is rising 36 Conclusions Laying the foundation for a future roadmap 44 About the survey 46 © 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  6. 6. 2 | KPMG’s Global Automotive Executive Survey 2011 Executive summary Influencing the roadmap Emerging markets continue to accelerate China clearly dominates, but India gains ground 42 percent of respondents expect domestic sales in China to exceed 18 million by 2015. Brazil and Russia catch up, but at a far slower pace Vehicle design will adapt to the environment Urban planning will influence future 76 percent of respondents mobility believe that vehicle design will be driven by urban planning. Customer needs will go beyond single platform locomotion; value- added elements will gain importance Overcapacity is a global issue TRIAD: Despite restructuring, overcapacity is still an issue Respondents believe China, India and Brazil will be Emerging markets are heading for overbuilt within five years. overcapacity Strategy to successfully manage overcapacity has not been found Source: KPMG’s 2011 Global Auto Executive Survey © 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  7. 7. KPMG’s Global Automotive Executive Survey 2011 | 3 Technology roadmap Powertrain leadership: OEMs still on top in battle for core competencies 71 percent of auto executives think OEMs will dominate Cooperation and alliances: the powertrain technology until 2020. preferred strategy to fund R&D activities Changing business model Shifting responsibilities: suppliers move up the value chain Influencing the roadmap 49 percent believe that Mobility solutions: OEMs should the future automotive consider alternative business models value chain will change completely. Niche players may turn the existing industry structure upside down Consumer focus on safety and fuel-efficiency Safety: new technologies come with new risks Fuel efficiency (91 percent) and Fuel-efficiency: driven by bank safety (82 percent) are the most balance not by environmental important consumer purchase conscience reasons. Hybrid and electric cars will grow steadily, but ICEs dominate until 2020 © 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  8. 8. 4 | KPMG’s Global Automotive Executive Survey 2011 Consumer trends Vehicles are now adapting to the environment, not vice versa! According to KPMG’s 2011 Global Automotive Survey, vehicle design and engineering will increasingly be influenced by specific 73 percent believe uses such as off-road, city, leisure or vacation. With growing future cars should environmental restrictions and urban planning making the streets be defined by their ever more car-unfriendly, sales of energy-efficient vehicles are expected to rise. Although car sharing is a potential solution in specific purpose. urban areas, such mobility solutions have not yet been embraced on a wide scale. Future vehicle design will be influenced by urban planning, environmental restrictions and customer needs Almost three-quarters of respondents It is impractical for most people to feel that car models should be defined by possess a different car for every their purpose, be it off-road, city driving, situation, so this need may ultimately commuting or leisure activities. This has have to be addressed by increased implications not just for branding and car sharing or other integrated marketing, but also for car ownership. multi-platform mobility solutions. Importance of defining vehicles by their purpose 1% 7% 19% 44% 29% Not at all important 4 3 2 Extremely important Source: KPMG’s 2011 Global Auto Executive Survey © 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  9. 9. KPMG’s Global Automotive Executive Survey 2011 | 5 Is vehicle design driven by urban planning? Many large cities are Yes restricting access to 3% No their inner core, like Don't know London, or forming 21% “environmental zones” (as in Germany). 76% Source: KPMG’s 2011 Global Auto Executive Survey Whereas in the past, the car has are effectively car-free, with (electric-only) influenced the design of towns and vehicles confined to the underground. cities, the reverse now appears to be Seventy-six percent of respondents true, with a rise in low-emission zones, believe that urban planning will influence declining numbers of parking spaces, future vehicle design, which again points charges for entering certain areas and to a need to produce city-friendly cars and the proliferation of car-free streets and embrace alternative mobility solutions. neighborhoods. New city concepts such as Masdar in the United Arab Emirates New York taxis march to the city’s drum beat In a radical departure, New York vehicle enables elderly or disabled With the notable exception of London, City has pledged to create a fleet of passengers to embark or disembark few cities have dedicated taxi fleets environmentally and people-friendly with ease, and seats up to five, with and this move demonstrates the taxis. Dubbed the ‘Taxi of Tomorrow’ space for wheelchairs, strollers, growing influence of urban planning the new vehicles will have to meet suitcases or shopping bags. on vehicle design. “We applaud the exacting standards of safety, comfort Mayor’s vision to modernize urban Critically, the engine compartment can and CO2 emissions. The chosen taxi travel, says Karsan Executive ” accommodate a variety of engines manufacturer will have exclusive rights Director Jan Nahum. “The ‘Taxi of and power sources, such as natural to supply the city’s taxis for ten years; Tomorrow’ project represents a great gas, hybrid or full electric, enabling the in the past, nine different types of car opportunity to design a comfortable, taxis to adapt to changes in technology. have been permitted. modern, sustainable and accessible taxi It even has a transparent roof to let that could become the model for taxi One of the three candidates (the other passengers take in the full New York service around the world. ” two are Ford and Nissan) is Turkish experience. automaker Karsan, whose proposed Source: KPMG research and input from Jan Nahum, Executive Director, Karsan Otomotiv Sanayii ve Tic. A.S ¸. © 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  10. 10. 6 | KPMG’s Global Automotive Executive Survey 2011 “In China, a number of cities, such as Shanghai, restrict Mobility solutions the number of car licenses at different times to avoid congestion and pollution. In future you may only be do not appear to allowed to register a vehicle that is electric or hybrid.” be a central part of Bernd Pichler, Managing Director (Commercial) most companies’ Volkswagen (China) Import Co. Ltd strategies. Only However, when questioned on how to car-sharing collaboration with Project 9 percent believe meet such challenges, only nine percent Better Place. Such a forward-thinking the concept to of the auto executives in the survey feel approach could become the competitive that car sharing mobility solutions will edge that will accelerate these be extremely be an extremely important part of their future strategy. Of course, not everyone companies into a leadership position in a realigned automotive value chain. important. shares such a view; some businesses Interestingly, although the emerging have already started exploring mobility markets still retain a strong emphasis on service offerings, such as Daimler with expanding car ownership, cities such as its urban car-sharing service ‘car2go’, Shanghai in China are already restricting and ‘Mu’ by Peugeot. Also Renault- car usage. The logical next step could be Nissan is focusing on new business to integrate mobility solutions. opportunities through an electric vehicle Importance of car-sharing mobility solutions 5% 22% 35% 29% 9% Not at all important 4 3 2 Extremely important Source: KPMG’s 2011 Global Auto Executive Survey © 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  11. 11. KPMG’s Global Automotive Executive Survey 2011 | 7 Consumers demanding fuel efficiency Safety has the and safety potential to once With rising oil costs and fears over technology develops and potentially again become a future supplies, it’s no real surprise that fuel-efficiency is considered the single unstable alternative forms of fuel are introduced into the marketplace, safety key differentiator biggest factor for consumers when innovation may once again become a and a source buying a vehicle, although its importance key point of differentiation. By combining has declined considerably relative to the technological superiority with safety of competitive 2009 and 2010 surveys. Interestingly, despite a heightened focus on the green leadership, e-car manufacturers and e-component suppliers could rise above advantage in agenda, less than a third of respondents their competitors. both mature and cite environmental friendliness as “extremely important, suggesting that ” Respondents from Asia Pacific consider emerging markets. safety as the single most important buyers are driven more by their bank consumer issue, which suggests that balance than their conscience. price is not the only selling point in Safety continues to influence markets like China and India, especially buying decisions, with 82 percent of as the middle classes expand in numbers respondents rating this as important and demand secure vehicles. for consumers. As new powertrain Importance of product issues to consumers 96% 94% 91% 82% 81% 75% 76% 74% 72% 71% 70% 70% 69% 61% 56% 57% 56% 55% 43% 43% 40% × × × × × × Fuel Safety Vehicle Environmental Ergonomics Built-in Telematics/ Use of Enhanced efficiency innovation styling friendliness and comfort navigation personal alternative vehicle technologies, assistance fuel lifespan speech services technologies recognition, etc. Note: Percentage of companies rating issues as important Source: KPMG’s 2011 Global Auto Executive Survey 2011 2010 2009 × No data for 2010 × No data for 2009 © 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  12. 12. 8 | KPMG’s Global Automotive Executive Survey 2011 KPMG comment: New technology brings new risks Car safety has been an intrinsic part of As more and more vehicles start to be automotive development for many years, and powered by new technology, the potential for this year’s survey shows that it ranks high on combustive batteries and other dangers rises, the agenda for consumers, automakers and giving both suppliers and OEMs the chance to suppliers alike. In mature markets at least, establish a lead in safety as a means of gaining vehicle safety is now seen as a “must have” vital competitive advantage. hygiene factor and rarely positioned as a Comfort is a further challenge that could point of differentiation. And while safety is of test the skills of powertrain engineers eager growing interest in emerging markets, there to bring on lower-cost, long-distance, fast is a trade-off with vehicle price amongst the electric cars. Having grown accustomed to aspirational middle classes keen to own a car. the benefits of air conditioning and climate However, technology is once again putting control (which makes a big demand upon the spotlight on safety, with the advent of battery power) consumers may be unwilling batteries and fuel cells for electric vehicles. to compromise on such comforts in an As these new technologies are introduced to electric vehicle. It is therefore likely that the marketplace, consumers may start to be electronic power components will be the concerned about the stability of the energy real differentiators of future electric vehicles, source and risk of combustion or other issues. as they manage the efficient flow of energy Until quite recently, even some of the relatively through the vehicle itself. small lithium batteries in laptops were at risk of exploding without warning. © 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  13. 13. KPMG’s Global Automotive Executive Survey 2011 | 9 Hybrid and electric vehicles are growing fast A majority of but total sales are still far behind respondents do Given the desire for more economical expected to lag well behind traditional not foresee a engines, the vast majority of auto internal combustion-powered cars over reasonably priced, executives (around eight out of ten) this period due to some significant believe that hybrids and electric cars challenges that have not yet been mass-market will enjoy the biggest growth of any vehicle category over the next five resolved, including: safety, reliability, comfort, image and, undoubtedly, cost. electric vehicle years. However, total sales are still being available for at least five years. “In the short run the focus is on hybrids. We’re launching a Touareg hybrid in 2011, which is still a powerful car. Most customers want to be environmentally friendly but don’t want to compromise on performance.” Bernd Pichler, Managing Director (Commercial) Volkswagen (China) Import Co. Ltd Respondents expecting vehicle sales increases by category 93% 88% 88% 84% 83% 82% 77% 69% 66% 63% 60% 57% 56% 51% 46% 46% 45% 44% 45%44% 41% 32% 33% 32% 29% 27% 27% 20% 15% 13% × × × Hybrid fuel Electric Cars Other Basic or Cross-overs SUVs Luxury Small Minivans Large vehicles vehicles alternative introduction vehicles pick-up pick-up fuel cars trucks trucks vehicles Note: Only increases shown. Source: KPMG's 2011 Global Auto Executive Survey 2011 2010 2009 × No data for 2010 × No data for 2009 © 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  14. 14. 10 | KPMG’s Global Automotive Executive Survey 2011 The responses to this year’s survey China want to be seen driving imported suggest that consumers are slow to premium cars, including SUVs, even shift their allegiance from preferred though high duties make them far vehicles such as SUVs. Despite being more expensive. Locally-built cars much maligned by environmentalists, are distinguished by the brand name these cars remain popular, although in Chinese characters on the back, more are becoming hybrids, which may yet this subtle difference accounts satisfy the owners’ conscience. for a huge price gap. ” In Asia Pacific, growth in SUV as well Although still high, the expected growth as luxury vehicles sales is predicted rate of basic or introduction cars has to be far higher than in other regions, fallen behind the newer alternative reflecting the aspirations of a fast- technologies when compared to the growing middle class in China and India. previous year’s (2010) survey. This According to Bernd Pichler, the desire indicates that emerging markets are for status symbols is intense: “People in serious about clean, efficient cars. Hybrid systems and batteries receiving the greatest investment Automotive The auto executives taking part in the Surprisingly, investments in liquid companies appear 2011 survey show a clear preference for petroleum gas (LPG) and liquid nitrogen to be investing in investing in hybrids and electric cars, gas (LNG) options are not considered which reflects the relative maturity important, despite the fact that these the more mature, of these technologies on the existing technology roadmap. Even if it is still fuels, especially LPG, are already readily available and the infrastructure exists green technologies, quite far away from mass market in many parts of the world. As only two but gas, which is production, hydrogen is often considered percent of all respondents envisage the most sophisticated propulsion these alternative fuels attracting already available, technology to power e-cars and is still an area of investment for more than significant investment, the sector may be missing an opportunity to at least is barely on the a fifth of the executives interviewed. develop a larger niche. agenda. Industry investments over the next five years in alternative fuel technologies 1% Hybrid fuel systems 4% Battery electric power 4% Fuel cell electric power (hydrogen) Biodiesel 37% 21% Solar power Ethanol LPG/LNG Others 31% Note: Only greatest investment shown Source: KPMG's 2011 Global Auto Executive Survey © 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  15. 15. KPMG’s Global Automotive Executive Survey 2011 | 11 KPMG comment: Responding to the changing landscape The trend towards cars that meet specific This scenario involving automotive companies customer needs signals a move away from and energy providers mirrors the challenges multi-purpose vehicles. You may want an SUV in the communications industry, where to take your family to the countryside, but in telecommunications, entertainment and IT future, strict regulations may forbid you from companies are converging. To take a leadership driving it to work in the city. And your small, role, companies must determine how best to low-emission commuter car may not be manage the interconnected network that will practical for leisure activities. form the future mobility grid. Car sharing schemes are proving increasingly The challenge of alternative mobility solutions popular with city dwellers, many of whom is more immediate in mature markets where find it impractical to own a vehicle. They give the concentration of car ownership is higher; customers access to a wide range of models in emerging nations the emphasis is still on with varying cargo space, and provide a great selling more affordable vehicles to a growing opportunity to focus less on selling cars and and aspiring middle class population. As Jayant more on enabling people to move. Davar, Managing Director of Indian component manufacturer Sandhar Technologies explains: Such mobility solutions can enable OEMs to “While some parts of the world are looking at access customers via longer- or shorter-term smaller cars to minimize the carbon footprint and rental. And with a more integrated approach, become more fuel-efficient, in India the essence travelers can go from a shared car to train, air, of a small car is one that is cheap. ” tram or bus to reach their destination, all set up by one service provider, offering an easy, However, this situation is changing fast and seamless journey. densely populated cities like Shanghai or Delhi may soon need new ways to manage With many different players forming part of a and move travelers. As congestion grows, it “mobility grid, automotive companies may ” won’t be possible for everyone to possess a have to compete to own the customer interface, car, despite the affordability of locally produced coordinate the various transport modes, and vehicles; in addition to conventional sales ensure that their own vehicles are a central approaches, it might be a smart move to part of the offering. Energy utility providers put mobility solutions on the roadmap in could become a critical component of these emerging markets. grids as electricity in cities becomes the primary source of power for moving people. © 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  16. 16. 12 | KPMG’s Global Automotive Executive Survey 2011 Future business models Changing roles for automakers and suppliers? With the capital markets still recovering, automotive companies are seeking strategic partners to help fund the rising number of technological innovations. These alliances may shift responsibilities, with suppliers investing heavily in product improvements and new manufacturing technologies in order to undertake some assembly tasks that are currently in the scope of OEMs. However, the survey indicates that automakers will continue dominating powertrain manufacturing for at least 10 years. Whether such supremacy continues into the era of electric engines remains to be seen. Manufacturer investments Comparable investment strategies for manufacturers 97% 2011 91% 89% 2010 71% 66% 2009 63% 60% 55% 56% 52% 45% 30% New Marketing and Logistics and New plants products advertising distribution 97% 93% 87% 85% 83% 81% 71% 66% 56% New New powertrain Improvements Standardization of IT systems New value-adding Marketing and Logistics and New plants products technologies to safety vehicle platforms technologies (e.g. advertising distribution performance voice recognition, etc.) Note: Only planned investment increases shown. Source: KPMG's 2011 Global Auto Executive Survey © 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  17. 17. KPMG’s Global Automotive Executive Survey 2011 | 13 New products and technologies are the primary focus for manufacturers and suppliers Manufacturers and suppliers’ top According to the survey, suppliers see investment strategies are to develop new new manufacturing technologies as and more sophisticated products, both another imperative, which could signal of which receive greater emphasis than a desire to climb up the value chain in the 2010 survey. And with powertrain and establish themselves as contract technologies remaining a high priority for manufacturers. OEMs, it seems that the main players are working hard to stay on top of their traditional core areas of competence. Supplier investments Comparable investment strategies for suppliers 2011 82% 2010 78% 71% 71% 66% 2009 58% 50% 50% 28% Logistics and Greater product New plants distribution range 88% 87% 86% 84% 74% 71% 71% 50% Research and Greater product New manufacturing Improvements to Increasing assembly Logistics and Greater product New plants development sophistication technologies safety performance capabilities distribution range Note: Only planned investment increases shown. Source: KPMG's 2011 Global Auto Executive Survey © 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  18. 18. 14 | KPMG’s Global Automotive Executive Survey 2011 The drive to innovate spurs process and Joint activities may market alliances further blur the When asked how manufacturers could However, this issue showed a strong differences between raise funds for R&D over the next regional bias; alliances were far more suppliers and five years, the most common response popular amongst auto executives from (from 31 percent of respondents) was Europe, Middle East and Africa and the manufacturers. to seek process and market alliances, Americas, whereas those from Asia with only 18 percent expecting to Pacific had greater confidence in their raise capital through bank loans. ability to secure loans. How can manufacturers fund R&D activity? Seek process and market alliances 31% Self-financing 26% Raise capital through bank loans 18% Seek supplier funding 11% Seek private equity investors 8% Seek other “angel” investors 3% Others 3% Source: KPMG’s 2011 Global Auto Executive Survey Alliances can also be a good way to of survey participants believe that such access specialized technological know- development will be achieved either how as well as help share risk and cost. through alliances or joint ventures with This is particularly relevant to hybrid technology partners, or via strategic and electric powertrain technology co-development with suppliers. development. Over a third (68 percent) “India does not have a long-standing legacy of R&D and design, so to date we’ve had to either import the technology or form alliances with foreign companies.” Jayant Davar, Managing Director Sandhar Technologies (Indian component manufacturer) © 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  19. 19. KPMG’s Global Automotive Executive Survey 2011 | 15 “To be competitive at a global level, Russian carmakers Emerging OEMs need to partner with global OEMs, to reap the benefit of their strong engineering and design knowledge. There are could seek foreign many examples of partnering, including AVTOVAZ with process and Renault Nissan and Sollers with Fiat.” manufacturing Oleg Lobanov, Executive Vice President of Finance know-how and Corporate Development, Chief Financial Officer AVTOVAZ to develop competitive cars and technologies. Best way to access new alternative fuel/hybrid technologies Strategic co-development with suppliers and/or alliances/joint ventures with technology partners 8% Outsource R&D to suitable vendors 11% Mergers and acquisitions with technology partners Employ in-house R&D experts 13% 68% Note: Only the most common strategy shown Source: KPMG’s 2011 Global Auto Executive Survey “Cooperation is absolutely necessary as electro-mobility is a composite of many industries. Neither the automotive 68 percent believe industry nor the Energy Sector will be able to carry out all alliances are the this innovation on their own.” best way to develop Dr. Carl Friedrich Eckhardt, Head of Business Development new technology. Vattenfall Europe Innovation GmbH © 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  20. 20. 16 | KPMG’s Global Automotive Executive Survey 2011 Changing roles and new players within the automotive value chain 49 percent believe the automotive Half of those involved in the survey providers/city builders. In this brave new (49 percent) feel that the automotive world, the traditional players would have value chain has to industry could evolve a completely new business model, where existing to carve out their respective roles. As the brand custodian, automakers would change to cope with interrelationships between OEMs, have to consider how to continue to future challenges. suppliers and dealers could change manage the customer relationship, and radically. The potential new value whether to retain ownership of core chain could involve any combination of powertrain R&D capability. Notably, module manufacturers, assemblers, respondents from the Asia Pacific region vehicle manufacturers/car designers and were the most open to such a change in finally mobility service providers/vehicle industry structure. “In future there could be two parallel worlds, with some people addressing OEMs, others Vattenfall for Green eMobility Packages. Our main aim is to use the electric car batteries as storage systems for renewable energy sources. I believe that a utility provider can service eMobility. But we should be realistic. Even if we reach a million electric cars in Germany by 2020, [Vattenfall] will generate little extra business: Electricity consumption would then equal 0.5% of overall demand, and only a third of electric vehicles may be connected to our supply grid at any one time.” Dr. Carl Friedrich Eckhardt, Head of Business Development Vattenfall Europe Innovation GmbH © 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  21. 21. KPMG’s Global Automotive Executive Survey 2011 | 17 Will the auto supply chain realign? Yes No 12% Don’t know 49% 39% Source: KPMG’s 2011 Global Auto Executive Survey However, such a move may still be some years ahead, as OEMs are not yet ready to concede the battle for foothold in electric powertrains through production of battery cells and packs, as well as e-motors. Despite such efforts, 71 percent of dominance of powertrain technology. the balance of power in powertrain auto executives When asked who would control this critical aspect of the market in ten technology may undergo a radical shift as suppliers and energy companies, think OEMs will years time, 71 percent believe it will which were not even on the radar three still dominate continue to be OEMs. Indeed, many years ago, seek to take a more dominant of them are trying to establish a firm role in electric vehicle manufacturing. powertrain technology by 2020. Who will dominate in powertrain until 2020? OEM Supplier (Tier 1 or Tier 2) 13% Energy company 16% 71% Source: KPMG’s 2011 Global Auto Executive Survey © 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  22. 22. 18 | KPMG’s Global Automotive Executive Survey 2011 Government subsidies necessary for Many respondents electric vehicles believe electric cars will not be The majority of auto executives surveyed encourage energy efficiency, invest acknowledge that the recent round of in low emissions coal plants, advance affordable without government subsidies has tailed off, with 43 percent expecting subsidies to the next generation of biofuels and fuel infrastructure, and begin transition to subsidies. decrease. Despite these observations, a new digital electricity grid. They have many feel the state has a role to play in also allocated an additional US$2 billion accelerating the affordability of electric towards the development of electric vehicles. Almost four in ten (38 percent) vehicle batteries and related components.1 would like to see subsidies in this area, Such an approach is also prevalent in which could be in the form of direct China, as the government seeks to contributions to R&D or through tax breaks make the People’s Republic a leader in to buyers of electric cars. The United battery design and production. Beijing States is making a clear commitment by has pledged approximately US$17 billion investing US$150 billion over 10 years to fund efficient drive train technologies, to accelerate the commercialization of including R&D support for automakers, as plug-in hybrids, promote development well as subsidies of as much as US$8,800 of commercial scale renewable energy, to electric car buyers in 26 cities.2 Expected changes in government subsidies in the automotive industry Increase Stay the same 23% Decrease 43% 34% Source: KPMG’s 2011 Global Auto Executive Survey 1 GKVS, 2009 2 FORTUNE magazine: http://tech.fortune.cnn.com/2010/10/19/china-charges-into-electric-cars/ © 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.
  23. 23. KPMG’s Global Automotive Executive Survey 2011 | 19 Many respondents believe electric To get the most out of any subsidies, cars will not be affordable without governments should let automotive subsidies. Certainly it is unique in the engineers set the agenda. They should history of automotive developments also avoid linking CO2 directly to any for the financing of new technologies single technology, as this could hold to be mainly derived from subsidies. back other potential solutions. How to make electric vehicles affordable Government subsidies 38% Automakers partnering with energy providers to 20% generate after-sales revenues on e-components Consolidation among e-car technology partners 13% Greater competition between e-car makers 11% Consolidation among e-car makers 9% Automakers shifting R&D costs to suppliers 3% Greater competition between 2% e-car technology partners Others 4% Source: KPMG’s 2011 Global Auto Executive Survey © 2011 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. All rights reserved.

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