Executives Divided on Solution to Auto Overcapacity

Automotive industry leaders are deeply concerned about excess factory capacity worldwide but don't agree on how to remedy the problem, according to KPMG's Global Automotive Executive Survey 2013.

Remarkably, only 10% of the 200 executives it polled favor cutbacks in production, KPMG reports. It says the most popular options are industry consolidation and alliances (25%), export increases (19%), government intervention (19%) and incentives from carmakers to boost sales (17%).

Executives project continued declines in sales and production in Japan and western Europe over the next five years. They predict the U.S. the rare exception to overcapacity also is the only major mature auto market in which demand and output will remain solid or expand over that period.

Not surprisingly, KPMG's survey respondents anticipate strong sales and production growth in Brazil, Russia, India and China. They predict the BRIC nations will account for nearly half the world's vehicle sales by 2018.

Executives also expect those countries to become heavy auto exporters. They say eastern Europe, South America and southeast Asia will be fertile territory for the BRICS; western Europe and the U.S. will not.

China remains the top choice for investment by all global carmakers, followed closely by India. Russia and Brazil are more distant third and fourth preferences, respectively. The report adds that Indonesia has the potential to become a "rising star" in the automotive world.

KPMG notes that the concentration of more than half the world's population in urban areas is changing views about car ownership. Seven in 10 of its survey respondents predict that as many as 15% of city dwellers will use shared mobility within 15 years.

The study projects that by 2027 markets for mobility services in lieu of traditional vehicle ownership could surge to 105 million people in China, 54 million in India, 32 million in the U.S. and 18 million in western Europe.

Other findings of the KPMG survey include:

Nine in 10 respondents say new products will drive growth. Eight in 10 believe corporate partnerships will be the key to success.

Executives predict 54% of future industry profits will come from making and selling conventional vehicles, powertrains and components. The balance of earnings will be generated by new technologies, many of them involving electrification and connectivity.

The carmakers most likely to increase their market share between now and 2018 are, in declining order, Volkswagen, BMW, BAIC, Toyota and Hyundai-Kia. Ford and General Motors rank 14th and 15th on the growth spectrum, behind seven Chinese automakers.

The five companies least likely to gain share are, in ascending order, Fuji Heavy Industries (Subaru), Mitsubishi, Mazda, Suzuki and BYD.