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KPMG survey finds global auto execs expect ICE dominance for some time; ICE downsizing and PHEVs to receive greatest investment over next 5 years; mobility-as-a-service in cities
10 January 2013
|Biggest investments in powertrain technologies over next five years. Source: KPMG. Click to enlarge.|
Global auto executives have cooled a bit on the prospects for e-mobility, with a majority of automakers from both developed and emerging markets believing that internal combustion engines (ICE) will remain the dominant powertrain for some time, according to the 14th Annual Global Automotive Executive Survey conducted by KPMG LLP, the US audit, tax and advisory firm.
Two-thirds (67%) of respondents believe e-vehicles will represent 15% or less of total new car sales by 2025. Nevertheless, this still represents potential sales of up to 5.7 million in China, 2.5 million in India, 3.8 million in the US and 2.1 million in Western Europe.
In the 12 months since the last KPMG automotive survey, the optimism over electric cars has dampened considerably among automakers from TRIAD [Japan, Western Europe and North America] countries, the majority of whom now acknowledge that it will be well over 6 years before electric vehicles overtake ICE as the cleanest, most efficient technology.The trend is similar among respondents from the BRICs [Brazil, Russia, India and China]: in 2012 half believed ICE had up to 5 years left as the leader, yet this year they acknowledge it could be another 6 to 10 years before e-cars become more efficient.
These results show an increasing realization that the electric vehicle is not quite the savior many had hoped for. Although e-technology is still high on the agenda, respondents from the mature regions now place a greater faith in optimizing ICE technologies. Even in the BRICs, ICE downsizing has become a big deal.—“14th Annual Global Automotive Executive Survey”
The survey found that most companies are hedging their bets and spreading funding across a wide range of areas, with ICE downsizing and plug-in hybrids expected to receive the greatest investment over the next 5 years. OEMs are allocating a higher proportion of their resources into hybrids (either plug-in or pure), with just 8% investing primarily in battery technology.
|“...more than half of auto executives involved in the survey feel that battery electric vehicles will have the same driving range as their petrol-fueled equivalents within 6 years.”|
Around 40% of Chinese and 37% of Brazilian manufacturers and suppliers are investing the largest proportion of their powertrain resources in ICE optimization, according to the survey. This is “quite a turnaround in direction”, the report on the survey notes, and a sign that some of the newer technologies are taking longer than expected to emerge.
The report suggests that perhaps TRIAD markets have already established a lead in ICE powertrains and are therefore choosing to expand into newer areas, while the BRICs are playing catch-up, and that consequently respondents from the developed TRIAD nations are more likely to invest in pure battery R&D.
Forty-one percent of executives taking part in the survey believe that government subsidies are needed if e-vehicles are to become affordable.
Since the 2012 global survey, respondents from both the US and Russia have become more optimistic about the potential for e-mobility in their countries, whereas those from Brazil and Japan have reduced their expectations, which is surprising given that Japan has traditionally been seen as a pioneering force in electric vehicles.
It seems that a lack of infrastructure, high purchase prices and limited driving range are deterring consumers from embracing e-vehicles on a large scale. However, despite the caution of manufacturers, more than half of auto executives involved in the survey feel that battery electric vehicles will have the same driving range as their petrol-fueled equivalents within 6 years.—“14th Annual Global Automotive Executive Survey”
Regional expectations on the market share of all annual new e-vehicle (based on light vehicles) registrations by 2027 (in million cars) are:
US: 40% of respondents believe the share of e-car registrations will be 16–20%.
Western Europe: 33% believe the share will be 6–10%.
Japan: 46% believe the share will be 11–15%.
Brazil: 35% believe the share will be 1-5%
Russia: 33% believe the share will be 16–20%.
India: 25% believe the share will be 6–10%.
China: 32% believe the share will be 11–15%.
In terms of allocating R&D expenditures, the single biggest response around the world (from 42% of respondents) was for the traditional combustion engine. Only 13% voted for alternative propulsion technologies. However, 24% split their spending equally among different technologies and 21% are uncertain how their company splits its expenditure, suggesting a lack of clarity over development strategies, the report notes.
Urbanization and mobility. The survey also found that auto execs generally agreed that in the future, more and more city dwellers will choose not to own a car, preferring to access vehicles and other forms of transport through mobility-as-a-service (MaaS).
A majority of respondents believes that 6-15% of urban inhabitants will use MaaS in the next 15 years. The market for MaaS could be as high as 105 million people in China, 54 million in India, 32 million in the US, 20 million in Brazil and 18 million in Western Europe. In comparison to last year’s survey, these figures are a significant increase.This is largely due to the expected increase of the urban population in China, within which the percentage of potential MaaS users has stayed the same.
For OEMs accustomed to selling and leasing cars, MaaS is to some extent a leap into the unknown. There are a number of ways to achieve positive margins from such new business models, with respondents most optimistic about the provision of added-value services, such as apps for mobile payment and location-aided services.
Two-thirds believe that MaaS could be a profitable solution for the overcrowded megacities of the emerging markets. Resales are seen as an attractive option especially in TRIAD markets, and this could also spread to China, with its anticipated rapid increase in demand for used cars. A higher proportion of respondents from developed countries think that mobility solutions offer opportunities to market e-vehicles.—“14th Annual Global Automotive Executive Survey”
Blurring boundaries, changing models. At a high level, the survey finds that a range of global megatrends are blurring the traditional boundaries of the automotive model. Automakers face environmental challenges, growing urbanization, changing customer behavior and the growth of the emerging markets.
These rapid changes are forcing a re-evaluation of traditional business models, as OEMs seek to broaden their core competencies and choose whether to move into multiple new areas or narrow their focus.
|Routes to success. Source: KPMG. Click to enlarge.|
Other areas investigated by the survey include:
Customer behavior and dealers. Online activity is increasing, as is multi-brand availability, with dealers serving as touch points for mobility services, financial services and car servicing. Captive financial service arms are increasingly attractive, especially in emerging markets.
83% of auto execs from the Americas predict that online activity will increase for both dealerships and intermediaries. Only 54% of respondents from TRIAD countries believe the existing dealership model is vital to future success.
Growth and globalization. BRICs’ share of global vehicle sales are expected to near the 50% mark by 2018, with these nations also exporting significant volumes.
While sales and production in Western Europe and Japan continue to decline, the reverse is true for the BRICs. Overcapacity remains an issue, and no efficient solutions have so far been found.
Routes to success. The main growth tactics include new products and new markets, affordable vehicles and sales and price incentives. OEMs favor corporate partnerships over organic expansion, while suppliers are expanding their value chains and diversifying.
Winners and losers. Volkswagen (at number one) and BMW are the only two providers from ‘mature’ economies in the list of top 10 fastest growers. There are four Chinese manufacturers in the top 10.