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KPMG: Auto Execs Expect Hybrids and Small Cars to Make Biggest Gains

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The chart indicates the percentage of auto executives expecting a type of vehicle to increase market share.

Auto executives surveyed by KPMG for its annual Global Auto Executive Survey believe that hybrids and low-cost, small cars will make the biggest gains in market share over the next few years.

Eighty-eight percent of auto executives worldwide believe that hybrids will increase market share. That number is 100% for North American auto executives, the first time the KPMG survey has encountered a 100% response.

With fuel prices high and likely to stay there, if not increase (although prices have fallen in the past three months), one North American VM executive said, “We will expect US$100 per barrel in the future.” It is not surprising that the two categories of vehicles respondents think most likely to gain market share are hybrids (up this year from 74 percent to 88 percent) and a new category for 2005, low-cost cars (79 percent).

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Regional differences in growth.

The responses reveal some sharp regional differences. While executives around the world concur on the growth in hybrids and low-cost cars, crossovers—touted by many automakers as a major growth area in North America— rank much lower in Asia and Europe.

SUVs, which are losing favor in North America, with just 6% of North American execs seeing growth their, are projected for strong growth in Asia and Europe.

Other key trends and perceptions in the survey include:

  • Executives think fuel efficiency is now the second most-important consumer buying criterion.

  • Executives think Asian brands are by far the most likely to gain global market share, with South Korean and Chinese brands leading Japanese and Indian brands.

  • Profitability expectations for the industry globally are dipping, with European and Asian executives now as gloomy or gloomier than their North American counterparts and executives of smaller suppliers more worried than those of big suppliers and vehicle manufacturers (VMs). Notable is a higher expectation of potential VM and supplier bankruptcy.

  • In Asia, Asian brands are expected to be the most dominant over time, with non-Chinese Asian companies thought to be most likely to succeed in China.

  • New manufacturing capacity will be added in Asia, South America, and Eastern Europe at the expense of North America and possibly Western Europe capacity.

  • The main reason for investing in China continues to be selling to Chinese consumers rather than manufacturing for export. Eight-six percent of respondents think Asian consumers will be a major source of growth for the industry over the next five years.

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