High gas prices, which are permanently etched on consumers&rsquqo; minds, have had dramatic implications for auto manufacturers who lack quality, fuel-efficient products to satisfy demand.

—Daron Gifford, National Automotive Industry leader, KPMG

For the second consecutive year, industry executives said they believe the most popular vehicles over the next five years will be hybrids, cited by 83% of respondents, and low-cost cars, according to 64% of respondents. Last year, 88% of executives said hybrids would be the most popular, while 79% cited cars.

Overall, 64% of executives said they expect cars to increase global market share over the next five years, outpacing larger vehicles, such as minivans, which were cited as a growth model by only 33% of executives. Meanwhile, just 28% said SUVs would be gaining share. Fifty-five percent of executives also expect market share for crossovers to increase, while 42% predicted market share for luxury vehicles will increase.

Gasoline prices have shifted the model mix in executives’ minds, and future winners in the global automotive marketplace will have to find ways to combine ingenious cost-efficiencies with startling design creativity.

—Daron Gifford

In breaking the categories down into a regional view:

• 95% of North American executives said they were more likely to see a rise in hybrid sales over the next five years, while 67% of North American executives predicted crossovers.

• 89% of European executives were optimistic on the sale of low-cost vehicles, and 57% forecasted luxury vehicles sales will increase.

• 37% of Asian executives are more confident about the sales of large pick-up trucks, while 72% expected car sales to rise.

This year, 71% of executives believe hybrids will become a US market force.

The hybrid mantra is that the breed cannot fail, given consumer demand and its relatively minuscule production numbers.

—Daron Gifford

Additional findings in the survey include:

• 90% of executives believe consumers will hold on to their new cars for three to seven years.

• 66% of executives cited innovations in manufacturing as the greatest source of cost savings for vehicle manufacturers, followed by materials innovation and outsourcing to countries like China and Eastern Europe according to 61% of executives respectively.

• 48% of executives named new models and 43% said new technologies are the areas where manufacturers will increase investment.

• Executives expect alliances, mergers and acquisitions among vehicle manufacturers, Tier 1 and Tier 2-3 suppliers to increase globally over the next five years. 81% of Asian executives expect global consolidations and alliances to increase over the next five years, followed by 58% of North American executives and 56% of Eastern European executives.

• 57% agree that alliances will be more important than mergers and acquisitions in the auto industry over the next five years.

• 56% believe the rate of bankruptcy in the industry will increase over the next few years.

• 42% of executives are predicting that industry profits will be flat or generally rise over the next five years, showing marginally high optimism when compared with last year’s 39%.

• 96% of executives expect manufacturing to grow in Asia. 75% of all executives agree that automakers and suppliers will continue to make significant investments in China over the next five years.

• 73% of executives cite India as the next region, aside from China, to undergo the greatest growth.

In the KPMG survey, the executives interviewed represented vehicle manufacturers and suppliers in Canada, United States, England, France, Germany, Sweden, India, China, South Korea, Japan and Australia. KPMG has released an annual survey of automotive executives expressing their views on the state of the industry since 1999.