Auto sector set for change

06 January 2012

LONDON: Innovation, connectivity and convergence are the main trends set to transform the automotive sector over the next five years, a study has argued.

KPMG, the business services firm, polled 200 senior executives, and found 75% of participants anticipated that mature and emerging markets would converge by 2025.

Another 76% of contributors thought fuel efficiency was a key factor in shaping consumer purchase choices at present, down from 96% in 2009. These figures stood at 65% and 72% respectively for eco-friendliness.

Safety logged 64%, as did style, while ergonomics and comfort yielded 61%, using alternative fuels hit 61%, and offering internet connectivity in cars posted 49%.

Elsewhere, 38% of those surveyed said developing original products and technologies was their primary strategy for fuelling growth, falling to 16% for integration with other industries and fostering new business models.

Just 9% pointed to improving affordability and 8% suggested enhanced brand management was vital, matching the result for providing deals.

More broadly, 63% of interviewees agreed it was "very likely" that the automotive sector would converge with the IT, media and entertainment industries as shifts towards in-car "connectivity" gain pace.

"Having become accustomed to instant internet access at home and in the office, people expect the same connectivity when on the move, with access to smartphones, tablets and MP3 players, as well as satellite navigation," the study said.

Competition is also set to intensify, especially as the auto sector is due to see overcapacity of 20–30% by 2016. Currently, the US is the most saturated market for 42% of the panel, and 51% forecast China would assume this role in five years.

Some 26% of the sample saw cutting production as the best way to deal with this problem, 24% cited the need for consolidation, 15% mentioned incentivising sales and 13% wanted to raise their brand profile.

Upon discussing the factors helping dealerships achieve differentiation, 74% of respondents asserted that providing high service quality during purchases was essential, standing at 60% for financing options.

Another 81% believed dealers are likely to invest more money in web marketing going forward, and 72% said expenditure on IT systems and ecommerce would increase.

Data sourced from KPMG; additional content by Warc staff