Survey points to car business consolidation
BY NEIL MCDONALD | 11th Jan 2007
These consolidations would come on the back of the rise of the new Asian car-makers in China and India, overcapacity and the continuing high cost of raw materials.
Although just 32 per cent of European executives believe alliances and mergers would increase over the next five years, Asian car executives were more strident, with four out of five believing more mergers were likely.
The survey concluded that such thinking by the Asian executives "would seem to recognise that numerous car companies still exist in China and, to a lesser degree, elsewhere in Asia, and that economies of scale and shared manufacturing technologies are necessary to achieve attractive pricing but also quality as workable systems to reduce mistakes are spread plant to plant".
China Brilliance, the Shanghai Automotive Industry Corporation and Chery are among the few larger Chinese car makers.
Chery has just signed a letter of intent with DaimlerChrysler to build a small car for DC for global distribution, badged as a Chrysler product.
By contrast more than 50 per cent North American executives forecast consolidation increases, similar to their Eastern European counterparts.
However, western European bosses were less convinced, with only 32 per cent predicting an increase.
Such divergent predictions follow the failed talks last year between General Motors and Renault-Nissan and continuing speculation over the possibility of an alliance between Ford and Toyota after a meeting between the new chief executive of Ford, Alan Mulally and the chairman of Toyota Fujio Cho.
However, Ford was quick to hose down any suggestions of an alliance.
The survey found that Asia features prominently in executive thinking and opportunity.
Most car executives expected the Asian brands to grow considerably and increase market share, adding to overcapacity in the industry.
Almost 80 per cent of respondents believe that Chinese brands would continue to grow while Indian brands and other Asian marques, including the well-developed Japanese industry, were forecast to grow by 55 per cent of directors.
Only 28 per cent believe European manufacturers could increase their position.
China also remains the most likely area to make money, according to most survey respondents.
Half of the executives polled think unit sales in China will grow annually at an unparalleled rate in the world economy – between 11 per cent and 20 per cent.
"Another 20 per cent expect five-year sales growth (through 2010) at 21 and 30 per cent. In total, 85 per cent of executives surveyed think sales growth in China over the next five years will exceed 10 per cent annually, with a third of them by more than 20 per cent a year." Despite the bullish China view, overcapacity was also high on executive thinking with 44 per cent of executives believing global car production is currently running at between 11 per cent and 20 per cent.
The KPMG survey, which has been running since 1999, asks 150 senior car executives globally their views on critical auto industry issues.