Global automotive industry stepping into new era

Top managers of the global automotive industry interviewed by KPMG consultancy unanimously agreed that redistribution in the auto market is to be expected within the next five years. They believe that in the stagnating traditional markets, markets of developing countries, in particular, Asian ones, will have increasingly more weight. This will give an additional impetus to the development of the Chinese automobile industry.

Since its appearance, the automotive industry has been highly competitive. This was partly due to the primitive nature of the first vehicles, which allowed production in any mid-sized workshop. On the other hand, the new form of transportation for a long time was not considered transport but rather a luxury. The effective demand, even on a global scale, was very limited, which in turn gave rise to a high level of competition, not only between manufacturers, but also between countries.

At first, Germany and France, closely followed by Italy, were considered the undisputed leaders of the automotive market. This did not last long. Henry Ford put the end to the hegemony of European automakers. He proclaimed that a car was not just a means of transportation, but a means of transportation that should be available to everyone. He put a great deal of effort in the implementation of his ideas. The market was pleased to accept the concept. The price was a more critical factor than the power of the engine and graceful contours of the body. Ford "Model T" was ridiculed and called an "auto for losers," but it filled the roads on two continents and was produced unchanged for nearly two decades.

Soon, European automakers who had a different concept got concerned. Over a fairly short period of time (which, incidentally, was contributed by two consecutive world wars that swept through Europe), Ford and other American automakers became the leaders of the world auto market. At least, so it seemed - until mid-1970s. The unfolding of a sudden oil crisis has forced the Americans, who were used to powerful full-size cars, look for something more efficient.

Suddenly it became clear that, while the American auto industry was resting on its laurels, Japan learned to make not only inexpensive, but also very good vehicles. Since then and to this day the main battle in the auto market has been between Japanese and American car makers.

Now, apparently, it is time for another global redistribution in the automotive world. At the very least, this conclusion can be made based on a survey of 200 top managers of the leading automotive companies interviewed by the renowned consulting firm KPMG. The study published before the beginning of the International Auto Show in Detroit caused considerable interest from the media. First of all, the automobile industry leaders unanimously declared that the industry clearly began regrouping its forces, and in the next five years the position of Asian manufacturers would be considerably strengthened. According to head of KPMG automotive department Matthew Meyer, among the ten companies with the greatest growth potential, eight are from Asia, and most of them are located in China.

This is not yet a change of leadership within the automotive powers, but a serious claim to it. Interestingly, the forecasts of experts and analysts do not rely on any technical innovation (that ensured European leadership in the early automobile era) or new approaches to production (such as the Ford pipeline or the Japanese quality management system). Their predictions are based solely on trend changes in terms of the volume and structure of the world automotive market. These trends are not promising for the renowned automakers. First of all, a series of economic crises significantly undermined the traditional markets. Europe, for example, was set back nearly to the numbers of 1995, decreasing to 12 million cars in 2012, which is 8.2 percent lower than a year earlier. The numbers of individual countries are even worse: the Spanish market lost 13.4 percent, Italian - 13.9 percent (setting the country back to the level of 1979, and at the same time dramatically decreasing the ratio of local producers), and French - 19.9 percent.

One of the problems of the European market is related to the fact that the EU authorities are no longer able to support their auto industry measures, such as recycling programs. Against the background of Europe, the U.S. auto market that in 2012 demonstrated an increase of 13 percent looks quite well. However, analysts predict a fall in the rate of growth in the coming years. The reduction of the domestic market share is a much sadder tendency for the American automobile industry. Meanwhile, according to the unanimous expert opinion, the auto market in Asian and the BRIC countries would rapidly develop. Chinese automakers alone forecast stabilization of the domestic demand in the country at the level of 20-30 million units a year in the next 10 years.

This significant production volume and balanced state policy would allow Chinese auto companies to implement any necessary modernization. According to experts, the fact that the Chinese cars approach quality standards of the developed countries, coupled with the growing interest of Western consumers in affordable and efficient segment (traditionally developed in Asian countries), would contribute to the prevalence of Chinese products in the automotive market.

However, Western companies accustomed to their leading position in the market are not going to give up without a fight. More than half of the executives interviewed by KPMG stated that they were planning to increase investment in the construction of new plants in the next five years, and were not afraid of overproduction crisis. Perhaps Russia should follow a similar strategy, the more so that experts are predicting growth in the Russian auto market. The growth may not be as impressive as in China, but it will definitely be incomparable with the European one.

Ilya Nikonov


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Author`s name Dmitry Sudakov