Automotive Capital Confidence Barometer
Growth is the primary focus for automotive companies: appetite for growth has increased to 61% from 43% last year.
With strengthened balance sheets and largely optimized capital structures, automotive companies plan to continue the implementation of their growth agendas over the next 12 months.
Although, the more than one quarter of respondents that are focused on cost reduction and operational efficiency highlights the regional variances that exist within the industry. As production volumes return in Europe and growth returns in emerging markets, the focus is expected to shift further to growth throughout the industry as a whole.
Focus on growth is at two-year high
Growth is the primary focus for an increasing majority of automotive companies: 61% of automotive executives now say that their focus over the next 12 months is on growth, compared with 43% one year ago.
Q: Which statement best describes your organization’s focus over the next 12 months?
Excess cash funds growth and pays down debt
Fifty-two percent of automotive companies with excess cash to deploy over the next 12 months plan to focus on investing in growth, with the majority of growth investments placed in lower risk, organic opportunities (38%). The remaining companies are focused on returning cash to shareholders, with majority doing so in the form of paying down debt (35%). This reflects better availability of capital and an expectation that deals can be financed when needed.
Organic growth strategies center on core products and existing markets
Automotive companies are largely focused on lower-risk growth strategies that include core products and existing markets. With non-core divestures executed following the Great Recession, automotive executives are now continuing to grow their core products and focusing on what they know best. Companies that are looking for more accelerated growth, albeit with higher risk, are focused on investing in new geographies / markets or exploiting their technology to develop new markets and/or products.