Rapid-Growth Markets Forecast: October 2013

A changing automotive industry landscape

  • Share

Global car sales are set to rise from 81 million last year to 116 million in the next decade. Most of that growth will be in emerging markets, with the BRIC countries acting as the primary drivers until 2020.

Sales of new cars in emerging markets now exceed those in developed countries, and their share is growing.

Given the low density of cars per 1,000 people, a growing middle class and, in some cases, strong population growth, emerging markets are vital to automotive companies — and they must invest in them.

However, each market is unique, and volatility is a growing challenge. Many markets face:

  • Poor infrastructure and urban traffic management
  • Complicated regulatory framework
  • Insufficient technological expertise, particularly in the supplier space

In most markets, the US, European and Japanese vehicle manufacturers dominate. The Chinese government is promoting its own brands, but they continue to struggle in the marketplace. Incentives for local manufacturers are also significant in Russia and India. In time, they will become big players. But that is not a near-term concern for established rivals.

To stay competitive, manufacturers need to identify the best vehicles for each market. There is a huge uptick across most markets in the sales of smaller, more fuel-efficient SUVs, and manufacturers can make good profits on them.

To reduce the manufacturing complexity, increase flexibility and save costs, companies are reducing the number of vehicle platforms and leveraging them across markets. They are laying thrust on global platforms, using the same base globally to produce multiple vehicles on the same line.

Improving the fuel efficiency of vehicles is also important for automotive companies, and light-weighting is just one way of doing so.

Looking ahead, diverse powertrains — including diesel, electric, hybrid, fuel cells and compressed natural gas — will all win a place in the market. No company alone can afford to pay the cost of being at the cutting edge of every technology. So they will have to collaborate to ensure that they aren’t shut out of some markets.

With the number of megacities growing, companies need to create sustainable integrated transport networks — involving the use of cars, trains, buses and bicycles — to address the future urban mobility market.

To succeed in this emerging ecosystem, companies need to develop their value propositions and identify ways in which they can work together to enhance their competitive positions.