New Alliances Among Auto and Technology Players on the Rise
Global car manufacturers and IT companies are realising the car’s potential as a gateway to the internet, according to KPMG’s 13th Global Automotive Executive Survey.
The majority (59%) of global car executives say the most successful investment strategy in the future for auto players worldwide is corporate partnerships such as joint ventures (JVs) and/or strategic alliances, and over a third (34%) of the executives intend to collaborate with technology and IT companies to access new technology and products.
This illustrates the growing importance of connectivity ‘on the go’ for consumers in their vehicles and brings the next generation of fully built-in ‘infotainment’ car systems one step closer to the horizon.
Over a third (34%) of car executives expect that consumers’ purchasing decisions over the next five years will be driven by whether the car they purchase has internet connectivity and built-in technologies such as navigation with live traffic update, voice recognition and access to smartphones through steering wheel controls and the dashboard. The importance of such features is almost on par with car safety (37%) and environmental friendliness (40%).
Consequently, the executives acknowledge a need for alliances and co-developments with partners from other industries including battery manufacturers, telecommunications and IT companies to produce advance software for the car of the future.
“Global car executives believe that as consumers become accustomed to instant access at home and in the office, customers will expect the same services when on the move in their vehicles,” said John Leech, Head of Automotive at KPMG.
“In the future, connectivity will not simply be a ‘nice to have’ feature but an intrinsic part of a vehicle. Right now the market is open for the taking – global manufacturers and suppliers are beginning to realise the potential of this market.”
As a result, the vast majority of the respondents anticipate an overdue convergence between the car industry and telecommunications, information, media and entertainment (TIME) industries.
“Car companies are already working with technology giants. For instance, the recent collaboration among Toyota and Intel to develop the next generation of built-in infotainment systems was announced at the end of last year,” John Leech said.
“Data from Intel found that the connected car is the third-fastest growing technological device, following smartphones and tablets – for a car maker that offers huge potential to gain market share in this space.
“In addition, the 2012 Audi A7 has built-in 3G wireless and Audi intends to extend it to other new models as they become available. So, the connected car concept is well and truly here – hence, car players will be racing to develop key strategic partnerships with global technology players over the next five years.”
Furthermore, over a third (32%) of car executives expect original equipment manufacturers (OEMs) to control the revenue streams linked to the built-in connectivity and a quarter (25%) expect IT and technology industries such as Google, Apple, Microsoft and LG to control the revenue streams by 2025.
John concludes: “The majority of current infotainment systems are provided by OEMs through built-in devices and proprietary software. Therefore, in order to stay in control, the auto industry has to open itself up to technologies and services offered by the technology industry.”
Over a third (38%) of car executives expect car makers to develop new products and/or technologies in the next five years to generate growth. The vast majority of global manufacturing executives intend to increase their investment over the next five years in new products (90%); e-motor production (83%); battery technology (81%).
Global car suppliers intend to increase their investment over the next two years in new manufacturing technologies (87%); battery technology (83%); power electronics for e-cars (77%); connected in-car software (77%); e-motor production (73%).
Global car executives expect the following countries / regions to increase joint ventures in the next five years, China (70%); Eastern Europe & Russia (59%); Asia excluding Japan, China (54%); Western Europe (52%).
Over half (53%) of car executives expect hybrid fuel, over the next five years, to attract the most auto industry investment – however 61% expect optimization of internal combustion engines (ICEs) will still offer greater efficiency and C02 reduction.
Two-thirds of executives don’t expect electric vehicles to exceed 15% of annual global sales within the next 15 years.
Majority of car executives expect German and Chinese companies to take the most global market share next five years: VW (70%); BMW (63%); BAIC (58%); SAIC (55%).
Global auto executives expect the world’s biggest markets for auto sales and production volume in five years time (2016) to be: China (80%, 81%); USA (42%, 44%); Germany (24%, 21%).
Over half (54%) of car executives expect electric components suppliers (battery, e-motor, power electric) companies to gain a significant role in the automotive value chain until 2025; 36% of executives expect the annual volume of unit sales in China in five years time to be 20-22million; 41% of car executives expect Chinese to export a significant number of cars to other markets in 2-5 years time.
The KPMG Global Automotive Executive Survey 2012: Managing growth while navigating uncharted routes is based on a survey of 200 automotive executives, over half of whom are business unit heads or higher. The respondents come from all parts of the automotive value chain including vehicle manufacturers, tier 1, 2 and 3 suppliers, dealers as well as financial service companies and for the first time mobility services providers.
A total of 47.5 percent of the executives are based across Europe, Middle East and Africa, 31 percent in the Asia-Pacific region and 21.5 percent in the Americas. Ninety-seven point five percent of the participants represent companies with annual revenues greater than USD100 million and more than a fifth work for firms with revenues greater than USD10 billion. The respondent interviews, which were held by phone, took place in August, September and October 2011.