A global survey of 1,041 senior executives in 30 countries and territories by KPMG suggests a dip in optimism as the automobile sector deals with concerns over the global economy and rising costs. Nevertheless, they hold a more realistic view of the EV transition.
'Around the world, auto executives are less confident that the industry will achieve more profitable growth over the next five years due largely to concerns over the global economy and rising costs. The share of Japanese executives surveyed who are extremely confident dropped from 32% to 10%. Extremely confident respondents dropped from 31% to 24% in Western Europe and fell from 48% to 43% in the US. Only in China did extreme confidence rise, moving from 28% to 36%. Extreme confidence among suppliers fell from 56% to 23%,' according to the survey. More than two thirds of OEMs anticipate a 5% to 10% price increase in 2024. Independent dealers are even more likely to anticipate such price increases. 'However, given recent price declines and the high number of new models, we believe these price increases might be more difficult to achieve than anticipated,' the KPMG report said.
The KPMG survey has suggested that the EV (electric vehicle) penetration outlook is maturing. Also, the survey finds less variation in estimates of market share for 2030. 'Three years ago, when we asked how much share of annual sales EVs might capture in 2030, the answers ranged from 20% to 80%. Even among analysts, there was a 1.6X difference between the lowest and highest estimates. Now the range of estimates has narrowed, a sign of greater realism. Even so, the mean estimates for penetration rose in the latest survey. In Western Europe, for example, respondents last year estimated that battery-electric vehicles would account for 24% of sales in 2030; this year the consensus estimate was 30%. In the US, the estimate went from 29% to 33% and in China the estimate jumped from 24% to 36%,' the report said.
Telsa On top
'Despite the flurry of new models by established brands, our survey respondents still expect Tesla to remain on top. The opening of the Tesla Giga factory near Berlin in March 2022 is helping Tesla gain share and heightening awareness about the global competition among European executives. In our survey, more European executives predicted that Tesla would stay on top through 2030 and fewer predicted that BMW and Audi would dominate,' the report said.
How soon can EVs reach cost parity with conventional cars (not counting subsidies)? Well, the executives are less optimistic this year. 'In the previous year’s survey, 70 % of executives said they expected parity by 2030; in the latest survey, 66 % said that was likely. However, 87% of Chinese OEM executives expect parity by 2030. That compares with 71% last year,' the report said. Significantly enough, the survey has found the expectations about the shift to electric powertrains continue to mature. 'In the past, when KPMG asked executives across the industry about how they expected EV penetration to trend in their markets, the responses varied widely. Now the range of estimates has narrowed, a sign of greater realism. Even so, the mean estimates for penetration rose in this year’s survey. In India, respondents feel that 20% of new vehicle sales will be battery-powered (excluding hybrids) by 2030,' the KPMG report said.
According to the survey, the emphasis on a smooth customer experience extends beyond buying the car and borders around having seamless operating software in it. 'This is a challenge for manufacturers. A car’s hardware is usually reliable. However, the software is less so,' said the report.
In this year’s survey, OEM executives, in particular, are less confident than in previous years that they can generate subscription revenue. Notwithstanding widely publicised breaches that have raised concerns about automotive cybersecurity, the executives surveyed are of the view that the auto-makers are providing adequate cybersecurity and customer data protection.
“A year ago, we said that automotive executives sensed the future was theirs to seize. In the latest survey, more than 1,000 executives in 30 countries again said they see enormous opportunities. But they are becoming more sober in their assessment of market prospects. Having committed more than half a trillion dollars to the EV transition, the industry is asking when companies will see a return on the investment. Right now, almost all auto-makers are losing money on their battery-electric vehicles, possibly presaging a shake-out among EV manufacturers and suppliers,' said Gary Silberg, GlobalHead of Automotive at KPMG International.
'After the disruptions of the past few years, the new norm in supply chain management is becoming “just in case” rather than “just in time.” Companies are pursuing a wide range of strategies to build resilience and things are far better than two years ago. Still, there is a high level of concern about the continuity of supply for many commodities and components over the next five years,' the report said.
If one were to go by the survey findings, auto-makers seem to be less prepared than in the previous year for advanced technologies such as Artificial Intelligence (AI), digital twins and advanced robotics. Only 12% of auto executives said they felt extremely well prepared, down from 22% the year before. 'The change is likely associated with the rapid advances in artificial intelligence, particularly generative AI, which is expected to bring automation to white-collar jobs. Auto-makers are going to train more workers to take advantage of AI in all its forms and must compete with other industries to hire people with the requisite skills. When it comes to powertrain technology, this year more companies seem to be hedging their bets. Hybrid technologies have jumped from fourth to second place overall in technology,' the report said.