Domestic market sheds stagnation
Given its reported double-digit recovery in 2013 after two years of stagnation, China's auto market remains the most promising in the world, according to renowned consultancy KPMG.
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Given its reported double-digit recovery in 2013 after two years of stagnation, China's auto market remains the most promising in the world, according to renowned consultancy KPMG.
The company predicts sales by China's automakers are set to account for one-third worldwide by 2020 thanks to constantly increasing investment in the sector.
According to KPMG's recently released 15th annual Global Automotive Executive Survey, sales are expected to surge in BRIC countries - Brazil, Russia, India and China, particularly in China.
And 10 out of the top 20 automakers that are expected to gain a larger market share in the next five years are from China, the survey found.
"Chinese auto consumers have high expectations and are increasingly keen to have more options in their vehicles, a wide variety of products to choose from and good service from enhanced dealer networks," said Andrew Thomson, a partner at KPMG China specializing in the automotive industry throughout the Asia-Pacific region and China.
"China offers a relative 'greenfield' environment to exploit a wide range of opportunities for auto manufacturers."
In 2013, China sold nearly 22 million vehicles, an annual increase of roughly 14 percent, maintaining its top position in the global market, according to the China Association of Automobile Manufacturers.
Sales of passenger vehicles alone jumped 15.7 per cent to nearly 18 million units.
Top priority
Additionally, Chinese survey respondents among 200 executives representing automakers, suppliers, dealers, financial service providers, rental companies and mobility service providers in 28 countries, ranked urban vehicle design as their top priority.
"The phenomenal expansion of cities in China is putting pressure on infrastructure, and our prediction is that there will be greater demand for solutions, such as improved connectivity, lightweight materials, alternative powertrains and even, eventually, self-driving cars to avoid congestion and pollution," Thomson said.
The report noted that an increasing proportion of automobiles produced by BRIC automakers are aimed at export markets.
Forty-four percent of respondents - doubled from previous year - said they are confident that China will export more than 2 million cars in two years, faster than previously expected.
However, statistics from CAAM show that in 2013, China exported 977,300 vehicles, a drop of 7.5 percent from 2012.
Passenger vehicle exports totaled 596,300 units, down 9.8 percent.
"It does not seem likely that China can match such bold expectations, as a big export push - especially into mature markets - would require significant efforts to improve not only quality but also brand perceptions and distribution networks," said Thomson.
"The current top export destinations for Chinese cars are Russia, Brazil, Iran and Venezuela."
While Chinese and other BRIC automakers are still struggling to conquer the mature markets of Western Europe and North America, their own domestic markets provide enormous potential, which is reflected in the high proportion of companies planning to either begin or increase their investment in these regions, KPMG found.
No 1 destination
China is rated as the No 1 investment destination, attracting positive sentiment from 73 percent of respondents in BRIC countries and 64 percent from respondents in the United States, the European Union and Japan - which are known as the TRIAD.
China is followed in attractiveness by India, Brazil and Russia.
Growing expectations of reduced market entry barriers in BRIC markets have also enhanced the attractiveness of these environments - 57 percent of respondents believe local content rules in India will decrease, 47 percent expect Brazil to have less local government intervention, while 44 percent anticipate that Russia's import and export duties will decline.
In the case of China, however, the majority expects conditions to remain stable.
Meanwhile, a significant majority of respondents see emerging markets as a major growth engine for the auto industry - 85 percent say that growth in the BRICs and other potentially high-growth markets is the biggest single industry trend until 2015, according to the survey.
Separately, the survey noted that organic growth has overtaken joint ventures and partnerships as the most favored business strategy.
A year earlier, respondents placed joint ventures and alliances as the main approach, but organic growth now tops the list.
About 84 percent of automakers from the TRIAD countries list organic growth as their main business strategy.
This significant response may be a result of challenges that are being experienced in current partnerships, such as effective integration and developing synergistic outcomes.
However, survey respondents indicate that joint ventures, alliances and mergers and acquisitions are most likely in China, the rest of Asia and Central and South Americas in the five years up to 2019.
These observations reflect the evolving nature of these geographies, as new and existing players strive to gain leadership positions.
"Once again, our survey highlights the dynamic and challenging nature of the automotive industry.
"China continues to be a key focus for almost every automaker and prospects continue to look bright for the future.
"While Chinese automakers continue to make progress, questions remain in respect to their future development," Thomson said.
"Meanwhile, their foreign counterparts continue to lead the Chinese market.
"As the auto industry becomes more global, it will be interesting to see who emerges as China's winners and losers".
Given its reported double-digit recovery in 2013 after two years of stagnation, China's auto market remains the most promising in the world, according to renowned consultancy KPMG.
The company predicts sales by China's automakers are set to account for one-third worldwide by 2020 thanks to constantly increasing investment in the sector.
According to KPMG's recently released 15th annual Global Automotive Executive Survey, sales are expected to surge in BRIC countries - Brazil, Russia, India and China, particularly in China.
And 10 out of the top 20 automakers that are expected to gain a larger market share in the next five years are from China, the survey found.
"Chinese auto consumers have high expectations and are increasingly keen to have more options in their vehicles, a wide variety of products to choose from and good service from enhanced dealer networks," said Andrew Thomson, a partner at KPMG China specializing in the automotive industry throughout the Asia-Pacific region and China.
"China offers a relative 'greenfield' environment to exploit a wide range of opportunities for auto manufacturers."
In 2013, China sold nearly 22 million vehicles, an annual increase of roughly 14 percent, maintaining its top position in the global market, according to the China Association of Automobile Manufacturers.
Sales of passenger vehicles alone jumped 15.7 per cent to nearly 18 million units.
Top priority
Additionally, Chinese survey respondents among 200 executives representing automakers, suppliers, dealers, financial service providers, rental companies and mobility service providers in 28 countries, ranked urban vehicle design as their top priority.
"The phenomenal expansion of cities in China is putting pressure on infrastructure, and our prediction is that there will be greater demand for solutions, such as improved connectivity, lightweight materials, alternative powertrains and even, eventually, self-driving cars to avoid congestion and pollution," Thomson said.
The report noted that an increasing proportion of automobiles produced by BRIC automakers are aimed at export markets.
Forty-four percent of respondents - doubled from previous year - said they are confident that China will export more than 2 million cars in two years, faster than previously expected.
However, statistics from CAAM show that in 2013, China exported 977,300 vehicles, a drop of 7.5 percent from 2012.
Passenger vehicle exports totaled 596,300 units, down 9.8 percent.
"It does not seem likely that China can match such bold expectations, as a big export push - especially into mature markets - would require significant efforts to improve not only quality but also brand perceptions and distribution networks," said Thomson.
"The current top export destinations for Chinese cars are Russia, Brazil, Iran and Venezuela."
While Chinese and other BRIC automakers are still struggling to conquer the mature markets of Western Europe and North America, their own domestic markets provide enormous potential, which is reflected in the high proportion of companies planning to either begin or increase their investment in these regions, KPMG found.
No 1 destination
China is rated as the No 1 investment destination, attracting positive sentiment from 73 percent of respondents in BRIC countries and 64 percent from respondents in the United States, the European Union and Japan - which are known as the TRIAD.
China is followed in attractiveness by India, Brazil and Russia.
Growing expectations of reduced market entry barriers in BRIC markets have also enhanced the attractiveness of these environments - 57 percent of respondents believe local content rules in India will decrease, 47 percent expect Brazil to have less local government intervention, while 44 percent anticipate that Russia's import and export duties will decline.
In the case of China, however, the majority expects conditions to remain stable.
Meanwhile, a significant majority of respondents see emerging markets as a major growth engine for the auto industry - 85 percent say that growth in the BRICs and other potentially high-growth markets is the biggest single industry trend until 2015, according to the survey.
Separately, the survey noted that organic growth has overtaken joint ventures and partnerships as the most favored business strategy.
A year earlier, respondents placed joint ventures and alliances as the main approach, but organic growth now tops the list.
About 84 percent of automakers from the TRIAD countries list organic growth as their main business strategy.
This significant response may be a result of challenges that are being experienced in current partnerships, such as effective integration and developing synergistic outcomes.
However, survey respondents indicate that joint ventures, alliances and mergers and acquisitions are most likely in China, the rest of Asia and Central and South Americas in the five years up to 2019.
These observations reflect the evolving nature of these geographies, as new and existing players strive to gain leadership positions.
"Once again, our survey highlights the dynamic and challenging nature of the automotive industry.
"China continues to be a key focus for almost every automaker and prospects continue to look bright for the future.
"While Chinese automakers continue to make progress, questions remain in respect to their future development," Thomson said.
"Meanwhile, their foreign counterparts continue to lead the Chinese market.
"As the auto industry becomes more global, it will be interesting to see who emerges as China's winners and losers".
