Auto Makers See New Models Key to Spurring Sales, KPMG Survey Reveals

Executives believe consumers want vehicles equipped with new technology emphasizing safety

NEW YORK, Jan. 2 -- Automotive manufacturers will be bringing new models to market at a rapid pace over the next five years as a way to get consumers back into showrooms, according to the fifth annual global automotive-industry survey by KPMG LLP, the U.S. audit, tax and advisory firm.

Auto makers also plan to cater to evolving consumer tastes by outfitting their new models with more useable technology, especially innovations to enhance driver and passenger safety, the survey of the 100 American, Asian and European executives shows.

"In terms of investment, new models are at the top of every manufacturers' list," said Brian Ambrose, national industry director of KPMG's automotive practice. "With the number of new product launches scheduled over the next several years, it's going to be important for automakers to flawlessly bring new vehicles to market with an increased level of quality."

For the North American market, 74 percent of respondents are predicting that marketshare growth over the next five years will come from hybrid vehicles-a new category this year-more than any other vehicle. The result is predictable, however: Hybrids still are relatively new to the market, and sales are still low compared with other vehicle types.

This year's survey indicated crossover vehicles will continue to increase in market share over the next five years; however, the percentage of respondents expecting crossover growth dropped to 54 percent in this year's survey from 73 percent in 2002.

Expectations for SUVs rose slightly, with 43 percent of respondents seeing growth, compared with 38 percent last year. Respondents also were more hopeful this year for pick-up truck sales, cited by 40 percent of respondents up from 27 percent a year ago. Minivans appeared to be rebounding as well, finishing with 29 percent of the votes, up 10 points from last year. Expectations for growth in car sales, cited by 33 percent of respondents, was about the same as last year.

In terms of global market share, the execs were asked about whether vehicle categories would increase, remain the same of decrease over the next five years, and 73 percent voiced that hybrids would increase in share, the highest percentage by far over any category of vehicle. Tied for second was luxury models and cars, at 48 percent, followed by cross-overs at 46 percent, minivans and SUVs, at 42 percent, and pick-up trucks, at 41 percent.

The survey also showed that executives believe consumers want their cars and trucks to be equipped with more useable technology. Safety continued to be a top priority for product innovation for even more respondents this year, with 82 percent of executives citing it as the most important area over the next five years, compared with 73 percent last year. Fuel cell technology gained some ground with 62 percent indicating it would be one of the three most important technologies for the industry, compared with 55 percent last year.

"The industry can't take anything for granted anymore when it comes to consumer preferences," Ambrose said. "Consumers have become more discriminating and patient, less willing to trust, tough on price, and more interested in fuel efficiency."

KPMG LLP is the audit and tax firm that has maintained a continuous commitment throughout its history to providing leadership, integrity and quality to the capital markets. The Big Four firm with the strongest growth record over the past decade, KPMG offers clients scale, global reach, industry insights, and a multidisciplinary range of services. KPMG LLP (www.us.kpmg.com) is the U.S. member firm of KPMG International. KPMG International's member firms have nearly 100,000 professionals, including 6,600 partners, in 150 countries.

DOW JONES TAKE ON STORY

BERLIN January 2, 2004; Dow Jones reported that the global auto industry expects a gradual recovery in profits, fueled by increasing demand from Asia, according to an annual KPMG survey of car industry executives.

After expectations bottomed out in 2003, over half of the managers surveyed expect profits to improve in the next few years, but they don't predict a return to full profitability until 2006, the accountants' study said.

Asia represents the biggest opportunity for the auto industry, with 90% of more than 100 executives surveyed at suppliers and carmakers predicting growth there. That's a clearer majority than the 66% that forecasted growth in Asia a year ago.

However, Asia is also the source of a threat, especially for U.S. carmakers, the survey showed. Some 80% of the managers surveyed expect Asian carmakers to increase their global market share at the expense of U.S. carmakers who are structurally less agile.

The continued pressure to cut costs and improve profitability will also increase the pace of acquisitions in the auto industry, KPMG said. Asia is seen as being at the center of activity, with 73% of the respondents expecting consolidation among the region's auto companies.