global auto executive survey 2010

8/9/2019 Global Auto Executive Survey 2010

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Automotive

KPMGs Global Auto ExecutiveSurvey 2010Industry Concerns and Expectations to 2014

kpmg internAtionAl


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nor does KPMG International have any such authority to obligate or bind any member rm. All rights reserved.

Contents

Chapter Page

1 Survey methodology 2

2 Executive summary 3

3 Introduction 4

4 The growth prospect 6Executive view: volume automaker Europe 8Overcapacity is now critical 9Emerging markets are becoming overbuilt 11

5 The perormance angle 12Executive view: mid-size automaker US 14No easy cost savings expected 15Capital costs to remain high 17

M&A set to grow 18Debt and technology needs will drive M&A 20

6 Product innovation and consumer change 22Fuel eciency and environment top o consumer concerns 24Low-cost producers to win most market share 26Hybrid technology rated clear leader 28Executive view: large Tier 1 supplier US 30R&D will win most investment 31

7 Investing in new markets 34Executive view: diversied supplier emerging market 36BRIC sales orecasts continue to grow 37Smaller emerging markets to gain 40


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Foreword

1Foreword

Dieter BeckerGlobal Chair, Automotive

KPMG ELLP

KPMGs Global Auto Executive Survey

2010 was conducted at the end o a historic

year or the auto business. The intensity o

the crisis that enguled the entire industry

can hardly be underestimated.

Last year we surveyed an industry that

had been plunged, very suddenly, into

total uncertainty. As one o the large

automakers interviewed as part o thisyears report said, a year ago we were

in the middle o nowhere anything

was possible.

This crisis was in part a consequence

o success. Auto products are better

than they have ever been: with todays

high levels o reliability and longevity,

many customers can deer the purchase

o a new vehicle. So when condence

collapsed on a global scale at the end

o 2008, that is exactly what customers

did. Sales plummeted in almost everymarket, while nancial conditions became

intolerable even or companies with

moderate levels o indebtedness. The

destruction o large segments o the

worlds auto industry and other

industries too became a real possibility.

As our survey records, the industry is

already on the way out o that period

o crisis. Condence is higher, while

growth and new investment are back

on the agenda.

But more striking is the record o autoindustry caution that the survey depicts.

We have come a long way, respondent

companies are saying, but we have a lot

urther to go. In particular, we note that

many companies are saying that

overcapacity is still at very high levels

respondents believe it is signicantly

higher than last year, despite a year o

closures and bankruptcies and the

consequence is that much o the

expected restructuring o the industry

may still lie in the uture.

And there are huge technology challenges

to be met. Last year companies told

us that uel eciency and emissions

improvements were top o their agenda.

This year they are still top o their agenda.

Meanwhile, companies ace the challenge

o nancing the cycle o innovation and

let us not orget that we are still in the

middle o a rapid innovation cycle whileconsumers eel they are poorer than

beore, and less inclined to spend. That,

say our respondents, means that companies

are likely to have to compete on technology

and on cost. That is a tall order.

Meeting that challenge inevitably means

more change more change in the structure

and in the practices o the auto industry.

I anything is clear rom what respondents

are saying to us today, it is that change has

only just begun.


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Vehicle manuacturer

Tier 1 supplier

Tier 2 supplier

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2 KPMG Global Auto Executive Survey 2010

Chapter 1: Survey methodology

CEO/President/Chairman

C-level Executive

Business Unit Head/Functional Head

Business Unit Function Management/

Leadership Team

Business Unit Functional Manager

4%

3%

47%

6%

40%

38.50%

50.00%

11.50%

Survey participantsby job title

Survey participantsby company type

KPMGs Global Auto ExecutiveSurvey 2010 is the 11th consecutiveannual survey o senior global autoexecutives carried out by KPMGInternational. This year the survey ismore extensive than in previousyears: 200 respondents rom 24countries took part in the survey

between mid-September and earlyNovember 2009, includingcompanies in the Americas, AsiaPacic, Europe, Arica and theMiddle East. All survey questionsrelate to the coming ve-yearperiod, extending to 2014, unlessspecically stated otherwise.

Each year we ask executives to describe

themselves and their companies. In earlier

surveys automakers and suppliers describing

themselves as Tier 1, Tier 2 and Tier 3

companies participated. However, the

increasing diculty o nding a large

sample o Tier 3 suppliers that are o

sucient size to participate in the survey

(with revenues in excess o US$100 million)

meant that in last years survey no respondentschose to describe themselves as Tier 3

suppliers, and results rom Tier 2 and Tier 3

suppliers in data rom earlier years were

grouped together. In the current survey

KPMG restricted the survey to Tier 1 and

Tier 2 suppliers. In almost all cases this

permits direct year-on-year comparisons

o results rom Tier 1 and Tier 2 suppliers

in only one case (noted in the text),

comparative data rom 2007 includes

some results rom Tier 3 suppliers.

In last years survey a number o questions

were restricted to regional companies.

In the present survey all companies were

oered the opportunity to respond to all

questions, irrespective o the region in

which the company was headquartered.

The result is a greatly expanded sample

base throughout the current survey.

Some questions elicited no response romsome respondents; thereore total results

may be less than 100 percent.


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3Executive Summary

Chapter 2: Executive Summary

Key resultsExpectations o emerging market

perormance and auto investment

accumulation have strengthened

considerably.

Overcapacity is still seen to be very high

over the ve-year period in the Americas,

Europe and Japan; M&A activity is

expected to be strong.

The long-term investment ocus remains

on new products and new technologies,

especially uel eciency.

The growth prospectAll emerging economy regions are

expected to contribute growth: not only

Asia excluding Japan, but also Eastern

Europe and Russia.

Growth expectations or Western Europe

are low, and lower still or both Japan andNorth America.

The industry still believes that overcapacity

in the established manuacturing triad

North America, Europe and Japan

remains very high.

Companies also have strong concerns

over the emergence o automotive

overcapacity in the BRICs. Concern is

highest in Russia but companies also

believe that the automotive industry

in Brazil will be overbuilt in the near to

medium term, and that China and India

will also have signicant overcapacity

not much later.

The perormance angleProtability expectations have allen.

Respondents believe best perormers will

be companies able to leverage the whole

o the supply chain, with higher prots

expected o automakers, and the lowest

expectation or Tier 3 suppliers.

Companies expect nancial conditions

to improve, but only moderately, withconditions better or consumers than

or companies.

Expectations or M&A have risen, marginally,

rom an already high level in the preceding

year, with the exception o the dealer

business, where ater a year o closure

and rationalization companies now see

M&A alling back.

Companies expect to nd ewer cost-saving

opportunities in existing businesses.

Product innovation andconsumer changeNew products and new technologies have

moved higher in the ranking o concerns

rom an already high leading position.

Fuel eciency and the environmental

prole o products continue to be

considered by companies the most

signicant consumer buying issues.

Chinese and Indian brands remain in the

top three places in terms o expectation o

market share gain, but conviction is slightly

lower than last year. Two signicant

winners o market share competition are

seen as Hyundai/Kia and VW.

Companies in all three global regions cite

exactly the same three vehicle types as top

market share gainers (hybrids, other

alternative-uel vehicles and low-cost

introduction cars).

Alternative propulsion technologies are

the key technological ocus or companies.

Electric power ranks only just behind

hybrid power developments and battery

and uel-cell approaches are ascribed

almost equal priority.

Companies say they will direct most

investment capital to technology and

new model development. New plantbuilding is accorded very low priority.

New marketsCompanies are nearly unanimous in

expecting emerging markets to build most

automotive capacity and to provide the

most growth in automotive revenues.

The majority o companies surveyed say

they intend to increase their investments

in the BRICs.

Expectations or both domestic and

export Chinese sales have increased.

The consensus view o companies on

sales growth in Brazil, India and Russia

is also strong, although Russian export

potential is not rated so highly.

Beyond the BRICs companies expect

strong demand growth and auto

investment in South East Asia and

in Eastern Europe.

Top-rated individual destinations or

auto investment beyond the BRICs

are Ukraine, Thailand and Mexico.


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Chapter 3: Introduction

Last years KPMG Global Auto Executive

Survey reported on an industry alling into

crisis. Sales were collapsing, growth

expectations were swinging rom positive

to negative, investment schedules were

being torn up, and or more than one large

company, bankruptcy loomed.

This year, we report on an industry that

has conronted the crisis, and has justbegun to emerge into a landscape o

greater stability. In many ways the crisis

was much worse than the gloomiest

predictions. Bankruptcy became a reality

or a number o large automakers, as

demand ell urther and aster than

expected, and as the ability o indebted

businesses to nance themselves simply

evaporated.

Yet the worst was avoided. Exceptional

government intervention helped to shield

the industry rom the worst o the all in

demand, and allowed some companies

to begin to rebuild themselves behind the

wall o temporary bankruptcy. Above all,

the sudden loss o condence in demand

and growth in the big emerging economies

was counteracted by an equally sudden

resurgence, as it became clear thatemerging world growth was much more

resilient than pessimists eared. The

stabilization and subsequent recovery o

asset prices against a background o less

volatile energy costs helped immeasurably.

But we are let with a world that has

changed: a deep restructuring o the

automotive industry has begun, and

continues. One dimension o this has

been a signicant transer o automotive

technology to the emerging world.

Existing producers with lower costs have

seen their businesses strengthened.

And with a global market that has clearly

shrunk, many established producers arehaving to conront the act that competition

or sales is likely to be much, much

tougher in the next ew years than any

time in the last two decades.

As one European automaker interviewed

or this report commented: this last year

has made us conront reality.


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Chapter 4: The growth prospect

The current survey shows that the gradual

reorientation o growth expectations away

rom the mature economies and toward

Asia and other signicant emerging

economies has passed a tipping point.

Although previous surveys show that

companies have consistently been

orecasting a decline in the growth trend

or some years, the great majority o

companies now locate all their signicantgrowth expectations or the next ve

years in the emerging world.

All emerging economy regions are

expected to contribute growth: not only

Asia (excluding Japan), but also Eastern

Europe and Russia. The balance o

expectations or Western Europe is now

even between companies expecting

some decline and companies expecting

some improvement (most expect little

change), but the balance is negative or

both Japan and North America: morecompanies now expect decline in those

regions than expect improvement.

On a regional basis, pessimism on

revenues in the Americas is strongest

in European and Asian companies.

Companies in the Americas are slightly

more positive both regarding their own

region, and on growth prospects in Asia.

76.00%

15.50%

6.00%17.50%

42.00%

36.00%

47.00%

28.00%

23.50% 24.00%

50.00%

24.50%

20.00%

52.50%

19.00%27.00%

47.00%

19.00%

Asia

(exclu

dingJa

pan)

Cent

ral&

Sou

thAme

rica

Easte

rnEur

ope&Rus

sia

Wes

tern

Eur

ope

Midd

leEa

st&

Afri

ca

Japa

n Nor

thAm

erica

21.50%

44.50%

31.50%

What are your orecasts or auto industry revenuesin the ollowing regions and countries?

Growth expectations largely geared to Asia

Eastern Europe shows second biggest increase

Biggest declines seen in North America and Japan

Increase Stable Decline


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2010 KPMG International. KPMG International is a Swiss cooperative. Member rms o the KPMG network o independent rms are aliated with KPMG International.

North America Western Europe Japan Eastern Europe &Russia

Asia (excludingJapan)

Central & SouthAmerica

Middle East &Arica

Americas Europe, Middle East and Arica (EMEA) Asia Pacic (ASPAC)

KPMG International provides no client services. No member rm has any authority to obligate or bind KPMG International or any other member rm vis--vis third parties,


7The growth prospect

46.67%

41.66%

18.34%

26.67%

30.00%

18.34%

45.16%

27.42%

17.74%

29.03%

19.36%

48.71%

38.46%

23.08%

19.23%

16.66%

27.42%

74.20%

86.67%

14.11%

69.23%

What are your orecasts or auto industry revenues in the ollowing regions and countries?*

Companies in the Americas most optimistic on emerging economy growth

Japan rated lowest growth market by EMEA companies

Broad regional consensus on high Eastern European and Asian growth

* Percentage o companiesexpecting improvements


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Executive view: volume automaker Europe

This Europe-headquartered globalautomaker with signicantmanuacturing and sales in allregions o the world says that morethan ever the key to success isproduct excellence.

My condence level has increased

signicantly in the last 12 months. A year

ago we were in the middle o nowhere

not just in the auto industry; it applied to all

businesses. Nobody knew what the next

24 months would bring. Anything was

possible. But now we have some clarity.

Consumer demand has recovered better

than we expected a year ago. It is stillgoing to take a long time to recover ully,

but the important thing is that recovery

is predictable.

I share the general aith in demand rom

the emerging markets. From the consumer

point o view these markets are simply

better placed than the US or Europe or

Japan. In the past these economies were

highly dependent on oreign direct

investment or their growth, but now they

are generating their own trade surpluses,

they have growth that is not investment-dependent, and some o them are still

beneting rom very low interest rates.

So the emerging market economies will

be airly positive over the next one to two

years. The question is, what does this

mean or autos? Weve seen a huge

increase in demand over 2009, but or the

near uture I am more doubtul about auto

demand. I dont expect a collapse, but

incentives like we have seen in China and

Brazil cannot continue orever.

As or the global picture, I think the next

ve years are going to see the industry

challenged to compete both on technology

and on cost. In technology we have a huge

challenge ahead o us, especially in CO2

reduction where expectations are enormous.

And on the cost ront there is no reason to

expect our mature-economy consumers

to become very much wealthier over the

next ew years, so there is also going to bea strong ocus on aordability.

The last year has shown us that the

winners in tough situations are always

the companies with strong products at

aordable cost. I you have weak products

you are going to suer even with a good

cost situation. That is irrespective

o segment or market


11/44


Yes No

Dont know

88.00%

3.00%9.00%

2.84%

37.50%35.80%

13.64%

10.22%

1-10% 11-20% 21-30% 31-40% Morethan 40%




Overcapacity is now critical

For several years KPMGs Global

Executive Auto Survey has asked

companies about their perceptions o

overcapacity: the extent to which the

manuacturing capacity o the industry is

overbuilt is a key determinant o protability

now and the likely path o restructuring

through mergers, acquisitions and

divestments in the coming ve years.

In the current survey these questionswere expanded to provide an insight

into industry perceptions o regional

overcapacity. (It is worth noting that

these questions on overcapacity relate

to long-term capacity: companies were

asked to rate levels o overcapacity over

a whole business cycle, and not just

overcapacity in relation to the current

years market).

The result is one o the most striking in

the survey. Ater a year o unprecedented

change in the structure o the auto

industry, one in which automakers

including the large US manuacturers

and suppliers closed capacity around

the world, the industry still believes

that overcapacity in the established

manuacturing triad North America,

Europe and Japan remains very high.

Companies see more overcapacity in

North America than in other regions,

but in all cases the majority sees

signicant overcapacity.

Those companies that do see overcapacity,

are more likely to rate the level o

overcapacity higher in North America than

elsewhere, with a consensus o around

25 percent overcapacity, although a

signicant minority see higher levels

one in ten companies thinks overcapacity

in North America is more than 40 percent,

or example.

Is there automotive overcapacityin North America today? How much?

North America seen as most overbuilt

Perceptions o 20 percent plus

overcapacity have risen strongly

year-on-year


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Yes No

Dont know

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Yes No

Dont know

80.50%

6.50%

13.00%

18.01%

37.27%

30.43%

9.32%

4.97%

1-10% 11-20% 21-30% 31-40% Morethan 40%

Is there automotive overcapacity

in Western Europe today? How much?

75.00%

8.50%16.50%

17.33%

8.67%

6.67%

35.33%

32.00%

1-10% 11-20% 21-30% 31-40% Morethan 40%

Is there automotive overcapacityin Japan today? How much?


13/44

2010 KPMG International. KPMG International is a Swiss cooperative. Member rms o the KPMG network o independent rms are aliated with KPMG International.ember rm has any authority to obligate or bind KPMG International or any other member rm vis--vis third parties,

to obligate or bind any member rm. All rights reserved.

23.24%

2.88%

1.92%

30.99%

33.10%

5.63%

7.04%

Chi

na

24.04%

43.27%

27.88%

India

13.64%

30.68%

43.18%

6.82%

5.68%

Brazil

22.62%

28.57%

29.76%

7.14%

11.9%

Rus

sia

Now 1-2 years 3-5 years

6-10 years >10 years

KPMG International provides no client services. No m

nor does KPMG International have any such authority


Emerging markets are becoming overbuilt

Given the high level o expectation o

revenue growth in the BRICs and the

high level o expressed intentions to build

investment in those economies, the act

that companies also have strong concerns

over the emergence o automotive

overcapacity in the BRICs is striking.

Companies believe that the automotive

industries in both Russia and Brazil will beoverbuilt in the near to medium term,

and that China will also have signicant

overcapacity not much later. Concern over

near-term capacities is highest in Russia,

where almost 12 percent o companies

think that overcapacity is already emerging

and 19 percent believe it will emerge

within two years.

However, it is worth noting that it is not

irrational or companies to plan investment

in locations where they believe overcapacity

is emerging: more ecient manuacturerscan always utilize ully their own investments

and make prots in an overbuilt economy.

When do you expect overcapacity in the BRICsto become a serious issue?

Overcapacity not conned to triad

Russia seen as most overbuilt in the short run

Brazil seen as most overbuilt in ve year orecast


14/44

2010 KPMG International. KPMG International is a Swiss cooperative. Member rms o the KPMG network o independent rms are aliated with KPMG International.s. No member rm has any authority to obligate or bind KPMG International or any other member rm vis--vis third parties,

39.50%

33.00%

27.50%

22.50%

36.50%

40.50% 44.50%

36.00%

18.50%

14.50%

38.50%

31.50%

22.00%

34.50%

40.00%

40.50%

42.50%

19.50%

Automakers Tier 3suppliers

Financialservices

DealersTier 2suppliers

Tier 1suppliers

Increase Stable Decline

KPMG International provides no client service



Chapter 5: The perormance angle

Who will best be able to make prots

against this background o alling revenue

expectations? Industry expectations o

protability by company type over the next

ve years are strikingly negative especially

when companies are asked about the

protability o their own type o company.

Overall, it is unsurprising that in an era

expected to be highly competitive

companies believe that higher prots will

accrue to companies better able to leverage

the whole o the supply chain, with higher

prots expected o automakers, and the

lowest expectation or Tier 3 suppliers.

On a regional basis, protability corresponds

roughly to revenue expectations, with the

best outlook in ASPAC.

How proftable do you think the global automaking, supplierand dealer industries will be over the next fve years?

Financial services seen as most protable

Tier 3 suppliers expected to show lower protability

Protability expected to decrease along value chain


15/44



13The perormance angle

30.0

0%

30.64

%

30.00

%

23.0

7%

27.4

2%

23.3

4%

17.9

5%

25.8

1%

21.6

7%

10.2

6%

22.5

8%

13.3

3%

8.9

7%

51.6

1%

46.6

7%

25.6

4%

32

.26%

20.0

0%

8.9

7%

Automakers Tier 1 suppliers Tier 2 suppliers Tier 3 suppliers Financial services Dealers


How proftable do you think the global automaking, supplierand dealer industries will be over the next fve years?*

EMEA protability expectations lowest

Across the whole value chain ASPAC expectations highest

* Percentage o companiesexpecting improvements


16/44



Executive view: mid-size automaker US

This subsidiary o a Japanese-owned global manuacturer remainsextremely cautious about long-termsales and prot prospects.

Over the last year my condence level

has not improved much. Unavorable

undamentals in the market have been with

us or some time now, but i anything it is

getting harder or people to sustain their

spending. No, Im not much more condent.

We have cut capacity. Perhaps not as much

as we should have done. I it werent or

our contract with the United Auto Workerswe would have done a lot more. We have

changed the product mix as well the old big

SUV products, or example, are just not

viable any more. Our competitive oers now

are in compact and crossover vehicles.

When we started developing small SUVs

people thought we were crazy but now we

are developing crossovers that are even

smaller, and people understand what we are

doing. These are the cars people want.

The government assistance scheme in the

US certainly had an impact, although ocourse it was not as great as we might have

hoped. Whether a company benets rom a

cash assistance program like that depends a

lot on the level o inventory it holds. We gave

up on the strategy o holding high inventory

and waiting or a miracle a long time ago

but when cash-or-clunkers came in, we

just didnt have the inventory. The Koreans

on the other hand do hold very high

inventories, so they had a home run.

When the cash assistance scheme ended,

sales plummeted. There just isnt the natural

demand in the market. So it is going to be

a very dicult 12 months, at least. But we

are going to have to grow our way out o it.

Government cant go on making sales or us.

Growth is the challenge, and that means

investment is the challenge. When you look

at the return on a dollar o investment in Chinaor in India, and you look at the return in the

US, the US does not look attractive. So the

uture is going to be all about operating more

eciently. We just cannot aord to waste

money on anything inecient.

The winners rom what has happened in

2009 will be primarily the Korean companies.

They have the lowest cost o production in

the US. That means they can prot in this

very weak market. But Japanese companies

also have low costs lower than the

domestic US makers, even ater all therestructuring. The Japanese also have the

culture, the camaraderie and the dedication

on the actory foor. I the domestic US

automakers cannot reproduce that, they

will never prosper.



17/44

2010 KPMG International. KPMG International is a Swiss cooperative. Member frms o the KPMG network o independent frms are afliated with KPMG International.KPMG International provides no client services. No member frm has any authority to obligate or bind KPMG International or any other member frm vis--vis third parties,

nor does KPMG International have any such authority to obligate or bind any member frm. All rights reserved.

62.0

0% 6

7.0

0%

57.0

0%

61.0

0%

59.0

0%

65.0

0%

55.0

0%

43.0

0%

43.0

0%

47.0

0%

50.0

0%

46.0

0%

27.0

0%

29.0

0%

46.0

0%

21.5

0%

28.0

0%

46.0

0%

48.0

0%

58.0

0%

x

38.0

0%

x x

23.5

0%

x x

30.5

0%

x x

Productmaterialsinnovation

Health careWagecosts/directlabor

Salarycosts

Taxefciency

Marketingand sales

Supplychainmanagement

Overheadcostreduction

Computermodeling

Low-costcountrysourcing

2009 2008 2007 X No data or 2008 X No data or 2007

154/Beyond crisis: challenges and opportunities 15The perormance angle

No easy cost savings expected

Falling expectations o both revenues and

proftability over the next fve years imply

a continued intense concern with cost-saving

opportunities. Yet in the current survey the

overall picture is that company expectations

o fnding cost-saving opportunities have

allen somewhat: in particular, there is less

expectation o fnding savings through

overhead cost-reduction and supply chain

innovation, and more interest inimplementing advanced IT in design.

There is a low expectation o fnding

savings through cutting wage costs

(the opportunity or making savings in

white-collar salaries is higher this years

survey is the frst in which companies

have been asked to distinguish between

wage and salary savings opportunities).

On a regional basis (results not shown

in chart) ASPAC companies are more

likely to view new design technologies as a

cost-saving opportunity. Companies in the

Americas are clearly more concerned thanother regions about salary costs and see

this as a cost opportunity, while European

companies continue to ocus more on

low-cost country sourcing.

* Percentage o companies seeingcost-saving opportunities by year

What are the cost-saving opportunities or auto manuacturers and suppliers?*

Cost ocus shits away rom restructuring

Increasing number o companies believe supply chains are ully optimized

Computer modelling rated sharply higher


18/44


24.6

7%

25.0

0%

43.4

8%

31.1

7%

29.0

0% 3

4.7

8%

68.8

3%

54.0

0%

65.2

1%

66.2

4%

60.0

0%

56.5

2%

51.0

0%

47.8

3%

62.3

4%

7.0

9%

18.1

9% 2

3.0

0%

48.0

5%

45.0

0%

52.1

7%

26.0

0%

17.3

9%2

2.0

8%

51.9

5%

47.0

0%

39.

13%

42.8

6%

33.0

0%

43.4

8%

Supplychainmanagement

HealthcareComputermodeling

Overheadcostreductions

Productmaterialsinnovations

Marketingand sales

Low costcountrysourcing

Wage costs/direct labor

Salary costsTaxefciency

OEMs Tier 1 suppliers Tier 2 suppliers



* Percentage o companies seeingcost-saving opportunities

What are the cost-saving opportunities or auto manuacturers and suppliers?*

OEMs see higher cost saving opportunities

Materials innovation, computer modeling and low-cost sourcing top opportunities or OEMs

Tier 2 suppliers most likely to cut labor costs

Wage and benets cost opportunities rated low by most companies


19/44

2010 KPMG International. KPMG International is a Swiss cooperative. Member rms o the KPMG network o independent rms are aliated with KPMG International.No member rm has any authority to obligate or bind KPMG International or any other member rm vis--vis third parties,

ority to obligate or bind any member rm. All rights reserved.


KPMG International provides no client services.

nor does KPMG International have any such auth


Capital costs to remain high

The sudden contraction in late 2008 in the

availability o capital or consumers and

companies, and the increase in borrowing

costs which remain high despite low policy

interest rates, have been key components

o the auto business crisis o the last year.

In the current survey, companies were

asked or the rst time how they expected

nancial conditions or consumers and

companies to evolve.

The chart shows company expectations

o improvement. They expect the

improvement to be less apparent in

corporate nancing than in consumer

nancing, and European companies are

most pessimistic about an early return

to easy nance.

31.67%

25.64%

30.65%

33.34%

14.10%

33.87%

25.00%

32.06%

37.10%

51.67%

34.62%

41.94%

Cost o capital Availability o capital Cost o consumer credit Availability oconsumer credit

How do you expect fnancial conditionsto evolve in the next 12 months?*

Companies expecting nancial improvement outnumber

those expecting decline

EMEA companies most pessimistic on corporate nancing

* Percentage o companiesexpecting improvement


20/44

2010 KPMG International. KPMG International is a Swiss cooperative. Member frms o the KPMG network o independent frms are afliated with KPMG International.KPMG International provides no client services. No member frm has any authority to obligate or bind KPMG International or any other member frm vis- -vis third parties,


72.0

0%

71.0

0%

52.0

0%

60.0

0%

73.0

0%

65.0

0%

51.0

0%

x

43.0

0%

70.5

0%

56.0

0%

52.0

0%

48.5

0%

47

.00%

73.5

0%

Automakers Tier 1 suppliers Tier 2 suppliers Tier 3 suppliers Dealers

2009 2008 2007 X No data or 2007


M&A set to grow

Perceptions o a continued high level o M&A is also expected in growth markets

overcapacity in the ace o a diminished as well as in stagnant markets: companies

consumer market imply continuing merger believe that the rate o M&A will not only

and acquisition activity. The results in the be high in the Americas and Europe, but

current survey show that expectations or also in Eastern Europe and in Asia.

M&A have risen, marginally, rom an Companies appear to be telling us that

already high level in the preceding year M&A may be driven by high growth as

although interestingly the one exception to well as by overcapacity in the mature

that rising expectation is in the dealer economies. Expectations or Japan are

business, where ater a year o closure lower, but still highly signifcant givenand rationalization companies now see the historically low rate o M&A activity

M&A alling back. in Japan.

How will M&A in these types o companies developover the next fve years?*

Expectations o OEM M&A growth stay

at last years high levels

Increasing expectation o M&A growth

or Tier 2 and Tier 3 suppliers

Only dealer M&A set to all back

* Percentage o companiesexpecting increase


21/44


59.00%

30.50%

8.50%

8.00%

57.00%

30.00%

25.50%

60.00%

7.00%

7.00%

28.00%

64.00%

35.00%

55.00%

6.50%5.00%

30.50%

62.00%

64.50%

28.00%

5.50%

Asia

(exclu

dingJap

an)

Cent

ral&

Sou

thAm

erica

Easte

rnEur

ope&

Rus

sia

Wes

tern

Europ

e

Midd

leEa

st&

Africa

Japa

nNo

rthAm

erica

Increase Stay the same Decline



How will M&A in these regions develop over the next fve years?

High expectations o Eastern European and Asian M&A

Less than one in ten companies expect M&A to decline anywhere



22/44


82.00% 83.00%

95.00%

54.50%

74.00%

67.00%

47.00%

53.00%

65.00%

30.00%

33.00%

55.00%

83.00%85.00%

75.00%

89.00%

73.00%

55.00%

80.00%

84.00%

x

Access to newmarkets andcustomers

Access to newtechnologies andproducts

Debt and risk obankruptcy

Raw materials andcost pressures

Labor costpressures

Pension andhealth costpressures

Potential orproduct synergies

2009 2008 2007 X No data or 2007



Debt and technology needs will drive M&A

Companies believe that a rising rate o

M&A will be driven partly by crisis actors,

and partly by the long-term imperative o

nding and developing new technology

solutions or a changing market (the

continued high stress that companies

place upon new technology development

is explored urther in chapter 6 o

this survey). So both debt and new

technologies rise in companies ratings

o the drivers o M&A, while access to

raw materials is seen as less important

against a background o alling raw material

prices during 2009. Pension and labor

costs all urther rom an already low

position in companies ratings o

M&A drivers.

What will drive M&A over the next fve years?

Indebtedness now seen as top driver o M&A

All cost pressures now seen as less signicant


23/44

2010 KPMG International. KPMG International is a Swiss cooperative. Member rms o the KPMG network o independent rms are aliated with KPMG International.member rm has any authority to obligate or bind KPMG International or any other member rm vis--vis third parties,

ity to obligate or bind any member rm. All rights reserved.

Access to newtechnologies

Access to newmarkets

Raw materialscost pressure

Product synergies


KPMG International provides no client services. No

nor does KPMG International have any such author


90.00%88.46%

72.58%

95.00%

83.33%

67.74%

51.67%

47.44%

66.13%

83.33%

87.18%

77.42%

* The our largest regionaldisparities shown

What will drive M&A over the next fve years roma regional perspective?*

Americas and EMEA level o global consensus

on M&A drivers is high

Americas companies more concerned with market access

ASPAC more concerned with raw materials cost pressure


24/44




When asked about their long-range Cost reduction has moved slightly lower But there are dierences ASPAC

priorities, automotive companies have while environmental concerns continue companies are markedly more concerned

consistently told KPMGs Global Auto to rise higher on the corporate agenda. than others with managing labor, and

Executive Survey that their highest-ranking Managing labor relations remains a low markedly more concerned with product

concerns are with new technology and new priority. quality (the proportion o ASPAC

products. That remained the case in the companies rating it very important

current survey: both new products and new Regional results show very similar as against moderately important is

technologies have moved higher in the patterns, suggesting as in earlier surveys high). ASPAC companies are also more

ranking o concerns rom an already high that the broad shape o priorities remains concerned with pricing, while companies

leading position in last years survey. the same in all regions o the world: auto in the Americas and in Europe preer tocompanies tend to take a global view. prioritize total aordability.

Chapter 6: Product innovation and consumer change

81.0

0%

79.0

0%8

4.5

0%

85.0

0%

82.0

0%

83.0

0%

80.5

0%

85.0

0%

86.0

0%

63.0

0%

64.0

0%

72.0

0%

65.0

0%

62.0

0%

90.0

0% 9

6.0

0%

x

64.0

0%

72.0

0%

49.50%

49.50%

59.0

0%

74.5

0%

69.0

0%

Developingnew products

Developing newtechnologies

Reducingcosts

Meetingenvironmentaldemands

Pricing andsales incentives

Improvingproduct quality

Improving totalaffordability

Managing laborrelations

* Percentage o companies rating

issues as important

How important today are the following issues to the global auto industry?*

Companies are shiting ocus rom quality improvement to new products

Total aordability and pricing seen as less important than innovation

2009 2008 2007 X No data or 2007


25/44

2010 KPMG International. KPMG International is a Swiss cooperative. Member rms o the KPMG network o independent rms are aliated with KPMG International.member rm has any authority to obligate or bind KPMG International or any other member rm vis--vis third parties,

Extremely Somewhat

EMEA

Americas

ASPA

CEM

EA

Americas

ASPA

C

EMEA

Americas

ASPA

C

EMEA

America

s

ASPA

C

28.33%

15.00%

26.92%

10.26%

30.65%

25.81%

45.00%

28.33%

39.74%

24.36%

43.55%

11.29%

26.67%

30.00%

33.33%

32.05%

38.71%

30.65%

36.67%

28.33%

30.77%

17.95%

32.26%

43.55%

Managing laborrelations

Improving totalaordability

Pricing and salesincentives

Improving productquality

KPMG International provides no client services. No


23Product innovation and consumer change

* The our largest regionaldisparities shown

How important today are the ollowingissues to the global auto industry?*

Asian companies least concerned with total aordability,

most concerned with quality

EMEA companies give low rating to quality improvement

Aordability a leading issue or companies in the Americas


26/44




Fuel efciency and environment top o consumer concerns

In qualitative interviews which accompanied In the current survey uel efciency and the inclined to rate consumer preerences as

the preparation o the current survey, environmental profle o products continue very important than are companies in

companies repeatedly stated that they to be considered by companies the most other regions. The relatively low priority

believe that adaptation to changing signifcant consumer buying issues. But ascribed to telematics is consistent with

consumer demand will be an important on a regional basis it is clear that consumer results last year globally, telematics

key to survival in the coming fve years. concerns are believed to dier: the high received the highest number o not

The survey questions on drivers o rating accorded to saety is due to ASPAC important scores. Overall, the efciency

consumer buying give an insight into companies citing this issue and on o vehicles is believed to dominate

just how companies will do that. all issues ASPAC companies are more consumer concerns.

50.00%

72.00%70.00%

75.00%

84.00%

96.00%

80.50%

71.00%

93.50%

Fuel efciency Environmentalriendliness

Saety innovation

* Percentage o companies rating issues as

important (the top three issues shown)

How important are these product issues to consumerpurchase decisions over the next fve years?*

Fuel efciency top concern over last three years

Companies think consumer concerns on

environment continue to rise

2009 2008 2007


27/44


58.9

8%

67.7

5%

56.6

7%

70.0

0%

65.3

9%

79.0

3%

76.6

7%

80.7

7%

83.8

7%

50.0

0%

44.8

7%

74.1

9%

95.0

0%

92.3

1%

93.5

5%

45.0

0%

35.9

0%

50.0

0%

40.0

0%

33.3

3%

56.4

5%

Saety innovation Vehicle stylingTelematics/personal assistanceservices

Enhanced vehicleliespan

Fuel efciencyErgonomicsand comort

Environmentalriendliness




* Percentage o companies ratingissues as important

How important are these product issues to consumer purchase decisions over the next fve years?*

Asian companies now rate styling, comort and saety signicantly higher than others

Asian companies also most likely to rate environment as top consumer concern

Fuel eciency or all regions most important


28/44



Chi

nese

brand

s

5.00%

13.00%

78.50%

Hyu

ndai/Kia

10.50%

13.00%

73.50%

Indian

brand

s

9.50%

14.50%

72.50%

Toyo

ta

11.00%

30.50%

57.00%

Fiat

25.00%

32.50%

40.50%

Renault

/Niss

an

15.00%

49.00%

34.50%

BMW

11.50%

56.50%

30.50%

Ford

26.00%

44.00%

29.00%

Mercedes

15.00%

57.00%

26.50%

Russianbrands

35.00%

38.00%

20.50%

Peugeot/Citroen

27.50%

53.50%

17.50%

Subaru/Fuji

31.50%

45.50%

16.00%

Mitsubishi

42.50%

37.50%

16.00%

GeneralMotors

68.00%

17.50%

13.00%

Chrysler

72.50%

18.00%

7.50%

Honda

10.00%

51.50%

36.50%

Volkswagen

6.50%

22.50%

70.00%

Increase Stay the same Decrease


Low-cost producers to win most market share

Company expectations o market

share gain and loss have changed in

signicant ways. Chinese and Indian

brands remain in the top three places in

terms o expectation o market share

gain, but conviction is slightly lower

than in last years survey. Both Toyota

and Honda are expected to win market

share at a lower rate than in previous

years, and there has been a all inexpectation or Russian brands. Overall

we note that the top six rated companies

have either very strong cost or product

advantages, or both.

Two signicant winners emerge

in year-on-year comparisons:

Hyundai/Kia is one a result that may

refect the success o Korean automakers

in proting rom government sales

subsidies during 2009 and VW is the

second. Market share gain expectations

or the big three US makers remain low

and Chrysler has allen urther, although

Fiat, now the key actor in Chryslersimmediate uture, is rated higher in terms

o market share prospects than in the

previous year.

Both Mercedes and BMW are also seen

as better placed to win market share, both

companies having deed expectations o

a collapse o premium vehicle sales.

How will market share by company change in the next fve years?

Low cost makers in top three places

Toyota and Honda all in ratings or rst time in three years

VW seen as strongest European OEM, Ford as strongest US OEM


29/44


8.33%

AmericasBest Worst

EMEABest Worst

ASPACBest Worst

Increase Stay the same Decrease


Expectations o the perormance o sales

by vehicle type show a remarkable degree

o consensus: companies in all three

global regions cite exactly the same three

vehicle types as top perormers (hybrids,

other alternative uel vehicles and low-cost

introduction cars). Expectations o declining

sales perormance are perhaps not

surprisingly ocused on larger and more

inecient vehicles, although it is notablethat companies in the Americas do not cite

luxury vehicles in their bottom three.

Hyb

ridfuelveh

icle

s

Oth

eralte

rnativ

efu

elvehicle

s

Low

-costi

ntrod

uctio

ncars

91.94%

4.84%

3.23%1.61%

17.74%

79.03% 80.65%

14.52%

3.23%

Luxu

ryvehicles

Smallp

icku

ps

Largepick

ups

32.26% 32.26% 24.19%

27.42%

48.39%

SUVs

Luxu

ryveh

icles

Larg

epi

ckups

62.82%

12.82%

24.36%

30.77%

44.87%

35.90%60.00%

19. 23% 19. 23%

Hybr

idfu

elveh

icles

Oth

eralte

rnativefu

elveh

icles

Low

-cos

tintrod

uctio

nca

rs

7.69%

91.03%

1.28% 1.28%

16.67%

82.05%

5.13%

12.82%

80.77%

SUVs

Min

ivans

Larg

epi

ckups

23.33%

68.33% 60. 00%

23.33%

16.67%16.75%

38.33%

45.00%

Hybr

idfu

elveh

icles

Oth

eralte

rnativefu

elveh

icles

Low

-cos

tintrod

uctio

nca

rs

95.00%

88.33%

10.00%

1.67%3.33%

10.00%

85.00%

5.00%

22.58%

29.03%

37.10%45.16%

* Regional best and worst perormers

How will sales by vehicle type change in the next fve years?*

Hybrids, alternative uel and low cost vehicles lead in all regions

Inecient vehicles to lose most sales



30/44



63.3

4%

61.5

4%

64.5

2%

68.3

4%

67.9

5%

67.7

4%

41.6

6%

20.5

1%

40.3

3% 4

6.6

7%

34.6

2%

46.7

8%

20.0

0%

34.6

1%

61.2

9%

85.0

0%

85.9

0%

82.2

6%

23.0

7%

41.9

4%

18.3

4%

Fuel-cell electricpower

Battery electricpower

Ethanol Biodiesel LPG/LNG Hybrid uelsystems

Solar power



Hybrid technology rated clear leader

The primary importance that companies

ascribe to vehicle eciency and the

urther development o alternative

propulsion technologies is already

apparent rom earlier questions in the

current survey, as well as rom the

growing emphasis on these developments

in year-on-year responses despite

relatively low sales (see next page).

Electric power ranks only just behindhybrid power developments in the current

survey responses, and battery and

uel-cell approaches are ascribed almost

equal priority. Regional views o other

alternatives are clearly infuenced by

regional issues, particularly the extent o

installed uel inrastructure; accordingly,

ethanol is rated low priority by EMEA

companies, while LPG is considered

considerably less important in the

Americas than elsewhere.

*Percentage o companies ratingtechnologies as important

How important are these alternative uel technologies over the next fve years?*

Strong global consensus on importance o hybrids and electric technologies

ASPAC companies rate solar power much higher than other regions


31/44



1.5 million Dont know

2.5 million Dont know

1.28%

6.67%

10.00%

13.33%

55.00%

11.50%

7.69%

7.69%

39.74%

17.95%

25.64%

16.13%

1.61%

38.71%

24.19%

19.35%

Americas EMEA ASPAC

37.10%

1.61%

19.34%

17.74%

24.19%1.67%10.00%

43.33%

28.33%

16.67%

10.26%

8.97%

38.46%

12.82%

29.49%

Americas EMEA ASPAC

*2008 sales approximately 780,000

How many hybrid vehicles will be sold in 2010?*

*2008 sales approximately 1.5 million

How many alternative uel vehicles (not including hybrids) will be sold in 2010?*


. .

.

, ,

. . .


32/44



Executive view: large Tier 1 supplier US

This large US supplier believes thatthe industry has made progressin 2009, but that more needs tobe done.

I am a little bit more optimistic than I was a

year ago, but there are a lot o uncertainties.

The US is only going to sell around 10 million

cars this year. Whether the recovery weve

seen during the second hal o the year

is sustainable in 2010 is uncertain:

the economy has not bottomed yet, and

unemployment is still rising. Elsewhere,

China is still growing, although that bubblemay burst. India still has huge potential,

although whether consumers have the

money to buy cars in volume we dont yet

know. And Europe I think may have a more

dicult time next year than this, once the

ending o the government incentive

schemes hits home. But South America

will grow, and especially Brazil will grow.

My sense is that in the US people still do

not understand how things are changing.

The automakers are very busy developing

smaller cars, but whether they are goingto sell them to the US consumer is another

matter: the mindset is not there, not yet.

We are working with a number o

companies on electric cars, hybrid-cars

and super-economical vehicles. I think the

pure electric car as a mass-market product

is ten years away at least. For now, plug-in

hybrids have more potential. But in both

cases the economics o the vehicles are

unavorable. For example, we are working

on a small electric vehicle, but it will still

have to cost around $40,000 thats an

expensive car. Even with hybrids, i youdo the math then they dont really make

sense. People dont buy them or economic

reasons, because as things stand you will

never get your money back in uel savings.

It is hard to see that as a mass market

proposition.

Overall the industry still needs to cut

capacity. It is much easier to cut capacity

in the US than it is in Europe, and that is

one reason why the big three have all cut

capacity in the US. That is something they

still have to do in Europe. The carmakers

will all need to continue moving European

production to the East to cut costs, and

they will need to cut their production in

Western Europe because there just wontbe the sales or those plants.

I think the biggest winner over the last

year has been General Motors. And it has

a pretty good model line-up now. As or

the others, Ford has had to borrow money

and that has damaged their nances.

Chrysler still has to be turned around, and

its an open question whether Fiat can

achieve that. I think European makers will

suer unless they can nd more ways to

cut costs. Even Toyota has seen a all in

US market share or the rst time. Almosteveryone has suered in some way.

For the US the question is all about demand.

The potential or selling 16 or 17 million

cars a year is there the demographics

are there. The only question is, will people

have the money to buy those cars? I dont

know the answer to that.



33/44


25.97%

85.71%

93.51%

55.84%

45.00%

93.00% 93.00%

49.00%

53.00%

44.16%

New plants New models/products

Newtechnologies

Marketing andadvertising

Logistics/distribution

2009 2008




R&D will win most investment

When companies were asked where they

would direct investment capital, while new

technology and new model development

remained top priorities, companies also

said they would spend more on marketing

but less on logistics and much less on

new plants. The pattern o investment

intentions or suppliers remains the same

as in last years survey, but or suppliers

too the reduction in expectation o newplant building is striking. Tier 2 suppliers

are expected to show a higher propensity

to invest, refecting the concern o many

Tier 2 suppliers (supported by the results

on protability earlier in this survey) that

they need to invest to raise protability.

The responses on dealer investment

represent the views o manuacturers on

dealer businesses (dealers themselves

were not participants in the survey).

Companies believed that ASPAC dealerswill have a higher propensity to invest,

and believed that domestic and cross-

border dealer expansion will be muted,

especially in the Americas and in EMEA.

We also note companies expectation o

signicant IT and training investment in

the dealer industry; this reinorces results

rom KPMGs study o the global dealer

industry published in early 2009, which

ound that dealers themselves believe

that the industry suers rom an IT and

training decit.

* Positive responses rommanuacturers only

Do you expect manuacturers to increase their investmentover the next two years?*

Investment growth expectations o OEMs all slightly

year-on-year

Expectations o investment growth in innovation

remain high


34/44


59.00%

93.00%93.00%

57.00%

88.00%91.00%

62.00%

59.00%

70.00%

64.00%

30.43%

95.65%100.00%

89.00% 91.00%

82.61%

64.00%

47.83%

44.00%

32.00%

Tier

2supplie

r

Tier

1supplie

r

Tier

2supplie

r

Tier

1supplie

r

Tier

2supplie

r

Tier

1supplie

r

Tier

2supplie

r

Tier

1supplie

r

Tier

2supplie

r

Tier

1supplie

r

Tier

2supplie

r

Tier

1supplie

r

Tier

2supplie

r

Tier

1supplie

r

Tier

2supplie

r

Tier

1supplie

r

Tier

2supplie

r

Tier

1supplie

r

Tier

2supplie

r

Tier

1supplie

r

New plants New models/products

Newtechnologies

Marketing andadvertising

Logistics/distribution

2009 2008



* Positive responses rom suppliers only. 2008 results includesome responses rom Tier 3 suppliers

Do you expect suppliers to increase their investment over the next two years?*

Supplier expectations o innovation investment have grown

Investment growth in new plants to all by almost hal

Tier 2 suppliers expect to increase investments in marketing and advertising


35/44



Americas

America

s

31.67%

66.67%

60.00%

38.33%

EMEA EM

EA

38.46%

53.85%

35.90%

51.28%

47.44%

46.15%

ASPA

CASPA

C

Americas

EMEA

ASPA

CAm

erica

s

EMEA

ASPA

C

43.55%

46.77%

72.58%

22.58%

77.42%

25.00%

Domestic expansionand acquisitions

Cross-border expansionand acquisitions

IT systems andcommunication

HR training

Yes


* Results rom manuacturers and suppliers

Do you expect dealers to increase their investment over the next two years?*

ASPAC companies see HR decit as signicant dealer issue

All regions expect dealers to improve IT


36/44

2010 KPMG International. KPMG International is a Swiss cooperative G International.. Member rms o the KPMG network o independent rms are aliated with KPMy authority to obligate or bind KPMG International or any other member rm vis- -v

6.50%

3.00%

10.00%

1.00%

73.50%

2.50%2.50%

1.00%

North America (US & Canada)

Western Europe

Japan

Eastern Europe and Russia

Asia (excluding Japan)

Central & South America

Middle East & Arica

Dont know

Over the next fve years whichregion o the world or country doyou think will build the mostmanuacturing capacity?

KPMG International provides no client services. No member rm has an is third parties,



Chapter 7: Investing in new markets

Companies are nearly unanimous in

expecting emerging markets to build most

automotive capacity and to provide the

most growth in automotive revenues. The

majority o companies say they intend to

increase their investments in the BRICs

(Brazil, Russia, India and China).

O companies with existing investments in

the BRICs, most say they will increase thevalue o those investments (the number o

companies with existing investments that

say they have no plans to change their level

o investment is negligible). Those results

refect companies revenue expectations:

the strongest expectations are or revenues

rom China although a very small minority

o companies envisage revenue decline in

China. In India many more companies see

moderate growth than see strong growth,

although no companies at all envisage

revenue alls. Moderate rather than strong

growth is also the majority expectation or

Brazil. Russia is the outlier while morethan hal o all investors have expectations

o moderate or strong growth, a signicant

minority now anticipate a all in revenues

over ve years.


37/44


Strong improvement Moderate improvement

Neutral/stable Moderate decline

Dont know

Rus

sia

Brazil

India

Chi

na

2.38%

15.48%

41.67%

25.00%

15.48%

3.41%1.14%

53.41%

29.55%

12.50%

29.81%

53.85%

16.35%

2.82%

42.25%

46.48%

7.75%

0.70%



35Investing in new markets

0.50%

2.00%

Rus

sia

Chi

na

India

Brazil

58.50%

26.00%

43.00%

35.00%

2.00%

Increase Decrease

Do you plan to increase ordecrease your investmentin the BRICs?

Existing BRIC investors will increase

exposure

Reduction o investment negligible

What are your revenue orecasts or theBRICs?

India and China seen as biggest growth markets

Signicant minority see Russian decline


38/44



Executive view: diversied supplier emerging market

This India-ocused supplier, parto a group with sales o over hala billion US dollars and over 6,000employees, says that automotivedemand in emerging markets isset to grow at breakneck speed.

I am almost 100 percent more condent

than I was at this time last year, and I am

especially condent about the Indian market.

The crisis certainly had a very negative

eect on many o our customers. We saw

the worst eects in the commercial

vehicle market. Vehicle usage was down,

demand or new vehicles was down, and

it was very dicult or companies tonance new purchases. Private passenger

car demand held up better: personal

nances were more resilient than

company nances.

We have cut output, but we did that by

reducing stang, a cut o somewhere

between 20-30 percent. We have not

closed any acilities. And in the last

quarter o 2009 we stopped cutting

manpower. It is quite likely that by the end

o the rst quarter o 2010 all those job

cuts will be reversed.

We have also cut costs by reducing the

number o processes we outsource,

things like powder coating and machining.

Our strategy has been to increase the

amount o value we add in-house.

As we go into 2010 I can see a lot o M&A

opportunities. Many companies outside

o Asia are not in good shape, and we may

be able to buy them cheaply. The limiting

actor is nancing: banks have cut lending,

and we will have to rely on internal sources

o capital.

We would look or market share and or

technology. In commercial vehicles, orexample, we have the market share, but

we are concerned that we dont have

uture technology. For passenger cars

we need market share.

For the next ve years our biggest

challenges are going to be dealing with

a growing market. We have two or three

main competitors in India, and we need

to maintain market share as the market

grows. A key will be winning business

rom the worlds main OEMs as they

invest more in India.



39/44




BRIC sales orecasts continue to grow

In previous editions o this survey,

companies were asked to give specifc

orecasts o domestic unit sales growth

ranges and export sales in China in fve

years time: the current survey extended

these questions to all o the BRIC markets.

Expectations or both domestic and export

Chinese sales have increased. There has

been an increase in expectation or the higherranges o domestic sales to be achieved by

2014, except in the extreme high range o

18 million plus: we believe this indicates both

a growth in optimism on and knowledge o

the Chinese market on the part o companies.

The proportion o companies expecting

export sales to pass one million within fve

years has also increased dramatically..

71.10%

28.90%

82.00%

18.00%

2009 2008

42.25%

10.56%

1.41%

20.42%

13.38%

9.15%

30.00%

10.00% 10.00%

20.00%

10.00%

20.00%

18 million16-18 million14-16 million12-14 mill ion10-12 million

*2008 sales approximately 9.4 million cars and commercial vehicles

What do you estimate will be the annual volume o unit sales in China by 2014?*

2009 2008

When will China sell a signifcant number (1 million+ a year)o cars in other markets?

Expectations o Chinese exports improve ater alling last year

Within 5 years Beyond 5 years


40/44



9.09%

36.36%

47.73%

4.55%

25.96%

11.54%

47.12%

15.38%

3-4 million 4-5 million

5-6 million >6 million2-3 million 3-4 million

4-5 million >5 million

*2008 sales approximately 3.2 million cars and commercial vehicles*2008 sales approximately 2.3 million cars and commercial vehicles

What do you estimate will be the annualvolume o unit sales in India in 2014?*

What do you estimate will be the annualvolume o unit sales in Brazil in 2014?*


The consensus views o companies on

sales in Brazil, India and Russia are also

strikingly strong. Expectations o sales

volumes in India are equivalent to a

consensus that growth o 17 percent will

be achieved annually. The consensus is or

growth o around 30 percent over ve

years in Brazil, and o around 40 percent

over ve years in Russia (although it should

be noted that a signicant minority thinkRussian sales will be fat or even all).

It should also be noted that investment

intentions noted elsewhere in this

survey or India in particular do not seem

commensurate with sales expectations,

suggesting that companies may be

expecting to sell in India a signicant

proportion o vehicles manuactured

elsewhere.


41/44




42.86%

7.14%

32.14%

15.47%

2-3 million 3-4 million

4-5 million >5 millionWithin 5 years Beyond 5 years

India

47.12%

52.88%

Brazil

54.55%

45.45%

Russia

63.10%

36.90%

*2008 sales approximately 2.8 million cars and commercial vehicles

What do you estimate will be the annualvolume o unit sales in Russia in 2014?*

When will Brazil, Russia and Indiasell a signifcant number (1 million +a year) o cars in other markets?

Expectations or the achievement o

export sales o over one million rank in

order India, Brazil and Russia. Over 50

percent o companies think that level will

be achieved by India within fve years, and

over 45 percent o companies think it will

be achieved by Brazil within the fve-year

horizon. However companies do not

believe that Russia is in that league:

almost two thirds o companies believe

Russia will not sell more than one million

cars outside its borders within fve years.


42/44



Eastern Europe including Ukraine Central and South America including Mexico Middle East including North Arica

Arica excluding North Arica Southeast Asia

35.00%

23.33%

6.67%

35.00%

39.74%

41.03%

10.26%

6.41%

22.58%

global auto executive survey 2010

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