China is seen as a global leader in electric mobility by the auto industry. Managers in the auto industry foresee China becoming the largest producer of all-electric vehicles in the near future. In contrast, car production in Western Europe is declining; less than 5% of cars are expected to be produced here by 2030.
This is according to the Global Automotive Executive Survey 2019 by accounting and consulting firm KPMG. Over 1,000 managers in the automotive industry and nearly 2,000 consumers were surveyed for the study. China is experiencing high demand for electric cars due to a combination of a rapidly growing middle class, environmental pollution and strong subsidies from the Chinese government. KPMG points out that China's pioneering role makes other countries increasingly dependent on its knowledge and expertise in electric mobility.
"China is currently one of the three largest producers of battery components," says Loek Kramer, partner at KPMG and segment leader Automotive. "This is another reason why the country wants to be at the forefront of developing technology for all-electric cars."
Availability of raw materials
Both managers and consumers expect the availability of raw materials in a country to determine the powertrain technology that countries embrace. For example, 70% of respondents foresee that countries with abundant crude resources such as oil and gas such as the United States will continue to focus on traditional internal combustion engines for longer than countries that lack them.
At the same time, this means that countries with abundant resources for developing electric examples are actually more likely to focus on electric drives. China is a case in point. Chinese managers surveyed expect about 35% of vehicles in the Asian country to be fully electric by 2040.
KPMG predicts that different types of powertrains will be in use worldwide by 2040. Kramer: "And the distribution is fairly even. Battery-powered electric cars (BEVs) account for about 30%, hybrid vehicles 25%, fuel cell vehicles 23% and internal combustion engine cars also 23%. A single international standard is therefore not on the cards in the coming years. In this respect, the world is divided, divisions that are mainly driven by the national regulator and the industrial policies pursued by each country."
'Governments set the agenda for OEMs'
The agenda of OEMs is largely driven by governments, according to 77% of managers. Herein lies a danger for Western Europe. For instance, KPMG warns that government policies towards the automotive industry are significantly better developed in Asia and the United States than in Europe. This is expected to affect car production in Western Europe. Two-thirds of managers predict that less than 5% of cars worldwide will be produced in Western Europe by 2030. This percentage is currently around 15%.
For the Western European market, KPMG sees opportunities mainly in Internet of Things technology and automation. In these areas, Western Europe can continue to play a global role, while in the field of in-vehicle connectivity, significant investments are in the pipeline.
Automotive industry goes through restructuring phase
Vehicles are increasingly equipped with software and IT components. As a result, car manufacturers are increasingly turning into ICT companies. At the same time, companies are under pressure from a combination of increasing complexity of both hardware and software, the need to develop new business models and regional shifts. KPMG predicts that car manufacturers' profitability will decline as a result.
Managers were also asked about the future of car dealerships. Almost 50% of managers expect the number of physical dealers to decrease by 30-50%. Almost 8 in 10 say that companies will have to transform into service locations, used-vehicle hubs or focus on ID management. An equally large group calls the retail landscape largely product-driven. 92% of managers expect aftermarket to become part of the OEM business.
Consumers are reluctant
Virtually every car manufacturer today is developing all-electric models. However, the majority of consumers appear to be reluctant to purchase an all-electric car for the time being. The preference is currently for hybrid vehicles, although cars with an internal combustion engine are also still high on the wish list.
In particular, the price of electric vehicles, having to recharge the battery and range are seen as the main obstacles. For instance, one in three consumers indicate that price is the main reason for not buying an electric car. Also, according to consumers surveyed, the infrastructure for electric cars is far from optimal.
Cooperation instead of competition
Managers are aware of the need for cooperation within the auto industry and the fact that "no company can stand on its own", KPMG concludes. Thus, 65% of managers say they believe in cooperation rather than competition. Chinese managers lead the way here; among this group, 84% share this view.
Kramer: "Transportation of people and goods will further converge in the future. Mobility and logistics will come together in one ecosystem. In that system, the distinction between urban mobility, metropolitan mobility and out-of-town mobility will become increasingly important. There is no single solution. Companies that are able to deliver customised solutions in these different areas combined with the necessary technology and infrastructure, such as 5G, a sufficiently dense charging station network, an adapted traffic infrastructure, are going to lead the way in the future."
Autonomous driving
The report also touts autonomous driving. 71% of managers surveyed expect that in practice, human drivers and autonomous vehicles will not be able to make good joint use of the road. One solution that KPMG suggests on is to create separate lanes for autonomous and electric vehicles, where charging equipment can be integrated into the lanes. At the same time, according to the consultancy, it is necessary to establish clear rules of behaviour to manage traffic flows.
Author: Wouter Hoeffnagel
Source: KPMG
Source photo: Pixabay / ssarwas0
