The cautious optimism that were evident among automotive decision makers during a 2008 global survey has now been replaced with concerns over lower profits and more bankruptcies, global audit, tax, and advisory firm KPMG said on Friday.

KPMG, which released the 2009 Global Auto Executive Survey, said firms were expecting a long cycle of restructuring, more overcapacity emerging, and believed that investment in the automotive sector would be low.

Speaking in Johannesburg, KPMG Africa automotive practice chairperson Gavin Maile said that South Africa was not exempt from these expectations, as the country was firmly integrated into the global market place.

During 2008, vehicle sales declined by 21%, after a 5% decline in 2007 and automotive exports increased by 66%. South Africa’s domestic production grew by an estimated 5%.

However, the 2009 Global Automotive survey was done during September and October of 2008, and Maile said that the automotive sector had significantly changed since then. In fact, when monthly export sales for 2009 were compared with the figures of 2008, January saw a 7% decrease in sales, while February was down a staggering 27% month-on-month.

“Year to date, we are about 20% down on export, and the forecast is not any better than that. We have a situation where a lot of our export markets are cutting back.”

Export sales and domestic sales were down in most countries, however, Maile said that India seemed to be bucking the trend. “India is going to be one of the biggest growth areas for exporting vehicles to the rest of the world.”

The country saw a 29% increase in vehicle sales the first part of 2009, with a year-on-year drop of only 7%. Maile noted that it was likely that within five year’s time, about 54% of Indian-manufactured vehicles would be exported.

SURVEY RESULTS

The KPMG survey was based on interviews with 200 senior executives at vehicle manufacturers and suppliers worldwide. It was also the fist time in the eight years that South Africa has reported on the survey, that the country had been directly involved in the survey.

Maile stated that the survey was broken into four sections to include the automotive crisis, new markets, technology innovation, and the challenges and opportunities. Within the automotive crisis sector, the most important issues identified were the global economy and reducing price costs.

Product pricing and affordability also ranked high on the list of concerns to deal with during the automotive crisis. “Although there has been a big move towards those in the global survey, they don’t get the same sort of concern as they attract locally. That is very important, because it is one of the issues, in terms of affordability, that needs to be addressed in South Africa.”

The area likely to receive the most investment in the automotive industry during the period to come was the research and development of new technologies. Maile noted that marketing and advertising, as well as logistics and distribution were likely to take a backseat while companies were struggling. The investment into technology innovation would be aimed at future cost savings, and doing business in a more innovative way.

Biofuels and hydrogen were also estimated to have the largest impact on alternative fuels going forward, and Maile noted that this was an area in which South Africa could possibly benefit, as the country had the right climate for biofuels production. “After the crisis, all the opportunities will be in fuel efficiencies and in affordability.”

Of the global survey, 96% of participants responded that fuel efficiency would be a top factor driving consumer purchase decisions, while 83% reported that affordability would have an impact.

Manufacturing fuel-efficient cars was the leading trend cited by executives, while switching to alternative fuel vehicles and production of environmental friendly cars, rounded out the top three trends.

“This demonstrates that the manufacturers are recognising the need towards more environmental friendly cars and fuels as the world struggles with the impact of climate change. The global reliance on oil and the recent high prices of oil have pushed the industry towards alternative, greener sources of propulsion.”

KPMG noted that the automotive industry was clearly facing an unprecedented crisis, which companies fully expected to reshape the industry. However, even amid the crisis conditions, the long-term concerns of automotive companies remained strikingly stable, and included the development and leveraging of technology in a gradual, but inexorable shift away from oil dependence.

The report stated that one of the lessons of the 2009 survey was that companies that managed that shift successfully were likely to be the industry leaders in the future.