The automotive sector is feeling the pressure from the strict regulatory standards being enforced globally, as well as increasingly tech-savvy consumers who not only expect, but demand, innovative services, says professional services firm KPMG in its ‘Global Automotive Executive Survey 2015’ report.

This is creating a completely new mobility culture, according to the survey, which also reveals that increasingly strict regulatory standards demand that manufacturers focus on the optimisation of traditional powertrain technologies and make significant investments into alternative drivetrains.

“However, purchase decisions are not yet driven by innovative concepts and online services and, therefore, connectivity and mobility services are considered a lower priority,” says KPMG automotive sector head Gavin Maile.

The survey reports that short-term market issues in South Africa are still being prioritised over strategic innovations. Maile explains that short-term market issues include the country’s low gross domestic product growth; economic uncertainty; low consumer confidence and high indebtedness; affordability issues owing to the exchange rate; vehicle prices increasing faster than previously; expected inflation increases and massive increases in running costs linked with the fuel price; as well as e-tolls.

Meanwhile, Maile notes that the top three trends in the global automotive industry have not only remained the same, but have increased in importance over the past three years. These trends include market growth in emerging markets, downsizing and optimising of internal combustion engines, and the increasing use of platforms and standardisation of modules.

indicates that, in the next five years, consumers will buy vehicles based on traditional product issues. For example, in the last two years, the industry has seen fuel efficiency as the most important consumer consideration when buying a car, followed by enhanced vehicle life span, safety innovation and comfort.

“Interestingly, the recent decline in global fuel prices occurred after the actual survey interviews and, therefore, the positive impact is not considered in these results,” notes Maile, adding, however, that he does not believe the current decline in global fuel prices will affect consumer buying preferences in the future.

“Vehicle exports have been a positive influence in the South African market and greatly helped to improve the country’s balance of payments. “However, this depends on the con- tinued recovery of export markets, which appear to be under pressure once again,” he notes.

Innovative Services
KPMG’s survey also reveals that innovations in technology-enabled connectivity between the driver, the car and its environment rank in the bottom four of ten vehicle features that respondents thought consumers would desire between now and 2020.

This includes plug-in solutions for navigation, speech recognition and mobile Internet devices; vehicle-bound Internet connectivity; built-in technologies such as navigation, speech recognition, telematics and personal assistance services; and alternative fuel technologies such as fuel cell electric power, biofuels and solar power.

“Further, over half of the survey respondents thought it somewhat unlikely, or not at all likely, that a major disruption to existing business models would occur in the next five years owing to competition between technology companies,” explains Maile.

Meanwhile, the survey reveals that original-equipment manufacturers (OEMs) believe they will matter the most in ten years’ time. KPMG’s view, however, is that future business models should consider aspects of the customers’ lives beyond their role as driver, such as connectivity and entertainment.

The survey respondents believe that, to survive, most globally established OEMs will remain independent instead of partnering with other companies. However, according to the survey, emerging market OEMs were more likely to favour stronger alliances to achieve the critical mass necessary to compete effectively with big players.

Alternative Drivetrains
Maile mentions that, in terms of the alternative powertrains automotive executives would be investing in, fuel cell technology this year moved ahead of battery-electrified vehicles and plug-in hybrids.

However, Maile says there appears to be a discrepancy between automotive executives’ investment plans and their views on customer demand. When asked what type of evehicles consumers would be buying by 2020, respondents placed plug-in hybrids in the top spot, followed by battery-electrified vehicles, with fuel cells at number three. Fuel cells, however, had the biggest increase in importance in 2014.