Indian cars seen increasing global share

Asian vehicle brands, including Indian, will increase their global market share significantly in the next five years as customers shift their preferences from North American and European manufacturers, according to a new survey.

Overall profitability would either decline or remain flat over the next five years because of increased competition and rising cost, said the study by the KPMG LLP, an American audit, tax and advisory firm.

Top 140 executives at vehicle manufactures and automotive were interviewed by the firm in the survey.

"Expectations for the industry's future profitability around the world are low, even in China," said Betsy Meter, partner in KPMG LLP's automotive practice. "Meeting consumer demand in regions around the world with high quality products is the formula for success."

A full 88 per cent of respondents expect Asian vehicle brands to increase in global market share over the next five years, at the expense of North American and European models. Korean and Chinese brands were viewed most favorable by respondents, with 79 per cent seeing an increase in Korean brands and 77 per cent saying Chinese brands would advance.

Respondents also view Japanese brands positively, with 65 per cent saying they would increase in global market share over the next five years, while 52 per cent say Indian brands would post gains.

"Automotive executives in our survey have been predicting market share advances by Asian brands for years now," said Meter.

"Asian brands have been successful at bringing the right product to the market quickly while being flexible in their manufacturing processes to respond to changes in demand," Meter said.

In contrast, respondents are growing increasingly pessimistic about the prospects for North American brands. Fifty-eight per cent expect these models to lose global market share over the next five years, compared with 45 per cent who held that view in last year's survey.

Only 32 per cent agree that American automakers will become more efficient and more competitive over the next five years, compared with 39 per cent who held that view last year and 50 per cent who agreed with the statement in 2003.

"The high cost of manufacturing is jeopardising the business of manufacturing in the United States," said Meter. "Domestic manufacturers need to get cost in line with their foreign counterparts in order to compete around the globe."

As for European brands, respondents are divided about their prospects: 34 per cent expect their global market share to increase, 28 per cent expect it to decrease, while 38 per cent believe it will remain the same.

In another major KPMG finding, the global executives surveyed are not optimistic on the profit outlook for the industry over the next five years.

Twenty-eight per cent expect profitability to decline, 21 per cent predict it will be flat, and only 16 per cent feel it will increase. Thirty-five per cent of the executives did not forecast future profitability, saying that it is "volatile and unpredictable."

In the survey, the executives interviewed represented companies in North America, Britain, France, Germany, Sweden, India, China, Korea and Japan.