KPMG: "Finding the right balance between digital innovation and social reality"
According to the Global Automotive Executive Survey conducted by the auditing and consultancy firm KPMG, digitalization and connectivity are the key challenges facing the automobile industry for the second year in a row. The Western European share of vehicle production is continuing to decline worldwide. KMPG has also concluded that social trends relating to the environment, taxes and mobility are leading to new challenges for the industry. For the twentieth edition of the Global Automotive Executive Survey, KPMG asked more than 1,000 automotive industry executives and nearly 2,500 consumers around the world how they believe the automobile industry is evolving.
As in previous years, digitalization and connectivity are the biggest challenges faced by the automobile industry in 2019. Frank Vancamp, Partner and Mobility Expert at KPMG in Belgium: “Technological developments and connectivity are an integral part of our lives now, so it is not surprising that these will continue to be the most important trends for the automobile industry. New developments such as 5G and the connection of traffic infrastructure are cementing this. We are gradually evolving toward a new ecosystem in which the traditional automobile industry collaborates with major players in the technology and telecom sectors, as well as government agencies. The sharing economy also plays a significant role in this ecosystem, with the growing popularity of carsharing being just one example."
The second and third most significant challenges revealed by the KPMG survey are the development of electric vehicles and electric vehicles powered by fuel cells. The survey also showed very clearly that several types of drive systems will be jockeying for position in the automotive market. By 2040, the survey respondents expect that electric vehicles will have a market share of 30%, with 25% for hybrid vehicles, 22.5% for fuel cell vehicles, and 22.5% for traditional combustion engines.
Arnaud De Splenter, Attorney and Mobility Expert at K law: "We have to get away from the idea that a single type of drive will dominate the entire market. Although the share of fossil fuels will continue to decline, it is premature to say that diesel, for example, will disappear entirely. Regional differences will also continue to exist, depending on fuel prices and other factors." The survey also shows that consumers are still holding back on electric vehicles due to price, range and battery capacity concerns. Among the respondents in the automotive industry, 80% see more advantages in fuel cell vehicles than in electric vehicles.
When asked about the prospects for vehicle production, two-thirds of the respondents said they expect the Western European share at global level to drop from 15% to 5% by 2030. Frank Vancamp: "Western Europe will face strong competition from China, which is increasingly positioning itself as a market leader in e-mobility and battery development. The automotive industry in Western Europe must therefore make huge investments in connectivity. While this means the outlook for the region is not so bright, the fact that Belgian production (in Vorst and Ghent) will focus on electric and hybrid vehicles in the near future is a positive sign." An additional problem is that only half of the respondents in the Western European automotive industry said there is a consistent policy to strengthen their own industry, compared to more than 80% in the USA and China.
According to KPMG, it is not just technological trends that are critical for the automotive industry; social trends also play a key role. In Belgium, this has manifested itself in the form of initiatives such as 'cash for cars' and the Mobility Budget, which is presently on hold due to the collapse of the federal government. However, policy measures implemented in 2018, such as the equalization of taxes on diesel, are having an impact. Frank Vancamp: "We are seeing a gradual change in the proportion of diesel vehicles versus gasoline vehicles in our fleet. In 2018, the price of diesel was higher than the price of gasoline for the first time. It is no coincidence that the yellow vests movement was triggered by rising diesel prices. It is interesting that this trend can not only be seen in the private vehicle market, but in the corporate vehicle market also."
2018 was also a key year for the roll-out of WLTP, the new testing and approval cycle for motor vehicles introduced in response to the 'dieselgate' scandal. “On average, WLTP leads to CO2 emissions that are more than 20% higher compared to the previous cycle. Vehicle manufacturers are discontinuing models because they no longer meet the standards or because the investments are too high. There was also a sharp rise in vehicle sales just before the introduction of WLTP in September 2018, followed by an immediate drop afterwards. It remains to be seen if this falling trend will persist in 2019, or if it was only a blip," concludes Vancamp.
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