Global auto executives are confident that the auto industry will see more profitable growth in the next five years and that the market share of electric vehicles will grow dramatically by 2030, according to a new survey by KPMG. At the same time, supply chain issues and labor shortages are of great concern.
KPMG’s 22nd Annual Global Automotive Executive Survey of 1118 executives across automotive and adjacent industries found that 53% are confident that the industry will see more profitable growth, compared to just 38% who are concerned about profit prospects. The survey, which included 372 CEOs, found that executives’ confidence extends to other areas as well, including the industry’s ability to withstand the next great disruption.
Jeyapriya Partiban, Head of Advisory at KPMG in Bahrain, commented on the report “The automotive industry is considered a key economic indicator worldwide. In reference to the report, it is encouraging to see positive results and a prevalent optimism about the growth prospects of this vital sector. Car manufacturers are now faced with a new set of challenges, putting more emphasis on new technologies and innovations than ever before. A recent report by the Economist indicated that in 2019 Bahrain had over 711,000 vehicles registered, which in percentage terms worked out to approximately 342 cars per 1,000 people. This represents a 10% increase since 2018. The industry across the region however, experienced a drop in sales attributed to the pandemic. Even though businesses were offering innovative solutions including remote and virtual test drives to enhance customer experience, customers’ expectations have changed leading to a rise in demand for all-purpose vehicles with unique and cost-effective features, and a spike in interest towards environmentally friendly options including Electric Vehicles (EVs) and Hybrids.”
Vulnerable supply chains and labor shortages
The news, however, is not all rosy. Executives are worried about a range of issues affecting the supply chain, including the price and availability of semiconductors, steel, rare earth elements and other scarce materials. Over 50% of respondents were “extremely” or “very worried” about the supply of these materials. Furthermore, 55% of executives were very or extremely concerned about labor shortages.
“There are urgent questions executives need to answer right now: Have they learned recent lessons to build more resilient supply chains and address labor shortages?”, said Gary Silberg, Global Head of Automotive at KPMG. “Auto manufacturers are competing for talent not only among themselves but also against other industries. We will likely see executives taking lots of time in the coming years to problem solve these risks.”
EVs on the rise
Executives expect the market share of EVs to grow dramatically, though there is no consensus about what market share it will capture.
EVs’ popularity may depend partly on significant investments in DC fast-charging infrastructure; 77% of executives expect consumers to require charge times under 30 minutes when traveling. Most charging stations in service today take more than three hours.
The survey also found that expectations for the EV market are based on when EVs will reach cost parity with internal combustion engines. Most believe EVs can be widely adopted without government subsidies (77%), but the majority still support such programs (91%).
The rise of new entrants and the shift to digital
The technology and automotive industries are converging, leading to new alliances and new entrants. Start-ups are raising billions, and executives believe tech companies will enter the market.
Furthermore, 78% of executives agree that there will be a fundamental change in how vehicles are purchased in the coming years, saying that most will be sold online by 2030. And about three-quarters predict that more than 40% of vehicles will be sold directly by automakers to consumers, bypassing dealers.
With the move to digital commerce, executives expect that automakers will monetize the vast amount of data they will collect; 43% expect that automakers will sell data to auto insurance companies.