China’s automotive industry sees transformation opportunities, while balancing risks amid the pandemic

China’s automotive industry sees transformation oppo...

KPMG China launches the third KPMG China Leading AutoTech 50 report


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China’s automotive industry is entering a phase rapid adjustment. In a constantly changing market environment, new technologies and models are triggering profound transformation in the structure and ecology of this sector, according to KPMG’s third annual China Leading AutoTech 50 research paper.

This year’s Autotech 50 is based on research conducted over the past year and continues to focus on technology companies in four major areas: intelligence and connectivity, after-sales market, mobility and car manufacturing. The Autotech 50 provides an outlook for the development of the automotive industry (please refer to the report for observations of specific trends in sub-sectors).

Honson To, Chairman of KPMG Asia Pacific and KPMG China, said: “The pandemic has created a significant impact especially in the automotive, electronics and mechanical equipment industries, which require a high degree of global value chain integration. However it has also brought digital transformation to the forefront and created demand for new infrastructure construction. New infrastructure, including 5G, artificial intelligence, data centre and the Internet of Things, has received widespread attention recently. As information infrastructure supports the transition of traditional industries towards digitalisation and intelligence, new infrastructure will help drive the further innovation of the automotive industry.”

Autotech companies are set to drive the application and commercialisation of emerging technologies such as autonomous driving, the ‘Internet of Vehicles’ and big data, reshaping the ecosystem and leading the digital transformation of the automotive industry. KPMG has selected the leading AutoTech 50 companies in China through in-depth analysis. A committee goes through evaluation of non-listed automotive companies based on six core criteria, namely technology and business model innovation, financial strength, disruption to traditional automotive industry, market acceptance, valuation and capital market recognition, and team capabilities. The evaluation committee comprised over 50 KPMG partners and consultants.  The evaluation process also involves consultation with experts and executives of leading automotive companies, research institutes and investors. 50 leading AutoTech companies and 17 cutting-edge start-ups were finally selected by the evaluation committee.

The report finds that senior management in the automotive industry should ensure that companies keep up with market developments and focus on key products and service offerings in 2020 and beyond, as this presents opportunities for Chinese automakers to further demonstrate their strength and vision. Automakers should also consider rebalancing their development focus given the impact from the current pandemic and economic downturn. In the future, KPMG foresees that most industry innovation will be driven by the breakthrough and integration of digital technology, in a bid to reduce production costs and enhance overall efficiency.

Philip Ng, Partner, Head of Technology, KPMG China also said: “Data, the key production driver of future automotive new economy, will be instrumental in the transformation of the industry. New infrastructure will further accelerate the flow of data. Meanwhile, the development of 5G, charging stations, data centres, artificial intelligence, and the Internet of Things are set to further spark the digitalisation and quality development of various subsectors of the industry, ranging from autonomous driving and connected cars to marketing. This will also further steer the evolution of the industry chain from automotive production to the internet of energy, vehicles and services.”

Speaking of China’s leading AutoTech 50 companies, Norbert Meyring, Partner, Head of Automotive Sector at KPMG China, said: “Although companies will adjust their liquidity management, their investment plans will not be postponed forever. The companies in the AutoTech 50 will play an important role in the future of the automotive industry. Existing automotive manufacturers, auto component suppliers, technology companies and companies newly joining this ecosystem will work together to reshape our future transportation and travel methods. Start-ups with innovative thinking should move toward creativity and transform in confidence, while manufacturers and component suppliers with assets should continue to work with the best of these start-ups to create a stronger automotive ecosystem.”

Ng added: “We believe that the development potential in China remains very strong. The purchasing power of the consumer is constantly increasing, spurring China to be the world’s largest consumer market. We hope Chinese autotech innovative companies will proactively seize the opportunities from the new era of digitalisation and technological development, and ultimately lead the industry’s transformation and evolution.”

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About KPMG China

KPMG member firms and its affiliates operating in mainland China, Hong Kong and Macau are collectively referred to as “KPMG China”. KPMG China is based in 24 offices across 22 cities with around 12,000 partners and staff in Beijing, Changsha, Chengdu, Chongqing, Foshan, Fuzhou, Guangzhou, Haikou, Hangzhou, Nanjing, Ningbo, Qingdao, Shanghai, Shenyang, Shenzhen, Tianjin, Wuhan, Xiamen, Xi’an, Zhengzhou, Hong Kong SAR and Macau SAR. Working collaboratively across all these offices, KPMG China can deploy experienced professionals efficiently, wherever our client is located.

KPMG is a global network of professional services firms providing Audit, Tax and Advisory services. We operate in 147 countries and territories and have more than 219,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such. In 1992, KPMG became the first international accounting network to be granted a joint venture licence in mainland China. KPMG was also the first among the Big Four in mainland China to convert from a joint venture to a special general partnership, as of 1 August 2012. Additionally, the Hong Kong firm can trace its origins to 1945. This early commitment to this market, together with an unwavering focus on quality, has been the foundation for accumulated industry experience, and is reflected in KPMG’s appointment for multi-disciplinary services (including audit, tax and advisory) by some of China’s most prestigious companies.

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