Global automotive industry exploring new opportunities

 Regulations to reduce CO2 emissions, fluctuating exchange rates, shifts in consumer behaviour and a challenging economic climate are just some of the issues facing the global automotive industry. "Despite the many challenges, the automotive industry is exploring new horizons and opportunities for growth," says Rick Hanna, PwC Global Automotive Leader.

According to PwC research, global automotive CEOs are exploring new ways to expand. They're focusing on adopting digital technologies to create value in new ways, developing diverse and dynamic partnerships and finding different ways of thinking and working.
Automotive CEOs are confident of generating higher revenues in the short- and longer-term: 75% expect to do so in the next 12 months, and 92% in the next three years. They have their sights set on China, the US and Germany as sources of growth.
Hanna says: "Like other CEOs, automotive CEOs are deeply concerned about the risk of over-regulation. 
"In addition, the disruptive potential of colliding megatrends is further cause for concern. In particular automotive CEOs are concerned about how shifts in customer behaviour (59%) and greater competition (57%) could transform their behaviour over the next five years. And just over half worry that changes in regulation will have a disruptive impact. 
Automotive CEOs surveyed by PwC as part of its 18th Annual Global CEO survey, are less concerned about new rivals from adjacent industries invading their space. Only 46% expect more competition from companies in other sectors over the next three years. Those who do, point to the technology sector as the most probable source of new competition.
South Africa's CEOs are contending with similar issues as their global counterparts, with the majority viewing Government response to the fiscal deficit and debt burden, social instability and high employment as barriers to business growth. Similarly, automotive CEOs worry about finding people with the right skills, how indebted government will manage their fiscal deficits and geopolitical upheavals.
Automotive CEOs know they need to keep up pace with technology. This year they are placing particular emphasis on data mining and analysis (83%), mobile technologies for engaging with customers (77%) and tools for boosting cybersecurity (77%). They are also attaching more importance to new battery and power technologies than CEOs in other sectors (68% versus 47%). And they are more actively exploring the potential of robotics (53% versus 37%). But they are increasingly anxious about the pace of technological change: 55% are now worried about keeping abreast of new technologies, compared to 49% last year.
Global automotive industry outlook
Currently, there are a number of pressing issues affecting the global automotive industry. The drop in the oil price has helped pushed the demand for pickups and SUVs globally. "For a number of reasons, mainly the lower tax rate on fuel, the impact of decreased crude prices on consumer actions such as new vehicle sales, develops much more quickly in the US than in other countries," says Hanna.
While 2015 is expected to be a modest year for the global automotive industry, several markets stand out due to their positive, or negative, contribution to the assembly top line. Light vehicle assembly is expected to reach 88.6 million units in 2015, representing a 2.7 year-on-year increase, according to Autofacts, PwC's automotive analyst group. 
Autofacts is forecasting 2021 light vehicle assembly to reach 108.6 million units, equating to a 3.5% Compound Annual Growth Rate (CAGR) from 2015 to 2021. The lion's share of the new assembly volume is expected to come from developing markets, and in particular developing Asia-Pacific providing nearly 65% contribution to growth from 2014 to 2021. China, the US, India, Thailand, Mexico and India are regarded as the top contributing markets in the industry. Despite calls for industry consolidation, particularly in China, the global automotive market is expected to remain highly diversified throughout the forecast window, with little to no merger & acquisition (M & A) activity at the automaker level.
Of the four major developing markets - Brazil, Russia, India and China (BRIC) - only China is consistent in growth, June and July 2015 which declined year on year approximately 3.3% and 6.6%, respectively, aside. Although South Africa is in moderate shape, established vehicle makers face competition from Chinese start-ups. 
Middle East Africa (MEA) regional outlook
According to analysis conducted by Autofacts, light vehicle sales in Iran over the first half of the year are up 15.4% to 633,728 units followed by Egypt. The Egyptian new light vehicle market is up a healthy 9.8%, bringing the year-to-date total to 140,431 registrations. The other three markets - South Africa, Morocco and Algeria - are down. In particular, the Algerian market is under considerable pressure with sales down 15.7% to 157,057 units over the last 25 months.
In addition, assemblers have begun to drive output in Iran upwards. Now that Iran has reached a historic deal with world powers, assembly is expected to increase even further to catch up with high pent-up demand. 
The outlook for the South African automotive industry
South Africa's vehicle and automotive component manufacturing industry, including exports accounted for 30.2% of total manufacturing output and 7.2% of the GDP in 2014. "South Africa is a production hub for the global automotive industry and therefore trade relations are important," says Kobus Minie, PwC Automotive Industry Leader for Southern Africa. The most important trading partners are the EU, North American and various African countries. In total South Africa exportED vehicles and component are worth about R115.7bn to 148 countries in 2014.
Recent interest hike rates, as well as subdued consumer confidence, increasingly slow economic growth, household income under pressure and the weakening of the Rand is expected to further limit local sales in 2015. "The buying power of the consumer is declining and this will have an effect on the sales of new motor vehicles," adds Minie.
Vehicle leasing has also been gaining popularity in South Africa as consumers' spending remains constrained by the difficult economic climate and high debt levels. 
In South Africa, several well-known premium and volume automotive manufacturers produce vehicles for the local market and the rest of the world. These OEMs are capable of producing more than 800k light and commercial vehicles annually.
Although the African continent has many challenges, there are a number of opportunities for giant automakers and suppliers who have already started making inroads on the continent. "There is definitely a huge opportunity for South African manufacturers to increase the localisation of components," concludes Minie.
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Posted on : 20 May,2024 | News Source : ABNews

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