Auto execs discount overcapacity, eye new global investments
A growing number of global auto executives say they are planning to increase investments in factories and distribution networks as their fears of widespread overcapacity wanes.
A survey released today by the financial advisory firm KPMG LLP finds that auto executives are becoming more bullish about the market despite economic worries in Europe and a perceived slowdown in growth in China.
The survey finds that 64 percent of automotive executives from around the world now plan on increasing plant investments in the coming five years. That's up from 55 percent of the executives questioned by KPMG one year ago.
Underscoring the executives' optimism is a recent study from IHS Automotive that predicted global auto sales will surge 27 percent to 100 million vehicles in five years. Global sales are expected to top 80 million for 2012 -- the first time the industry has topped that threshold, LMC Automotive predicted last month.
KPMG has queried industry decision makers about their outlook and published the results every year since 1999.
Global overcapacity has been a perennial concern in industry forecasts. Last year 36 percent of the executives questioned by KPMG said they envisioned more than 21 percent factory overcapacity. This year the number fell to 29 percent.
The rising executive optimism serves as a barometer for the industry's near future, says Gary Silberg, KPMG's national leader for automotive industry activity.
"We read from this outlook that automotive is a bright spot in the global economy," he says. "They're envisioning growth. China continues to grow, albeit at a slower pace than before. Europe is uncertain, but North America is growing. The U.S. market holds promise for companies around the world right now."
But not all of the perceived growth will come from increased vehicle production, the executives told KPMG. More than half of those surveyed said captive finance companies will provide a larger opportunity over the next five years.
Silberg says the gains from finance business will come largely from less mature markets, including China.
"It's been common in China to see consumers paying cash for their new vehicles," he says. "But markets are rapidly becoming more sophisticated, and consumers want financing alternatives."
You can reach Lindsay Chappell at email@example.com.