Survey: Spending on plants to rise
More global auto executives say they plan to boost spending on factories and distribution networks as their fear of widespread overcapacity wanes.
A survey released last week by the financial advisory firm KPMG finds that auto executives are becoming more bullish about the market, despite economic worries in Europe and a perceived slowdown in growth in China.
According to the survey, 64 percent of automotive executives plan to increase spending on plants within five years, up from 55 percent a 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 polled industry leaders 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 only 29 percent of surveyed executives foresaw that level of overcapacity.
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."
Also, more than half of executives surveyed said captive finance companies will offer automakers a big 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 firstname.lastname@example.org.