Oil Prices Change Auto-Sales Landscape Permanently, KPMG Survey Of Automotive Executives Says

Fuel efficiency and quality seen as consumers' most important car-buying criteria; Cars outpacing minivans and SUVs in market share

DETROIT, Jan 4. -- Automotive executives worldwide strongly agree that high oil prices have permanently changed consumers' purchasing habits globally, driving them toward more fuel-efficient vehicles, including hybrids, according to an annual global survey of industry leaders by KPMG LLP, the U.S. audit, tax and advisory firm.

The KPMG survey, based on interviews with 150 senior executives at vehicle manufacturers and suppliers worldwide, found that executives continue to believe that fuel efficiency and quality are the primary consumer preferences when purchasing a new car, 89 percent and 88 percent respectively. Last year, 87 percent of executives said quality was the leading factor, and 84 percent said it was fuel efficiency.

"High gas prices, which are permanently etched on consumers' minds, have had dramatic implications for auto manufacturers who lack quality, fuel efficient products to satisfy demand," said Daron Gifford, National Automotive Industry leader, KPMG LLP.

For the second consecutive year, industry executives said they believe the most popular vehicles over the next five years will be hybrids, cited by 83 percent of respondents, and low-cost cars, according to 64 percent of respondents. Last year, 88 percent of executives said hybrids would be the most popular, while 79 percent cited cars.

Overall, 64 percent of executives said they expect cars to increase global market share over the next five years, outpacing larger vehicles, such as minivans, which were cited as a growth model by only 33 percent of executives. Meanwhile, just 28 percent said SUVs would be gaining share. Fifty-five percent of executives also expect market share for crossovers to increase, while 42 percent predicted market share for luxury vehicles will increase.

"Gasoline prices have shifted the model mix in executives' minds, and future winners in the global automotive marketplace will have to find ways to combine ingenious cost-efficiencies with startling design creativity," said Gifford.

  In breaking the categories down into a regional view:

  - 95 percent of North American executives said they were more likely to
    see a rise in hybrid sales over the next five years, while 67 percent of
    North American executives predicted crossovers.

  - 89 percent of European executives were optimistic on the sale of low-
    cost vehicles, and 57 percent forecasted luxury vehicles sales will
    increase.

  - 37 percent of Asian executives are more confident about the sales of
    large pick-up trucks, while 72 percent expected car sales to rise.

This year, 71 percent of executives believe hybrids will become a U.S. market force, with between 200,000 and 500,000 cars being sold compared with 200,000 sold in 2006.

"The hybrid mantra is that the breed cannot fail, given consumer demand and its relatively minuscule production numbers," said Gifford.

  Additional key findings include:

  - 90 percent of executives believe consumers will hold on to their new
    cars for three to seven years.

  - 94 percent of executives consider product quality as the most important
    industry issue in 2006, while 89 percent named cost reduction.

  - 66 percent of executives cited innovations in manufacturing as the
    greatest source of cost savings for vehicle manufacturers, followed by
    materials innovation and outsourcing to countries like China and Eastern
    Europe according to 61 percent of executives respectively.

  - 48 percent of executives named new models and 43 percent said
    new technologies are the areas where manufacturers will increase
    investment.

In the KPMG survey, the executives interviewed represented vehicle manufacturers and suppliers in Canada, United States, England, France, Germany, Sweden, India, China, South Korea, Japan and Australia. KPMG has released an annual survey of automotive executives expressing their views on the state of the industry since 1999.

About KPMG LLP

KPMG LLP, the audit, tax and advisory firm (www.us.kpmg.com), is the U.S. member firm of KPMG International. KPMG International's member firms have 113,000 professionals, including more than 6,800 partners, in 148 countries.