Automotive Manufacturers Continue to Focus Heavily on Sustained Investment in New Technologies

Hybrid systems and electric & battery technology getting the greatest investment

DETROIT, January 8, 2009: In the next five years automotive manufacturers are expected to be intently focused on investing heavily in new models/products and new technologies to satisfy consumer demand in purchasing fuel efficient, affordable cars, according to an annual global survey by KPMG LLP, the U.S. audit, tax and advisory firm.

In the KPMG survey, based on interviews with 200 senior executives at vehicle manufacturers and suppliers worldwide, 96 percent felt that fuel efficiency will be the top factor driving consumer purchase decisions, but also rate alternative fuel, at 85 percent, and affordability, at 83 percent, high.

To meet demand, the auto execs for the second successive year state that manufacturers are intent on keeping high levels of investment in new models and/or products. In fact, 91 percent, versus 94 percent a year ago, said that investment will increase in new technologies in the next two years, and 92 percent of those surveyed said they expect OEMs to increase investment in new technologies, slightly down from 93 percent. With limited dollars for investment, attitudes toward other facets of the organization may regress, including expected funds for marketing and advertising, down from 72 percent to 55 percent this year, and in investment in new plants, dropping to 52 percent, down from 72 percent a year ago.

"The execs clearly understand that they can't take their eyes from investment in technological innovation," said Gary Silberg, National Advisory Automotive Industry leader for KPMG LLP. "They need to be focused on that end game and will not be deterred from it as it presents a solution to either keeping ahead of the competition or joining those on the high end of the ladder."

Manufacturing fuel efficient cars, selected by 29 percent of execs, was the leading trend cited by the execs today, while switching to alternative fuel vehicles (23 percent) and production of environmentally friendly cars (22 percent) rounded out the top three trends.

But where the investment and focus is right now has shifted from the KPMG survey of a year ago. Asked to rate the importance of automotive product innovations over the next five years, in the 2007 KPMG survey, the execs said hybrid systems, fuel cell technology, advanced materials and electric & battery technology. This year they voiced much stronger views for hybrid systems, up to 91 percent from 79 percent. And they moved electric and battery to a clear number two, up to 82 percent from 60 percent.

"This demonstrates that the manufacturers are recognizing clearer winning paths to getting to market sooner, and there have been great advancement in electric and battery technology," said KPMG's Silberg.

On the topic of areas in which manufacturers and suppliers alike should look to for cost savings over the next five years, the top three were manufacturing process and technology innovations (up 3 percentage points to 70 percent this year), product materials innovation (up 10 percentage points to 67 percent this year), and low-cost country sourcing (falling six percentage points this year to 59 percent). When asked specifically about the top cost-savings opportunity by sector, the execs said OEMs (68 percent), Tier One (69 percent) and Tier Two suppliers (77 percent) would benefit most through manufacturing process and technology improvements.

In the KPMG survey, the executives interviewed represented vehicle manufacturers and suppliers in Canada, United States, United Kingdom, France, Germany, Sweden, India, China, South Korea, Japan, Thailand, Brazil, Mexico, Spain, Poland, Slovakia, Russia, Czech Republic, Italy, Switzerland, South Africa and Australia. KPMG has released an annual survey of automotive executives expressing their views on the state of the industry since 1999.