While several mature markets will grow over the next four years, the biggest breakthrough growth will come from BRIC countries. They will account for more than 40% of forecast global light vehicle assembly increases and represent 52% of the industry’s forecast global capacity expansion. These factors are reflected in the fact that nearly all major global automakers are pursuing a BRIC strategy in some form as they attempt to gain competitive advantage by tapping the potential of these emerging markets.
This is just one of the findings included in the annual ‘Global Automotive Financial Review’ by PricewaterhouseCoopers. It is the eighth edition of an extensive collation of research on the sector, which also includes summaries of financial data, trends and practices as reported by forty leading global vehicle manufacturers and suppliers.
In their struggle with the adverse factors on developed markets in the auto sector, such as high raw material prices, plunging car prices due to tough competition (average profit per car sold in 2005 dropped to $26,800, from $28,300 in 2004), labour disputes and others, companies are forced to search for new ways to survive and grow.
Automakers are looking for the solutions to these problems through expansion in developing markets. The most successful are those who manage to economise through using the local workforce, taking advantage of favourable currency exchange rates and winning large privileges from government bodies. According to PwC’s forecasts, companies like Toyota, Renault-Nissan and Hyundai combined will account for over 50% of growth in the auto industry by 2010.
Another form of competition is the further segmentation of product lines. In trying to increase its market share and satisfy the changing tastes of consumers, carmakers are expanding their model ranges, which requires heavy investment in research and development. In 2005 the average investment figure in R&D was 3.68% of total revenue. BMW Group invested more than anyone in R&D, while Hyundai Motor Corp. was at the opposite end of the scale in this category.
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