2016 KPMG AUTOMOTIVE EXECUTIVE SURVEY – FROM A PRODUCT CENTRIC WORLD TO A SERVICE-DRIVEN DIGITAL UNIVERSE

KPMG recently released its 17th annual KPMG Global Automotive Executive Survey, which sought feedback from over 800 senior executives from the world’s leading automotive companies on topics such as key trends, business model disruption, data ownership, technological challenges, new products and who will be the frontrunners in the auto industry.

This year’s survey findings reveal that executives’ mindsets have shifted significantly and they now see definite disruption ahead. Nothing will stay the way it is and the traditional automotive business model is changing swiftly.

KPMG Automotive Partner, Aaron Street, says that ‘connectivity and digitalisation’ has become the #1 key trend dominating auto executives’ strategic agenda until 2025. It has finally outpaced growth in emerging markets and alternative drive-train technologies, which were the key trends in past years.

It is now clear that the auto industry needs to shift its focus towards customer needs rather than traditionally product and technology-led internal concerns.

The 10 key themes arising from the KPMG survey are:

1. Connectivity and digitalisation is sky rocketing
Auto executives’ mindset has shifted year-on-year. Connectivity and digitalisation have finally outpaced growth in emerging markets and alternative drive-train technologies as the key trend dominating executives’ strategic agenda until 2025.

2. The countdown for disruption has already started
A major business model disruption is anticipated to be extremely likely for almost 10 times more survey respondents then last year. More than 80% are convinced that connectivity and digitalisation will strongly disrupt the auto industry by the end of this decade.

3. The centre of gravity of the customer relationship will shift
This year, respondents are far less confident that traditional auto companies will be able to dominate the customer relationship in the connected car. Last year, two-thirds still believed auto companies would see off competition in this area from ICT sector third parties.

4. Business models will be circling in different orbits
Connectivity will pave the way for an entirely new data and service-driven business model for those traditional auto companies able to retain a direct customer relationship. But by no means all survey respondents are convinced of this; already every fifth respondent believes vehicle manufacturers could also turn into mere contract manufacturers for ICT companies.

5. Data is the fuel that informational engineering ignites
Although strong informational engineering capabilities and data-driven mindset will be a decisive factor to compete with new entrants at the customer interface, most respondents said the usage of data in all corporate functions is currently at a very early state, at best.

6. The race to the planet of data has not been decided
Most respondents believe nobody but the driver owns the data generated in or by a car. While some executives still think that data is at their companies’ free disposal, customers think differently. They will choose the party they trust the most and that offers the best benefits in return, instead of just giving their valuable data away free.

7. Does using the auto-pilot mean losing sight?
The majority of survey respondents see self-driving features as an absolute purchasing criteria, or at least expect it to become more important by 2030. Survey results suggest that in a world of autonomous driving, classical differentiating factors will diminish in favour of total cost of ownership (TCO), questioning the sustainability of the traditional automotive business model.

8. The auto industry is in a clock speed dilemma
The era of the one car product development cycle is over. To defend their position against third parties and respond to real-time customer needs, auto companies will need to manage different clock speeds for innovation, development processes and corporate culture all at once.

9. The industry is not living in a vacuum
More than 80% of respondents see regulation as having high or very high impact on the auto industry. The recent ‘diesel-gate’ scandal shows that the technology challenges putting pressure on the auto sector regarding more eco-friendly alternative drive-trains have not become any smaller.

10. Conquering new spheres remains a focus
The presence in emerging markets is more than fundamental to the success of global auto companies. China has not only become the most important market volume-wise, but for the majority of respondents China is now also the No 1 place to pilot new innovations and launch new products.

What it is clear from the KPMG survey is that challenging but exciting times are ahead for the automotive industry.

For a complimentary copy of the 2016 KPMG Auto Executive Survey, please contact KPMG Partner, Aaron Street, on 07 5577 7545 or astreet@kpmg.com.au.

Aaron Street
Partner,
Private Enterprise
KPMG

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