Automakers getting real about the future of mobility

Our 24th annual KPMG Global Automotive Executive Survey comes at a pivotal moment for automakers and suppliers. Completed by more than 1,000 executives in 30 countries, the survey results show that the industry is becoming more sober about future market prospects. Especially in Europe, there is a growing pessimism on profitable growth over the next 5 years. This is despite a lowering concern on interest rates, energy prices and inflation, stabilization of commodity prices in the short-term as well as easing of regulatory pressures from the policymakers.

At the same time, though we anticipate that supply chain issues will have a lower negative impact in 2024, medium-term supply chain disruption of key commodities like Battery materials, Oil (and Gas), Rare earths and Semiconductors continues to bother European automakers, given the ongoing geopolitical tensions.

Global automotive executives anticipate new battery electric vehicle (BEV) sales to be 30 percent of all vehicle sales in Europe by 2030. With easing of “Euro 7” norms and the continuity of fossil-fuel powered vehicles running on e-fuels beyond 2035, we believe that growth of Hybrid EVs will also pick up pace in Europe. However, with the IRA (Inflation Reduction Act) regulation in the US, and the Chinese influx of cheaper EVs in Europe, European OEMs are already facing the heat when it comes to EVs.

When it comes to EV charging, consumers across regions are getting more comfortable with the behaviors required for ultra-rapid charging, including those in Europe. “Charging Network Operators” and “Electric Utilities” are best positioned to own and operate these EV charging stations, especially in North America and Europe. Europe has a tall target to achieve by 2030 in terms of EV public charging infrastructure (6.8 million publicly available EV charging points and $70 billion in investments).

“Brand image”, “Infotainment”, and “Self-driving” are no longer the top considerations for buying vehicles in Europe – instead, “Driving performance”, “Seamless experience”, “Electric mobility” and “Vehicle connectivity” are top vehicle purchasing criteria, among European consumers. While the European executives are much less confident about majority of vehicle purchases completed online by 2030, the vehicle retail & distribution model will increasingly shift towards Direct-to-Consumer sales by automakers, the agency model, and pure-play digital e-commerce players.

Automotive companies across regions also seem to be less prepared and ready for advanced manufacturing technologies, including GenAI (Generative AI). Artificial Intelligence (AI) and Autonomous Vehicle (AV) software engineering skills seem to be the most important to automakers compared to advanced manufacturing, and electronic hardware skills.

Given the advent of software-defined vehicles, big tech companies and tech startups will likely shake up the future of mobility, and increase their share coming from new revenue streams, especially within infotainment systems, cybersecurity, motor insurance, EVs and autonomous vehicles. As automakers grapple with these disruptive forces, they also need to free up capital to invest in emerging growth areas. Corporate restructuring will likely pickup pace as many automakers and suppliers divest their non-strategic assets especially those which are dependent on fossil fuel powered vehicles.

Our 24th annual automotive executive survey examines the above insights in great detail and shows how executive sentiment has changed and how concerns and challenges have made global and European automotive leaders more cautious. To help ensure companies end up as winners, not losers, executives should rethink their strategies and ask themselves some important strategic questions. Finding the right answers to these strategic questions will help determine how automotive companies succeed in the coming years. We believe that a dazzling future for the automotive business—with amazing products, more delighted consumers, and a positive impact on the planet—is still in view. But getting there will require overcoming near-term challenges.