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Car industry confidence slumps

Results of a new survey of 100 global automotive executives has shown a slump in business confidence – with the majority suggesting they only expected the sector to move into profitability by 2005 at the earliest.

The KPMG survey marks a substantial downturn in confidence levels. Last year, executives had suggested that signs of recovery would emerge in 2003.

Fuelling the increased pessimism are industry concerns that discounted deals and special finance offers, which have been bolstering demand, will not be an affordable option for carmakers struggling to recover profitability.

Says KPMG Automotive senior partner Mike Bacon: “It comes as no surprise to me that the number of incentives being offered are expected to decline. The recent KPMG study on pricing in Europe showed how, with profitability low, the whole automotive supply chain simply cannot afford to be offering such costly incentives. It may well be that such incentives have now run their course.” The survey results also point to a clear focus on the need to increasingly meet consumer demands as the key to enhanced carmaker profitability. 73 per cent of executives surveyed felt that crossover vehicles would increase market share over the next five years, compared with 58 per cent in last year's survey.

Other expectations highlighted in the survey include:

  • An increasing sales role for the Internet – 63 per cent felt it would be a major growth area for new car searches and purchase completions.
  • The trend towards purchase of newer vehicles continuing.
  • A boost in car recycling.
  • Further carmaker consolidation through joint ventures rather than mergers.

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