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Hybrid demand to rise, say industry executives

The future for the global car industry is low margin models such as small cars and hybrids, according to senior automotive executives.

Management in America and Europe believe the profitable SUV bubble has burst, although Asian executives still forecast healthy growth.

That isn’t stopping them from launching new products, however, with Peugeot, Citroën and Mitsubishi the latest to lift the wraps.

The findings are published this month in the KPMG Global Auto Executive Survey, which questioned 150 carmakers and suppliers.

Last year’s 4x4 sales in the UK seem to confirm those views – the sector fell by 6% to 175,805 units. But the SMMT claims this was due to models replacements for the three sector leaders: CR-V, Rav4 and Freelander.

It believes demand has simply plateaued and does not predict a collapse. Executives questioned also predict that financial pressures and overcapacity of some six to eight million vehicles per year will force car companies into alliances, mergers or bankruptcy over the next five years.

Hybrid is tipped to grow due to rising fuel prices, with almost all American executives predicting a move away from SUVs to alternative-fuelled vehicles. Expect the big USA three – Ford, General Motors and Chrysler – to plough more funds into the development of hybrids.

Last year, 200,000 hybrid models were sold worldwide; 34% of industry executives expect that to rise to 300,000 this year, while 37% put the figure at 300,000-500,000.

Retailers looking for manufacturer winners should consider Asian marques, say executives. They predict that Chinese and Indian brands, followed by South Korean and Japanese, are the most likely to gain global market share. American brands are the losers, with European carmakers holding ground.

The outlook for European and American carmakers is worsened by the expectation of growth in loss-leader and low margin sectors such as hybrid and small cars.

Most executives – 38% –believe profits will be “volatile and unpredictable” (2006: 35%). There is some cause for cautious optimism, says KPMG, as the percentage forecasting a fall in profits has reduced from 28% last year to 19%, while 26% expect flat profits (up from 21%).

However, just 16% think profits will rise, the same as last year’s survey, with North Americans least optimistic.

One saving grace is the expectation that luxury models will enjoy a growth spurt.

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