Automotive Manufacturers Expect to Face Intense Competition in Emerging Markets for 2012-2017

September 11, 2012. Automotive industry players have long seen Emerging Markets as key to survival. The carmakers in M-Brain (formerly GIA)’s Business Perspectives on Emerging Markets 2012-2017 Report survey said that they expect almost 40% of their total global revenues from BRIC, and other markets such as South Africa, Turkey, Indonesia and Mexico by 2017.

When M-Brain (formerly GIA) asked the 24 automotive industry professionals surveyed what their most important key success factors will be for emerging markets, they agreed on three; localized competitive positioning, pricing and localization of products and services. Ford Otosan, the Ford joint venture in Turkey, is an example of how local consumer knowledge can turn a manufacturing hub into a consumer market as well. Domestic sales for Ford cars reached 43% of the company’s revenues in Turkey for 2011.

Unlike other industries, which rated corruption, bureaucracy or economic volatility as their top threats, automotive executives say it is competition, both from local and foreign players, that threatens their foothold in Emerging Markets.

Emerging market carmakers are aggressive about becoming global brand names, with the likes of Beijing Automotive Industry Corp (BAIC) acquiring all the equipment and core technologies of Weigl Transmission Plant AB (Sweden). Other Chinese examples include Geely, Chery and Great Wall, who are now exporting to South America, the Middle East and Africa. Such moves help to strategically place Emerging Market players abroad, and to acquire the production expertise needed to compete effectively in their domestic market. In 2011 for instance, Chinese automakers exported around 850,000 vehicles, 50% more than in 2010.

Western markets may continue to outpace Emerging Markets by volume and total sales in cars for now, but this gap will be smaller in 2017 than it is in 2012. For auto manufacturers to capture the potential of the BRICs and secondary Emerging Markets, they will repeatedly face two challenges, to understand and to adapt to the fast growing markets.

Success Factors in Emerging Markets for the Automotive Industry (2012-2017)

Rank Success Factors
% Respondents
1 Localized competitive positioning 38%
2 Localization of products/services 38%
3 Pricing 38%
4 Building a strong brand 25%
5 Flexibility to change as the market develops 25%
6 Distribution / access to customers 21%
7 Finding the right talent 21%
8 Government relations 21%
9 Local partner(s) 21%
10 Adapting to local culture 17%
11 After-sales service/spares/maintenance 17%
12 Local business relationships / lobbying 13%
13 IP protection 8%
14 Supply chain 8%
15 Access to local sources of financing 4%
16 Appetite for risk 4%
17 Cost control 4%
18 First mover advantage 4%
19 Product/service quality 4%
20 Availability of finance 0%
21 Reliable access to energy sources 0%

Source: M-Brain (formerly GIA)’s Business Perspectives on Emerging Markets 2012-2017 Report N=24

Threats in Emerging Markets for the Automotive Industry (2012-2017)

Rank Threats
% Respondents
1 Competition from other foreign companies 54%
2 Competition from local companies 46%
3 Corruption / weak rule of law 21%
4 Economic volatility 21%
5 Lack of local market understanding at headquarters 21%
6 Regulations and taxes 21%
7 Unreliable local partners 21%
8 Rapid change in the market 17%
9 Bureaucracy and red tape 13%
10 Difficulty breaking into local networks 13%
11 International supply chain cost 13%
12 Lack of demand 13%
13 Lack of reliable market intelligence 13%
14 Grey markets / parallel imports 8%
15 Political risk 8%
16 Poor infrastructure 8%
17 Foreign exchange rate changes 4%
18 Repeated losses 0%

Source: M-Brain (formerly GIA)’s Business Perspectives on Emerging Markets 2012-2017 Report N=24

 

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