Auto leaders ramping up to seize big opportunities, but challenging choices remain

Auto industry leaders globally will see more profitable growth over the next five years, with global electric vehicle (EV) sales predictions for 2030 becoming more realistic. Yet, the leaders in KPMG’s 23rd Annual Global Automotive Survey are also worried about short-term growth due to issues with raw materials and parts availability and macroeconomic concerns like inflation and interest rates.

The survey comprises over 900 auto executives, including over 250 in the US, across the auto industry ecosystem in 30 countries worldwide. The study looks at the global outlook, the future of powertrains, digital consumers, vulnerable supply chains, and new technologies and entrants.

What was once thought of as future of the automotive industry is nearer than we think. And auto leaders are more optimistic about growth over the next five years than last year, with 82% of US auto executives confident of long-term, profitable growth over the next five years, compared with 67% in 2021. 

The future of powertrains

The expectations of electric vehicle (EV) sales are becoming more realistic, with US respondents predicting almost 40% of total new vehicle sales in the US will be EVs by 2030. In last year's survey, US respondents indicated EVs would be 62% of new vehicle sales by 2030.

Auto companies have made significant investments in the future of EVs. Car customers will have various choices after automakers committed to investing more than $500 billion in EVs by 2026. These investments are going towards electric-battery plants, semiconductors, autonomous systems, software, electronics, and cutting-edge developments.

An essential part of the customer experience is consumer affordability. When asked when EVs reach production cost and consumer affordability would be on par with gasoline-powered vehicles, 45% said by 2030, 23% by 2025 while 10% said they already have. But this won’t be achieved without technological advancements from new and existing companies in the EV space.

Supply Chain

As the reality of EVs gets closer, automotive leaders are concerned about the continued availability of components and raw materials. About 66% of US auto executives remain very or extremely concerned about supplies of commodities and components, such as semiconductors (64%), lithium and other battery components (64%), rare earth elements (64%), specialty metals (e.g., high strength and electrical steel) (66%), and lightweight materials (67%).

Automakers and their suppliers are making changes to their supply chain strategies. There was an increase over the course of 2021 in the number of respondents who say that near-shoring and reshoring are very important, as well as the direct sourcing of raw materials and investments in suppliers.

New Technologies 

One of the most surprising findings from the survey was that many auto executives think Apple will enter the car market and become a leader in EVs by 2030. Apple is now ranked 4^th by US (and all) auto execs surveyed among those who are expected to be lead, up from 11^th among US respondents in 2021.

If companies are making advancements every day to propel the auto industry forward, they might anticipate that things will accelerate even more in the years to come. The automobile industry is evolving at a furious pace, and the businesses that can make better judgments faster than their competitors will most likely come out on top. The choices that leaders make now will pave their future. There are several paths that can lead to success and several that can lead to failure. 

The survey findings help frame some strategic questions that can assist automakers in making these critical decisions: 

• Should companies go it alone, form alliances, or do joint ventures? With whom and why?
• How should they allocate capital among the different powertrain ecosystems?
• What role will contract manufacturing play in the future of the industry?
• What does a reimagined customer experience look like?
• How important should autonomous systems be to our strategy?

The automobile industry has rarely confronted such a wide range of possibilities and difficulties. Executives see a future with significant changes in powertrains, customer interactions, revenue models, production methods, technologies, and data flows. Business model innovation on a worldwide scale is anticipated throughout the upcoming decade. However, their current capacities won't be sufficient to carry them through. They should get ready to be stretched more than ever.

Read more of the survey findings here, where you can also interact with and filter the data for many more insights. To interview KPMG Global Automotive Leader Gary Silberg, please contact Hannah O’Toole.