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Fuel-Efficient Cars Gaining Market Share

26 January, 2006

Auto Execs See Hybrids And Low-Cost, Fuel-Efficient Cars Gaining Significant Market Share In Coming Years, KPMG Survey Finds

Luxury cars, SUVs losing appeal, especially in North America; Quality and fuel efficiency seen as consumers' most important car-buying criteria

Automotive executives believe strongly that consumers will be opting for fuel-efficient low-cost cars and hybrids over the next five years, over purchases of SUVs and luxury cars, according to the results of an annual global survey of automotive leaders by KPMG LLP, the U.S. audit, tax and advisory firm.

The KPMG survey, based on interviews with 140 senior executives at vehicle manufacturers and automotive suppliers around the globe, found that auto executives believe that quality and fuel efficiency will be the top-two criteria consumers will use in deciding which car to buy over the next five years.

In the KPMG survey auto executives were asked their opinions on a number of categories of vehicles over the next five years and ranked hybrid cars - which combine two power sources, usually as gasoline and electricity - number one, at 88 percent, and low cost cars second, at 79 percent. Hybrids and low cost cars ranked significantly above all other categories, although the execs anticipate cars overall, at 59 percent, and cross-over vehicles, at 48 percent, to increase.

At the other end of the spectrum, most auto executives believe that sales of larger, less fuel-efficient vehicles will decline over the next five years, with only 35 percent predicting an increase in luxury-car sales and 36 percent expecting sales of sport-utility vehicles to rise. They are slightly more optimistic on minivans, at 40 percent. Only 24 percent expect pick-up trucks to increase market share in the next five years.

In breaking the categories down into a regional view, North American execs were more likely see a rise in hybrids and low-cost cars in the next five years. Execs in both Europe and Asia were more optimistic on the sale of larger vehicles, such as minivans and SUVs, and Asian respondents are more optimistic about luxury vehicles and pick-up trucks, compared with their North American and European peers.

When it comes to what consumers will look for most in a new car, 87 percent of executives in the KPMG survey say that car-buyers will mostly base their purchase decision on quality while 84 percent say fuel efficiency. These factors ranked much higher than affordability, at 68 percent, and significantly higher than sales incentives, at 47 percent.

In fact, in the KPMG survey, 45 percent of the executives said that a sizable proportion of American consumers would begin to move away from less fuel efficient vehicles if gasoline prices rose to between $3 and $3.50 a gallon. Another 20 percent said consumers would shift to more fuel efficient vehicles if gas prices stayed in the $2.75 to $3.00 range.

In the KPMG survey, the automotive executives interviewed represented companies in North America, Great Britain, France, Germany, Sweden, India, China, Korea and Japan. KPMG has released an annual survey of automotive executives since 1999.


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