Automotive Executives Say Demand for Low-Cost Cars Will Increase

A new survey reports that automotive executive around the world see fuel-efficient, low-cost cars increasing market share over the next five years as consumers shy away from SUVs and luxury vehicles.

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

Based on interviews with 140 senior executives at vehicle manufacturers and automotive suppliers, the KPMG survey 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 half decade.

"Automotive leaders are cognizant of the lasting impact of rising gas prices on the minds of consumers," Betsy Meter, audit partner in KPMG's automotive practice said in announcing the results. "The focus right now is on producing fuel-efficient vehicles that will meet consumer demand."

Auto executives were asked their opinions on a number of categories of vehicles over the next five years and ranked hybrid cars. Hybrids and low cost cars ranked significantly above all other categories, although the executives anticipate cars overall and cross-over vehicles 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 SUVs 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. Executivess in both Europe and Asia were more optimistic on the sale of larger vehicles. Asian respondents are more optimistic about luxury vehicles and pick-up trucks compared with their North American and European peers.

"While there are regional differences, there is one common theme," Meter said. "Consumers worldwide are now on the same page. They desire a good quality, fuel efficient car."

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.

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