Report Reveals Final Automotive Frontier


  • "Beyond BRIC" Picture

    "Beyond BRIC" Picture

    Emerging auto markets in places like Iran and Saudi Arabia may influence future automotive design. | October 22, 2013

Just the Facts:
  • Countries like Iran, Saudi Arabia and Malaysia are the final frontier for automakers, according to a new report, and they may influence future automotive design.
  • Automakers looking to enter such markets should take into account the need for vehicles to resist damage from rocks, water and road debris, due to rugged conditions.
  • Vehicles should be designed to run on lower grades of fuel than is commonly found in traditional markets.

DETROIT — According to a new report by international business advising firm Boston Consulting Group, automakers seeking the best opportunities for future growth should look past the emerging markets of Brazil, Russia, India and China.

Citing the decline of sales in Europe and Japan, as well as the impact of the economic downtown on U.S. manufacturers, the report, Beyond BRIC: Winning the Rising Auto Markets, states: "Geographic diversification has never mattered more to the automotive industry than it does today."

To maximize growth potential, the report advises automakers to concentrate on the ASEAN nations, including Indonesia, Malaysia and Thailand; Middle Eastern countries like Iran, Saudi Arabia and Turkey; North African countries such as Algeria, Egypt and Morocco; and the Andean nations, which include Argentina, Chile and Columbia.

Although sales in the BRIC countries will continue to increase over the next decade, the report says the regions it has now identified as "the last frontier" for the automotive industry, will account for one-fifth of worldwide new-vehicle sales through 2020. That's a growth rate of 6 percent, or four times higher than traditional markets like the U.S., Canada, Europe, Japan, Australia and New Zealand.

While acknowledging that individual automakers have made significant inroads into one of these regions, the report states that none has successfully penetrated all of them. And no manufacturer has really been able to dominate any of these markets.

In order to do so, the report advises taking a strategic approach by cluster, rather than by individual country. None of the "Beyond BRIC" markets, it notes, can generate sales on its own to equal those of any one of the BRIC countries. Taken together, however, these regions present a powerful opportunity for automakers.

On the other hand, the report cautions that diversity within each cluster will require highly specialized approaches. As one industry executive told the authors of the report: "The big challenge for OEMs is finding a regional approach, within which they can treat markets individually."

For example, in some areas, poor road conditions make ruggedness and extra ground clearance important considerations. According to the report, OEMs looking to enter such markets should take into account the need for vehicles to resist damage from rocks, water, and road debris.

In other regions, where fuel quality is inconsistent, vehicles should be designed to run on lower grades of fuel than is commonly found in traditional markets. Similarly, the report says, vehicle technology could be an issue in areas where highly trained service personnel are scarce. For those markets, simplicity of design and ease of repair would translate to higher sales.

Customers living in regions with extreme heat will expect even the lowest-priced vehicles to be air-conditioned. Those in crowded urban areas will respond best to automatic transmissions. And in countries with high fuel prices, many buyers will be looking for a broad selection of diesel-powered vehicles, and most will eschew any car with an engine larger than 1.6 liters.

Although the challenges are many, the report, based on an analysis of 88 "Beyond BRIC" markets, stresses the considerable opportunity for automakers who move into these regions. It also cautions: "Those that fail — or fail to try — will be shut out of the industry's last frontier, the last great global opportunity for large-scale growth."

Edmunds says: Although global sales trends can be hard to predict, the findings of this report should prompt manufacturers to look more closely at these markets.

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