Car Industry Set To Flourish In 2014, Says KPMG

On the back of a positive close to the year for the automotive industry, John Leech, KPMG Head of Automotive, looks ahead to 2014 and predicts that the industry is going in the right direction, with car production and sales in both the UK and EU set to increase.

Highlighting increases in sales and production, Leech said: “2013 has been fantastic for the automotive industry, the latest UK car manufacturing figures highlighted that 1,286,287 cars were produced in the first 11 months, a rise of 5.4 percent with sales also up by 9.9 percent. The current sales and production run rates are back at pre-recession levels last seen in 2008.

“UK car sales will grow in 2014 but at a slower rate than in 2013 as we are almost back to our natural long-run average.  The rate of growth depends principally on when the car manufacturers pull back on the cheap credit that is currently pump-priming the market.  If this cheap credit remains available throughout next year then there is an increasing risk of oversupply of new cars which could raise anxiety regarding a potential shock fall in used car residual values.

“UK car production will grow again for the fifth year running as European car sales start to slowly rise once more. This should also see European car production finally turnaround and grow in 2014 for the first time in seven years.”

The automotive component supplier sector will also see activity in the coming year, Leech said:  “M&A activity will jump in the automotive component supplier sector from a surge of inward investment into the UK to supply the rising UK vehicle production, which I forecast to reach 1.9 million vehicles in 2017 (up by over 25 percent on 2007 production levels).  By contrast, France, Italy and Spain are expected to be making 33 percent, 28 percent and 17 percent fewer cars in 2017 compared to 2007 respectively. Germany on the other hand will only be just back to where it started from.

Leech continued: “According to KPMG International’s 14th Global Automotive Executive Survey, consumer enthusiasm for electric cars in 2013 failed to ignite but the outlook in 2014 will start to brighten as range-extended battery-powered cars are launched, like the new 2014 BMW i3.”

Forecasting developments in driverless cars, Leech said: “New self-driving features will be deployed in executive cars such as ‘traffic-jam assist’ which will see cars driving themselves in low speed traffic jams.”

“The focus on innovation by the UK government will also help the development of driverless and electric cars. Plans to test driverless cars in the UK by global car manufacturers will push the UK as a player in driverless car technology.”