Fewer two-car families, reduced complexity among firm's auto predictions

A decline in the number of families with two or more cars, increased demand for vehicles in other parts of the globe, and a reduction in the complexity of vehicles are all trends that an auditing firm expects the automotive world to experience in the coming years.

KPMG LLP, an audit, tax, and advisory firm based in Montvale, New Jersey, recently published its findings in a white paper entitled "Me, My Car, My Life." Pete Bigelow, writing for Autoblog, says the report was released at the Los Angeles Auto Show.

"At this moment, every aspect of the automotive business is changing: from how cars are designed, produced, and built; to how they are marketed and sold; to the underlying economics," said Gary Silberg, national automotive industry leader for KPMG and the author of the report. "Not since the first automotive revolution has there been such a massive innovation and displacement of the status quo, where we will see new players surge forth, some old players reinvent themselves, and others totally left behind."

The report notes that some trends are suggesting a gradual shift in car ownership. The share of 19-year-olds with driver's licenses dropped from 87 percent in 1983 to about 75 percent in 2009. The average distance traveled by drivers between the ages of 18 and 34 declined 23 percent between 2001 and 2009, from 10,300 miles per capita to 7,900 per capita. These changes are attributed to several factors, including the price of gasoline, graduated driver licensing requirements, alternate transportation, and changing preferences among younger drivers.

The report also says that the world's population has been shifting toward urban areas since 1950, when 70 percent of all people lived in rural areas. It notes that the United Nations Department of Economic and Social Affairs anticipates that 66 percent of the world's population will live in urban areas by 2050.

Most American households still own multiple vehicles, with 2013 data from the United States Census Bureau showing that that 57 percent of the 115 million recorded households own two or more cars. However, the share tends to be lower in urban areas. Only 13.9 percent of New York City households and 23.4 percent of Philadelphia households owned multiple vehicles.

Silberg says other transportation options are likely to gain popularity, especially in urban areas where they can be more cost-effective than owning multiple vehicles. These include mobility-on-demand services, public transportation, and car and bike sharing.

The increase in such services will give fleet owners a greater share of car ownership and possibly allow them to have more of a say in vehicle design, the report predicts. It also expects a higher rate of vehicle turnover as fleets turn in vehicles more frequently for software updates.

However, the report also warns that manufacturers should be careful not to create vehicles with systems that are too complex. It says doing so increases both the probability of a vehicle recall and the chance that a driver will get frustrated with problems in the design and user-friendliness of the car.

The report predicts that auto manufacturers are also likely to find increased demand in new markets. The report says new demand will arise from markets such as China, India, and sub-Saharan Africa as increasing numbers of people reach the middle class threshold when people tend to purchase a car.

Silberg predicts that the most successful manufacturers will be those that are "nimble, future-oriented, and prepared to invest in new technologies, new talent, and new strategic alliances." He says automakers that do not adapt to changing customer trends will not have the "economic or reputational resiliency" to bounce back from recalls or failed vehicle launches.

KPMG suggests that designing and producing vehicles has become a complex enough process that it is not cost-effective for a single company to manage on its own. It says companies should be willing to invest in new technologies and talent, but also form strategic alliances with other companies.

The report says that automakers will have to analyze customer data to better understand what vehicle features are in demand. It also says companies need to update their economic models to predict capital expenditures, vehicle demand, and profitability due to factors such as more frequent vehicle launches, increased competition, and the connectivity between consumer and automotive technology.

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