Germany's car industry needs to speed up work on new technology and shift its focus to smaller models to remain competitive with Chinese and Indian companies, an Ernst & Young LLP consultant said.
Automotive executives in Europe indicated in a survey that they may put off research spending, Peter Fuss, a partner at Ernst & Young, said at a press conference in Frankfurt yesterday. Innovation ranked eighth among managers' immediate priorities, rising to second place only in three years.
Manufacturers such as Volkswagen AG, Bayerische Motoren Werke AG and Continental AG have cut production as they confront the worst auto market in six decades. General Motors Co. and Ford Motor Co., the two largest U.S. carmakers, are selling European units as they reorganize to stem losses. Half of the respondents in the August survey of 300 executives at carmakers and suppliers predict consolidation in 2010, Ernst & Young said.
"We see a great danger that urgently needed investment in state-of-the-art technology, particularly for engines and reduction of fuel consumption, will succumb to cost cutting," Fuss said. "Developing new engine technologies has become so expensive that we'll see an increasing number of mergers and cooperation agreements."
Luxury auto manufacturers in Germany may need to look at building smaller, more fuel-efficient models to win back customers, Fuss said. About 70 percent of managers in the survey foresee sales of small cars increasing until 2014, while only 19 percent predict delivery gains for high-end models and 45 percent expect a decline, according to Ernst & Young.
