If Toyota wants to remain the top automaker worldwide, it needs to focus on growing sales in developing markets.
The auto industry’s “Last Frontiers” around the globe are in four regions spread across South America, Africa and Asia where car sales will grow faster than in China between now and the end of the decade, according to a new study by the Boston Consulting Group (BCG).
Car sales are set to explode in the Andes Region, North Africa, the Middle East – where Iran and Saudi Arabia are poised to become substantial markets – and in Southeast Asia where Indonesia vehicle sales are growing.
All four regions have been scared over the years by terrorism, cycle of economic boom and bust and acute poverty. Nonetheless, the economies in all four regions are expected to grow at a pace that will sustain rapid growth in car sales, noted Xavier Mosquet, senior partner in charge of BCG’s Detroit office.
The report also contained upbeat news for Toyota, which is struggling to hold off General Motors and Volkswagen. Toyota is the dominant brand in both the Southeast Asia and the Middle East. But GM/Chevrolet is dominant in the smaller Andean market and Renault has an edge in North Africa.
Volkswagen is second to GM in the Andes, but Kia holds the second position now in the Middle East and Hyundai is second in North Africa, indicating both Korean brands have been aggressively looking for new markets beyond the U.S. and European Union.
Southeast Asia, however, is a Japanese bastion with five different Japanese automakers, including Honda, Mitsubishi, Isuzu and Nissan, holding the biggest shares, according to BCG’s survey.
The firm’s analysts, however, said the fact the four regions are made of diverse countries and cultures mean the automakers must develop well-honed strategies that can bring the right vehicle into the local showrooms across all four markets.
“The subscale size of many of the ‘Beyond BRIC’ markets makes a stringent regional approach necessary,” according to the study.
BRIC refers to expanding economies of Brazil, Russia, India and China, all of which have substantial populations with rising incomes, a growing middle class yearning for vehicle ownership. They have been the main expansion of targets of major automakers, such as Ford, GM, Volkswagen, Toyota and Renault/Nissan during the past two decades.
However, carmakers and suppliers should be looking beyond the BRIC markets as the newer markets will account for one-fifth of global new-vehicle sales through 2020.
“Brazil, Russia, India and China have generated substantial growth opportunities in the last decade and will certainly be vitally important over the coming decade,” the report said. “But we believe that concentrating on BRIC markets alone will be insufficient to ensure longer-term success.”
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They offer opportunity for growth in a world in which established markets are largely characterized by stagnation or low growth and the key stakes have already been distributed in the BRIC markets,” Boston Consulting said in a separate statement.
Countries in Southeast Asia, including Indonesia, Malaysia and Thailand, are forecast to have new vehicle sales of 4.6 million by 2020, which is larger than Russia’s sales.
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Middle Eastern countries, including Iran, Saudi Arabia and Turkey, may have 5.8 million sales in 2020, larger than 5.2 million forecast for Brazil, the study said.
“These regional clusters should be on the growth list of every OEM and supplier with ambitions to be a truly global player,” Thomas Dauner, a senior partner at the consulting firm and co-author of the report, said in the statement.