DETROIT -- For at least the next decade, the future of the automotive industry lies in the BRIC countries. Together, Brazil, Russia, India, and China, also known as the “BRIC” countries, will account for 30 percent of world auto sales in 2014 -- while also offering significant opportunities for cost-effective R&D, sourcing and manufacturing, says a new report released today by The Boston Consulting Group (BCG), a global management consulting firm and leading advisor on business strategy.
Yet, although virtually all multinational automotive OEMs and tier 1 suppliers have set up operations in the BRIC countries, they are not fully capturing those markets' strategic potential because the operations are not deeply localized, says BCG.
Because these countries differ dramatically in market development and local capabilities, as well as in consumer preferences, companies must devise country-specific approaches to localization, as well as strategies that span all four countries, BCG contends.
"Auto companies cannot succeed in these markets by offering one-size-fits-all BRIC products, processes or approaches," said Nikolaus Lang, a Munich-based partner and lead author of the report. "To realize the full value of localization, the key is knowing which functions are best suited to which BRIC countries."
The BCG report analyzes the challenges and opportunities associated with localizing R&D, sourcing, manufacturing and sales in each of the four countries. The findings are based on the firm's experience and more than 250 interviews conducted with senior executives at the leading auto OEMs and suppliers that are active in those countries.
Exceptional Growth Opportunities Through 2014
While the economic crisis plunged many of the world's auto markets into free fall, markets in the BRIC countries generally performed strongly in 2009 and "now offer prospects for exceptional growth," says the report. Whereas auto sales in the Unites States, Europe and Japan will grow only moderately from early 2009 through 2014, at an average rate of some 2 percent per year, sales in the BRIC countries will grow by more than 6 percent per year, BCG predicts.
In 2009, Brazil's market grew 11 percent, India's 13 percent and China's a staggering 42 percent -- while Russia's market shrank by 48 percent. The first three markets will continue growing relatively steadily through 2014. While Brazil's market will grow at about 3 percent per year, China's market will grow at about 5 percent per year and India's at about 9 percent per year. In contrast, auto sales in Russia, which dropped by one half in 2009, are expected to stabilize in 2010 and then grow some 15 percent per year through 2014. The Russian market's development is hard to anticipate, however, because it will hinge on external factors, such as prices of raw materials.
China will remain by far the largest of the four auto markets, expanding its share of total BRIC sales from 53 percent in 2008 to 61 percent in 2014. Brazil is the most mature and stable of the BRIC markets and is likely to remain the second-largest of the four through 2014. India will grow rapidly and remain the third-largest BRIC market through 2013. In 2014, the Russian market's strong postcrisis recovery is likely to propel it up into third place, nudging India down to fourth place.
