BRIC to account for 40% of auto sector assembly growth: PWC

New Delhi, Sep 25 (UNI) The Brazil, Russia, India, China (BRIC) countries will account for more than 40 per cent of the forecast global light vehicle assembly increases, and represent 52 per cent of the industry's forecast global capacity expansion.

These factors are reflected in the fact that nearly all major global automakers are pursuing a BRIC strategy in some form, as they attempt to gain competitive advantage by tapping the potential of these emerging markets, the findings in the annual 'Global Automotive Financial Review' by Price waterhouse Coopers (PWC) said.

It is the eighth edition of an extensive collation of research on the sector, which also includes summaries of financial data, trends and practices as reported by 40 leading global vehicle manufacturers and suppliers.

Corporate bankruptcies, restructuring efforts and plant closures have been seen in the past few years, and massive structural changes like high raw material prices and razor thin profit margins against a backdrop of increases in the level of global competition, are seen gaining momentum, which will peak as the entire automotive value chain struggles to adapt to new market realities, the PWC study said.

As per the report, the emerging strength of the BRIC countries is common to all manufacturing sectors. Companies that maintain a ''business as usual'' strategy or wait too long to act will find it extremely challenging to sustain momentum as the competitive environment transforms around them.

As the auto industry becomes more global and markets more competitive, the winners will tend to be those companies that fully capitalise on the opportunities in emerging markets - from the perspective of both sales growth and cost reduction, the report added.

''The Indian automotive manufacturing sector is poised to grow, with increasing domestic market in India being projected as the 'hub' for small cars. All the major global vehicle manufacturers have either established or are in the process of establishing their presence in India,'' PWC Automotive Industry Leader Ramesh Rajan said.

He added that, however, the industry needs to work with the government to address some of the key areas such as inadequate infrastructure, high direct and indirect tax regime, inflexible labour laws, etc, to ensure that the industry is able to seize the opportunity and achieve the potential growth.

The Indian automotive manufacturing sector is projected to increase, and almost every major global vehicle manufacturer is establishing assembly facilities here. Companies are increasingly establishing design and research centres in India, in addition to its more established role as a low cost global sourcing destination.

With a reduction in the rate of excise duty on the manufacture of small cars, (engines with a maximum displacement of 1,200 cc and an overall length under four metres) India is seen as a new global manufacturing hub for small cars.

Like other markets, there remain challenges like inadequate infrastructure, rising input costs and a high level of corporate taxation. However, the automotive industry will need to work closely with the Indian government to address these challenges and leverage advantages to market the ''made in India'' brand.

Brazil's intensively competitive environment is exacerbated by excess capacity, high rates of taxation and interest, weakening consumer purchasing power and a lack of adequate consumer financing tools.

A unique characteristic of the Brazilian automotive market is the predominance of flex-fuel engines, which run on gasoline, ethanol or any blend of the two.

Brazil, however, cannot sustain its position without robust local market demand. Despite this, the country continues to be a key market for global automakers.

The automotive market is one of the most dynamic sectors of the Russian economy. In dollar terms it has increased in value by 27 per cent over the last three years and further growth is expected.

Growth of local production of foreign brands looks set to increase by as much as 375 per cent in the next seven years. To support this growth many more global suppliers are expected to invest in Russia.

China is the fourth largest auto producer in the world, following the US, Japan and Germany. It is expected to overtake Germany this year. In 2005, China contributed 23 per cent of the total growth of the global automotive industry.

A fundamental driver of sustainable growth in the domestic automotive market is the growth of the ''middle class'' earnings bracket (7,400 to 14,800 dollars). Currently this represents 50 million people and is expected to triple by 2010.

PWC provides industry focused tax and advisory services to build public trust and enhance value for its clients and their stakeholders. It has offices in Bangalore, Bhubaneshwar, Chennai, Hyderabad, Kolkata, Mumbai, New Delhi and Pune.

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