MUMBAI, 12th December 2024 – In the Industrial Manufacturing and Automotive sector 74 per cent CEOs are confident about the global economy’s growth prospects a survey of 240 sector leaders from across the world finds. Also, industrial manufacturing and automotive CEOs report high levels of confidence about the outlook for their industry, with 80 per cent seeing good growth prospects .
The report which is a sector cut of the KPMG 2024 CEO Outlook, now in its tenth year globally, reveals economic uncertainty is a predominant concern, cited by two thirds of industrial manufacturing and automotive CEOs, while the race to embed generative AI and other technologies (53 per cent) and geopolitical complexities (45 per cent) are also top of mind.
Alongside M&A to drive growth by vertically integrating businesses (with 45 per cent of CEOs describing their deals appetite as ‘high’), a strong employee value proposition to attract and retain key talent, and advancing digitization and connectivity across the business, are also seen as key levers. Organic growth and M&A too are both on the agenda. However, more automotive CEOs see M&A as a strategically important growth lever for the next three years (29 per cent ), while for industrial manufacturing inorganic growth is a little more prominent (31 per cent).
The economic picture may be shadowed by uncertainty — but industrial manufacturing and automotive CEOs are sure that embracing innovative technologies including AI, and embedding them deeper into manufacturing and assembly processes — which are already transforming as Industry 4.0 takes hold — is a path towards future growth and productivity.
It is interesting that new technology such as AI is viewed as both an opportunity and a challenge. In particular, Gen AI has become a major investment priority — especially for automotive CEOs ( 63 per cent) than in industrial manufacturing where the majority (68 per cent) are neutral
They are also very cognizant of the challenges and barriers involved with Gen AI such as ethics, regulation, and costs, as referenced earlier. Two thirds of CEOs feel that regulation needs to move quickly to provide clarity, as a slow pace of regulatory progress will be a barrier to their organization’s success.
An even bigger proportion (73 per cent) believe that the degree of AI regulation should be proportionate, mirroring that for climate commitments. The highest proportion of CEOs (60 per cent) flag the IT function as the biggest area in their businesses for Gen AI adoption, but sales & marketing is not far behind (57 per cent) while manufacturing is a key area for automotive specifically (50 per cent), and research & development is seen as another domain ripe for its use (40 per cent) — suggesting a wide range of potential use cases across the enterprise.
This year’s survey shows that building trust is seen as a key priority. Three-quarters of industrial manufacturing and automotive CEOs believe that engaging with communities is important. The same proportion also say they would be willing to divest a profitable part of the business that was damaging the organisation’s reputation. Six in ten CEOs say that stakeholder expectations around ESG change more quickly than they can adapt their strategy. In response, CEOs are demonstrating agility with 67 per cent saying they have changed their communication strategies around ESG.
Reaching net zero is a critical element in the decarbonization agenda — and by far the biggest barrier to achieving it, according to industrial manufacturing and automotive CEOs is decarbonizing the supply chain (56 per cent). Just as supply chain was a top risk for industrial manufacturing CEOs specifically, so it stands out as by far the biggest barrier for them to achieving net zero (cited by 74 per cent of CEOs). This is much higher than for automotive CEOs (38 per cent), albeit supply chain is the biggest barrier in automotive too.
Despite the advent of AI and advanced technology, 74 per cent of industrial manufacturing and automotive CEOs believe this won’t impact the overall number of jobs, even if it does bring with it an upskilling need and the redeployment of some existing resources.
With talent high on the agenda, CEOs recognize that generational issues could be brewing that require their attention, with this perception being more marked amongst industrial manufacturing CEOs compared to automotive. There is a risk of struggling to replace retirees who have built up years of knowledge and experience if Millennials and the new generation aren’t attracted to the industrial manufacturing environment. CEOs recognize the importance of their response to social issues as levers to keep younger staff motivated, engaged and on board.
Jeffry Jacob, Partner, and Head (automotive) KPMG in India said “A sense of optimism laced with a bit of caution is how I would sum up the mood amongst industrial manufacturing and automotive CEOs. That said, economic conditions have stabilized with costs having reduced, which means sustained earnings growth is something we could see. Geopolitical Uncertainties are a key concern. How that plays out — including impacts on oil prices — could have a significant impact on future trading scenarios.”
Rohan Rao, Partner, Automotive and Lead- Electric Mobility, KPMG in India said “A good amount of consolidation and deals are expected in the automotive industry over the coming years. This is not only because of some overcapacity that we are witnessing in the market but it’s also a result of original equipment manufacturers (OEMs) feeling the need to acquire new capabilities in areas such as microchips and batteries for EVs. This could spawn growing number of partnerships and JVs as well as outright acquisitions.”