We’ll spare you the awful cliches about failing to learn from the past and get right to the point. “Emerging markets” like China and India are all the rage right now for profit-hungry car makers, but the same problems of too much supply and weakened demand could spell doom for OEMs if a similar situation pans out in the locales that automakers are banking on to help propel their recovery.
A report released by multinational consulting firm KPMG was blunt in its findings, stating “”It does seem likely that China and India will see some overcapacity within the next few years. The industry may have to brace itself for some casualties.” The report was based on interviews with 200 auto executives around the world.
The biggest culprit behind a surprise contraction of the industry would be automakers expectations not matching up with reality. Despite seeing year-over-year growth of over 30% in China and India, the potential exists for automakers to “overbuild” by as much as 20 percent. China’s recent limits on the number of vehicles its allowing to be put on the road could play a big role in this phenomenon. India, on the other hand, is already experiencing overcapacity by 17.6%
[Source: The Financial Post]