German automakers must merge to persist against rival technology firms: study

BERLIN, Jan. 5 (Xinhua) -- Germany's automotive industry faces a wave of corporate mergers in face of heightened competition from technology firms, said a study published on Friday by the management consultancy KPMG.

"Especially for mass producers, corporate fusions offer the only hope to survive in the battle against technology giants," Dieter Becker, automotive expert at KPMG told press at the study's presentation in Frankfurt.

Becker argued that existing firms would be well advised to moderate their current level of competition amongst each other as they attempt to come to terms with structural and technological changes in the industry.

Large U.S. firms such as Alphabet and Apple have announced their desire to apply their industry knowledge to the development of new automotive technologies such as self-driving cars and car-sharing.

Becker warned that these companies were well poised to dethrone current market leaders like Volkswagen and Daimler due to their enormous financial resources.

With a market capitalization of around 900 billion U.S. dollars, Apple's market value is roughly 10 times as high as that of Volkswagen or Daimler.

"The 50 largest automakers only account for 20 percent of the market capitalization of the 15 largest technology firms," Becker warned. As recently as 2010, this percentage had still been 40 percent.

KPMG based its findings on a global survey of over 900 managers from the automotive and technological sectors, as well as 2,100 consumers.

Three quarters of managers (74 percent) believed that the share of total cars produced in Western Europe would sink from currently 15 percent to under five percent by 2030. Respondents also expected the number of car dealerships to decline dramatically by between 30 and 50 percent until 2025.

However, while technology firms have invested large sums in automotive production, their sales and profits in the sector still lag far behind those of established manufacturers. For example, shares of U.S.-based electric-automaker Tesla dipped after the company revealed weaker-than-expected deliveries of its new Model 3. As of its latest available annual earnings figures published in 2017, Tesla yet to post a profit since it was founded.

By contrast, Volkswagen saw operating profit rise by 15 percent to 4.98 billion euros (5.99 billion U.S. dollars) in the third quarter of 2017 despite the economic damage of the ongoing "dieselgate" and "cartel" scandals. Enditem