Uwe Achterholt heads automobile vertical for KPMG, the global consultancy network. Mr Achterholt has been involved in numerous international projects in the past and was named Global Lead Partner for the Siemens group in 1998 and Advisory Lead Partner for BMW in 2007. Over the last few years, he has focused on the areas of merger-related process integration and worldwide markets.

He is based in Germany and was recently in India. Taking some time out of his two day hectic visit, he shares his global perspective with ET Automania on automobiles and the emergence of India as a low-cost hub for engineering and valued added services. Excerpts of the interview.

Q: What is the scenario of the global automobile industry and what changes are expected in near future?

A: Earlier there was lot of optimism and buoyant market conditions, which was maintained till the last quarter of 2007 but after the sub-prime crisis there is pessimism and the worst is not over. The industry is still going through a stage of transition and phase of re-structuring. Companies are going for major cost-reductions and shifting base to low-cost countries like China and India. There is a renewed focus on sustainability and the environment, an increase in growth-orientated investment, rising popularity of passenger cars and fuel-efficient vehicles, and higher projected sales of hybrids.

Q: After the Tata Motors success with the acquisition of Jaguar and Land Rover, will there be more mergers & acquisitions in the near future?

A: While M&A activity is expected to decline over the next five years among manufacturers, it is expected to rise among suppliers (especially Tier 1 suppliers) and dealers. Executives continue to see alliances and mergers as significant vehicles for industry restructuring and new market entry. Continued high levels of activity are predicted in Asia, Eastern Europe and other developing markets. Like Tata Motors we fell there will be more Indian companies looking for deals in Europe and North America.

Q: In that scenario what role does India in the global space and what is in store for the market in the future?

A: India's future is bright future and very good changes for development and it has immense ability to catch up on technological and quality fronts. With a strong engineering base and quality controls it take a major share in developing future technologies. While there is some concern over the product development in the short-term, its advantages in IT and strong engineering talent will become a major destination for future product development.

Q: What is does future hold for the BRIC counties?

A: They will see a major growth in near future. All the economies will be growing on the back of strong domestic demand, which may be a bit less in Brazil while China, India and Russia will be major growth markets for the next few years.

Q: So will that make China and India a major force in automobiles. Will that make a formidable Asian force in the global auto market?

A: No, I do not see that happen, as there are differences on many counts. They may have many common interests and synergies, but they are more of competitors as they have different structures. For India language (English) and strong IPR are the advantages, while China has much higher level of infrastructure and scale of production apart from them they have huge domestic market. India needs to catch up on its strength to take up the Chinese challenges.

Q: What are the areas where Indian automobile companies need to work?

A: They have to improve their quality standards. Not many vehicles from Indian company are available in any developed markets. Many Indian auto makers have tried to enter in the past but have failed either on quality or performance. Here the standards are quite low and will take some time to meet the international levels. While Tata Motor's new small car Nano has created ripples in the international market, it is yet to prove itself in the international market.

For India, components have been a major strength. Do you see it becoming a force to reckon with in near future? Indian components are available worldwide but they are only targeting the after market. Very few are being sold directly to original equipment manufacturers' (OEM). Even if small quantities are being procured, they are minor equipment and no critical parts are being sourced. As far as bigger markets are concerned, like Germany and Europe, people are sceptical about their quality and prefer local spare parts to them.