The global automakers' final frontier

October 29, 2013: 5:00 AM ET

To keep up sales growth, car companies need to enter the so-called beyond BRIC markets -- which include countries as large as Indonesia and as small as Belize.

By Doron Levin

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FORTUNE -- If global automakers want to benefit from sales growth over the next decade -- as they do now in Brazil, Russia, India, and China (the so-called BRIC nations) -- they must figure out how to sell in four major regional clusters where vehicle ownership has been sparse.

The Middle East, despite its political instability, is likely to be the largest of the four regional clusters that constitute the "Final Frontier" for global automakers. The other three are Southeast Asia, the western half of South America, and North Africa, according to a study from the Boston Consulting Group.

The so-called beyond BRIC markets -- which include countries as large as Indonesia and as small as Belize -- could collectively account for 21 million vehicle sales annually by 2020, up from 15 million currently and representing an annual average growth rate of 6%. That would result in a larger vehicle market than China's, currently at 17 million in annual sales, and bigger than North America or Europe.

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"The top 15 countries in this group will be incredibly important," says Xavier Mosquet, who leads BCG's global automotive practice. This top tier includes emerging market countries that should have sales of at least 400,000 vehicles annually by 2020.

Toyota (TM) currently is the top-selling automaker in Southeast Asia and in the Middle East, while General Motors' (GM) Chevrolet division is the top seller in the South American countries stretching from Colombia through Chile. French automaker Renault and its Dacia brand lead in North Africa.

Automakers vying for a substantial share of the rising markets will be forced to think in terms of regional clusters, since none of the countries will come close to generating the sales of a single BRIC market, according to Nikolaus S. Lang, a BCG partner and co-author of the firm's auto study.

Within geographic clusters, consumers from different countries are expected to exhibit a broad and eclectic range of tastes and preferences, so automakers will not be able to simply export models that have been successful elsewhere. They will have to develop new versions and figure out how to manufacture locally.

In Turkey, for example, shoppers are interested in compact and subcompact cars, which account for more than half the auto market there. But in adjacent Iran, smaller minicars are most popular. Saudi Arabian buyers aspire to big SUVs and pickups, which account for 35% of the market. According to BCG, the emerging Middle East could see sales of 5.8 million vehicles annually by 2020 -- making it a bigger car market than Brazil.

U.S. automakers GM and Ford (F) have their work cut out if they intend to gain from the growth in Southeast Asia and the Middle East. The Chrysler-Fiat partnership is far behind and must come up with a strategy to keep from being shut out. It won't be simple for any automaker, because each country has particular rules, specifications, cultural traits, and tax policies that require adaptation; in the case of small countries, even if automakers can adapt, they won't be rewarded with a large number of sales.

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But creativity could pay off. Chevrolet devised a clever financing plan for Colombia, Venezuela, and Ecuador that allows a group of buyers to purchase cars collectively, take delivery sequentially according to a lottery, and save up to 18% on the total payment with no money down. The ChevyPlan accounts for 12% of Chevrolet sales in Colombia.

Bicycles, scooters, oxcarts, and bus transportation finally are giving way to automobiles in emerging economies. A few global automakers are bound to be big winners.

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