North America Light Vehicle Outlook - IHS MarkitNorth America Light Vehicle Outlook . October 3,...

North America Light Vehicle Outlook

October 3, 2012

Guido Vildozo Manager, Latin America IHS Automotive

Copyright © 2012 IHS Inc. All Rights Reserved.

Presentation Outline

Global Vehicle Sales Forecasts

North America Overview

United States

Mexico

Summary


External Shocks to The Global Auto Industry

Spluttering Along

Spain & Italy Defaults, Eurozone Breaks Apart Global Financial Crisis II (Early Vortex)

Greece Exits

RECOVERY Re-ignites

Sub-Prime Crisis Bear Sterns

Oil Hits $147

Lehman Bros

Economies Rebound (inventory)

Libya, Arab Spring, Oil Surges

Japan Disasters

Greek Debt Crisis kicks off

Liquidity Freeze

Global Great Recession

US Debt Ceiling Debacle Downgraded

Is Greece Europe's Lehman Bros ?

Confidence Slumps

Markets Drag Italy Into PIIGS Class

Inflation Surges in Emerging Markets

TARP China Stimulates

Banks Recapitalised, Nationalised, Guaranteed

Fiscal Pump Priming

Private Sector Debt => Sovereign Debt

Confidence Slumps

Banking System is Stabilized

Consumer De-leveraging

Mature Economies Growth Fades

Consumer De-leveraging Still There

Polic

y R

espo

nse

Event or Shock

QEII Interest Rates Slashed, QEI

Auto Incentives Europe, China, Brazil, Japan, US India

Auto Incentives Ending

Auto Incentives Phasing out

Auto Bail Outs, Financing and Restructuring

World Auto Sales Track

Cooling Measures In EM

Japan Supply Chain Crisis

Fiscal Tightening Accelerated

Successive EU Summits -no silver bullet

Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12ECB (LTRO)

ESM

Iran embargo

?


Global Light Vehicle Sales

50

60

70

80

90

100

110

120

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Mill

ions

BASE OPTIMISTIC PESSIMISTIC

.

% CHANGE 2011 2012 2013 2014 2015 BASE 4.3% 4.7% 3.1% 6.7% 5.9%

Copyright © 2012 IHS Inc. All Rights Reserved. 5

Light Vehicle Sales: Top Ten Manufacturers

0

2

4

6

8

10

12

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Mill

ions

Volkswagen-Porsche Toyota General MotorsRenault-Nissan Hyundai-Kia FordFiat Auto-Chrysler Honda PSASuzuki

Units/MM Global players, look for more cooperation among OEMS in the future


Light Vehicle Sales: Greater China the New Colossus

0

5

10

15

20

25

30

35

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Mill

ions

% CHANGE 2011 2012 2013 2014 2015 BASE 3.6% 7.2% 8.7% 10.7% 8.9%

Sales struggling a bit this year, soft landing is key to long-term growth


Light Vehicle Sales: Western Europe

12

13

14

15

16

17

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Mill

ions

Units/MM

% CHANGE 2011 2012 2013 2014 2015 BASE -0.3% -8.8% -2.0% 5.5% 5.3%

Fiscal austerity will limit long term recovery


Light Vehicle Sales: Western Europe

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Mill

ion

s

France Germany Italy Spain United Kingdom

% CHANGE 2011 2012 2013 2014 2015 France -1.4% -10.5% -4.2% 5.9% 2.7% Germany 9.7% -2.2% -0.1% 4.1% 1.7% Italy -9.9% -21.5% -1.0% 7.6% 11.8% Spain -17.0% -16.7% -2.4% 13.1% 24.3% UK -2.3% 1.1% -0.8% 5.6% 5.6%

“Southern Tier “ takes big hit, “Northern Tier” never regains scrappage peak


Light Vehicle Sales: Eastern and Central Europe

2

3

4

5

6

7

8

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Mill

ions

Units/MM

% CHANGE 2011 2012 2013 2014 2015 BASE 23.8% 3.3% 3.0% 9.3% 6.0%

Russia drives short term gains, other EE and CE sustain long term growth


Light Vehicle Sales: North America

10111213141516171819202122

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Mill

ions


% CHANGE 2011 2012 2013 2014 2015 BASE 9.3% 10.3% 3.8% 5.2% 3.7%

US leads recovery, but Canada and Mexico having a strong 2012


Light Vehicle Sales: South America

1

2

3

4

5

6

7

8

9

10

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Mill

ions


% CHANGE 2011 2012 2013 2014 BASE 9.3% 5.5% -0.6% 6.1%


Auto Industry, Balancing the “Old World” and “New Frontiers”

Triad Markets

(West Europe, Japan, North America)

‘E7’ (China, India, Brazil, Russia, Indonesia, Mexico and Turkey)

G7 (Germany, France, Italy, Japan, United Kingdom, Russia, Canada, USA)

BRIC (Brazil, Russia, India,

China)

VISTA (Vietnam, Indonesia, South Africa, Turkey,

Argentina)

MIST (Mexico, Indonesia, South

Korea, Turkey)

GCC (Gulf Cooperation Council)

N-11 (Next 11 - Bangladesh, Egypt, Indonesia, Iran,

South Korea, Mexico, Nigeria, Pakistan, Philippines, Turkey and Vietnam).

CEMENT (Countries in Emerging

Markets Excluded by New Terminology)

CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa)


Country Vehicle Penetration Scatterplot Reveals Strong GDP-Vehicle Need Relationship

Vehi

cles

In U

se P

er 1

000

Peo

ple

GDP Per Capita (in thousand 2005 US$)

US

Sweden

Russia

S Korea

Japan

Australia

Brazil

Italy Slovenia

Spain

China

Poland Czech Rep

Canada

UK France

Germany

Taiwan

India

Thailand

Hungary

Mexico

Turkey Chile

Linear Trend: Each $1000 increase in wealth leads to 15 more vehicles

per 1000 people.

Source: CY2010 Data, IHS Data Insights


y = -0.0000003749x2 + 0.0272263164x - 76.5859828870R2 = 0.7429749568

-100

0

100

200

300

400

500

600

0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 55000

14

Global Light Vehicle Developments International Passenger Car Saturation Model

GDP Per Capita PPP in USD (2005)

Car density per 1000 pop


Global Light Vehicle Developments Global Sales Forecast

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000 Beyond BRIC BRIC Mature

Key Information: • In 2000 about 80% of global light vehicle demand came out of mature markets. In 2012 this already decreased to 48% and by 2019 it will have reached 40%.

• Mature markets are not forecast to return to pre crisis 2007 volumes again. The general economic situation in various countries, demographic changes, increasing costs of ownership and different trend perceptions are only a few reasons for this development.

• China itself will contribute around 28% of global demand by 2019.

78.7 million

105.5 million


Old Worlds and New Frontiers

05

101520253035404550

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Mill

ions

TRIAD BRICS ROW

Units/MM

ROW = Rest of World

BRICS = Brazil, Russia, India, China

TRIAD = North America, Western Europe, Japan

ROW – Iran, Saudi Arabia, South Africa are the volume leaders

Emerging markets no longer just about growth, but size and stability


Global Light Vehicle Developments The Next Wave of Growth Markets

Population in Mio.

GDP/Capita in Real US-$

Population in Mio.

GDP/Capita in Real US-$

PopulationChange

GDP/CapitaChange

BRIC China 1,347 3,142 1,385 5,547 3% 77%BRIC India 1,241 1,065 1,372 1,802 10% 69%BRIC Brazil 197 5,729 209 7,486 6% 31%BRIC Russia 143 6,872 141 8,849 -1% 29%

1 Indonesia 242 1,660 261 2,419 7% 46%2 Mexico 115 8,378 125 10,455 9% 25%3 Philippines 95 1,434 108 1,834 14% 28%4 Turkey 74 8,325 80 10,528 9% 26%5 Thailand 70 3,024 72 4,112 3% 36%6 South Africa 50 5,969 52 7,896 4% 32%7 Colombia 47 4,130 52 5,403 11% 31%8 Argentina 41 6,773 44 8,685 7% 28%9 Malaysia 29 5,735 33 7,979 13% 39%

10 Chile 17 8,568 18 11,490 6% 34%

2011 2019

Beyond BRIC Beyond BRIC

2011 vs. 2019

Beyond BRIC

Source: IHS – August 2012 Forecast


40%

50%

60%

70%

80%

90%

100%

0

2

4

6

8

10

12

14

Brazil China India Russia ROW

2019 Capacity U

tilization %

Stra

ight

Tim

e C

apac

ity C

hang

e (M

illio

ns)

2012-2019 Change 2012 Utilization 2019 Utilization

Straight-Time Capacity = Core shift set up 1, 2 or 3 shifts

Capacity Shifts 2012 vs. 2019


Capacity Expansion 2012 - 2019

0 100 200 300 400

Ford

Mitsubishi

PSA

GM

Jianghuai

Chery

Honda

Ren/Niss

VW

Fiat

Straight-time Capacity - Thousands

Brazil

0 30 60 90 120

Ren/Niss

PSA

GAZ Group

Fiat

VW


Russia

19


Capacity Expansion 2012 - 2019

0 250 500 750 1000

Honda

Ren/Niss

Tata

Hyundai

VW

GM

Ford

Bajaj Auto

Mahindra

Maruti /Suzuki

Straight-time Capacity – Thousands

India

0 300 600 900 1200

Geely

Dongfeng

FAW-VW

Dongfeng -Yueda-Kia

Great Wall

SAIC- GM-Wuling

**S-GM

Chery

Changan- Ford-Mazda

*S-VW


China

20

* S-VW = Shanghai VW, ** S-GM = Shanghai GM


Worldwide Trends

• Growing personal wealth is increasing the motorization rate in developing markets

• Air quality (smog, health effects) issues are spreading throughout the world as motorization increases, especially in cities

• Climate change (decarbonization) is becoming a global issue

• There is a growing sense of need for energy independence: some countries are turning inward to maximize the use of their own resources

• Demand for petroleum is increasing globally while lower-cost resources are largely in politically sensitive regions

• The need to import energy creates a difficult balance of trade for many countries

21


Global CO2 Legislation Trend The countries which plan to introduce Fuel Economy regulation by 2020

Have already introduced

Will introduce


Technology ‘Islands’ start to merge Legislative Convergence

• Standards coming in other countries as well • Likely to follow European standards • Possible global standardization of test procedures?

23

60 80

100 120 140 160 180 200 220 240 260 280

2003 2006 2009 2012 2015 2018 2021 2024 2027 2030

US (FTP75/US06) Europe (NEDC) Japan (JC08) China (NEDC) S.Korea (NEDC)

CO

2 (g/

km) N

orm

aliz

ed to

NE

DC

Te

st C

ycle

Global CO2 target number range now starting to converge

Global non-CO2 emission ‘norms’ continue to tighten and converge

PGM loading intensifies globally as last few regions adopt Euro3>


Emission Summary: Most Countries Will Follow European Standards With Some Lag

24

Largely follows US standards on a sales-weighted “bubble” basis


0 100 200 300 400 500 600 700 800 900 1000 1100 1200

Time (sec)

140

120

100

80

60

40

20

0

Spe

ed (k

m/h

)

City Mode Highway Mode

Test Cycles The decisive but divisive factor!

NEDC

FTP75/US06

JC08


0

10

20

30

40

50

60

70

80

90

100

110

120

130

140

150

0 300 600 900 1,200 1,500 1,800Time in s

Veh

icle

spe

ed in

km

/h

-10.0

-9.0

-8.0

-7.0

-6.0

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

Acc

eler

atio

n in

m/s

²

WLTC ver.4 Acceleration

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

0 5 10 15 20 25

v*a_pos in m²/s³

Cum

. fre

quen

cy

mid, WW databasemid, WLTC v2mid, WLTC v3mid, WLTC v3 1121mid, WLTC v4

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

0 10 20 30 40 50 60 70 80 90

Speed (km/h)

Cum

. fre

quen

cy

mid, WW databasemid, WLTC v2mid, WLTC v3mid, WLTC v3 1121mid, WLTC v4

Cum. Frequency of V * a_positive

Cum. Frequency of Vehicle speed

WLTC ver. 4

Apply supplemental methodology

Reflection of validation1 Set minimum speed @ 10km/h Eliminate the micro transient

portions Set maximum acceleration @

95 percent tile

http://www.unece.org/trans/main/wp29/wp29wgs/wp29grpe/wltp_dhc11.html

Worldwide Harmonized Light Vehicle Test Procedure (WLTP) – Characteristics of WLTC Ver.4


Intention to Buy New Vehicle in 6 Months

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

6 Month Moving Average Actual

(Percent Yes)

Conference Board


200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

Total Raw Material Cost in a Car

Total Cost (Euro) Total Cost (US$)

Pure Raw Material Cost in a Car – Debt Crisis Lowers Input Costs

European Car @ 2700 Lbs in Euro

US Vehicle @ 3500 Lbs In $

Steel Aluminium Plastic Resins Rubber Glass Iron

(Excludes Fuel, Processing and Transportation costs)

Latest Data Point July 2012


0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011

Direct (Bank) Loans Indirect (Dealer) Loans

(% - Accounts past due 30 days or more)

Months

Source: American Bankers Association

New Auto Loans — Delinquency Rates


55%

60%

65%

70%

75%

80%

85%

Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12

Unweighted Average of Prime, Near and SubprimeMonths

New Auto Loan Application Approvals

Source: CNW Marketing


4.55.05.56.06.57.07.58.08.59.09.5

10.0

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Quarters

(Percent)

Federal Reserve Board

New Auto Loan Rates – Commercial Banks


$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

$5,000

$5,500

$6,000

$6,500

$7,000

Jan-04

Jul-04

Jan-05

Jul-05

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

Jul-11

Jan-12

Jul-12

GM Ford Chrysler Toyota Nissan Honda

Manufacturer Incentives



30%

40%

50%

60%

70%

80%

90%

100%

Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12GM Ford Chrysler IndustryToyota Honda Nissan

Source: CNW Marketing Months

Residual Value Index (Index = Lease contract residual value versus CNW estimate of residual at end of lease term)


20%

21%

22%

23%

24%

25%

26%

27%

28%

29%

Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

Leases by Month

(Share)

US Light Vehicle Sales: Lease Penetration



US Light Vehicle Inventory: Units

Months — Seasonally Adjusted

(Units in thousands)

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012


US Light Vehicle Inventory: Days Supply

30

40

50

60

70

80

90

100

110

120

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

(Days Supply)

Months — Seasonally Adjusted

Light Trucks

Cars


89

10111213141516171819202122

Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13

SUVL

(Units in millions)

US Light Vehicle Sales, SAAR


8

9

10

11

12

13

14

15

16

17

18

1990 1994 1998 2002 2006 2010 2014 20188

10

12

14

16

18

September 2012 Forecast July 2011 Forecast

(Units in millions)

US Light Vehicle Sales


US Sales: Major Manufacturers Market Share

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

GM FORD CHRYSLER/FIAT TOYOTAHONDA NISSAN HYUNDAI/KIA


US Sales: By Car Segment (54%)

0%2%4%6%8%

10%12%14%16%18%20%22%

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Compact Full-Size Micro + Mini Mid-Size Sports Subcompact

(Light Vehicle Share)


US Sales: By Light Truck Segment (46%)

0%

5%

10%

15%

20%

25%

30%

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

CUV MPV PUP SUV VAN

(Light Vehicle Share)


8%

10%

12%

14%

16%

18%

20%

22%

24%

0

2

4

6

8

10

12

14

16

18

20

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Mill

ions

Volume - L Canada- R Mexico - R

`

(Units in millions)

North America - Light Vehicle Production

(Share of NA Prod.)


North America - Light Vehicles Exports

-30%

-20%

-10%

0%

10%

20%

30%

40%

0.0

0.5

1.0

1.5

2.0

2.5

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Mill

ions

Volume - L Change - %

(Units/)


NA Export Sales: By Region of Destination

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Asia Europe Middle East/Africa South America


US Auto Market Overview • Pent – Up demand is driving the auto recovery. • Sales have exceeded expectations, despite a sluggish economy. • There has been a heavy dose of fleet activity in the first half of the

year. • Sales have improved, as Japanese cars return to the showrooms. • High gasoline prices actually helped sales (trade-in gas guzzlers) • Incentive spending has risen modestly, as inventories rebuild, but

there is more pricing discipline today. • There is an over-supply of 2012 models; inventories are getting

heavy. • Auto credit quality is excellent and availability is almost back to

normal. • The used car and truck market is the healthiest it has been in years. • Cost pressures are easing and industry profits in North America are

good.

Bottom Line – A weak economy will hurt the release of pent up demand, slowing not derailing, the auto market recovery


0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1/1/1997 1/1/1999 1/1/2001 1/1/2003 1/1/2005 1/1/2007 1/1/2009 1/1/2011

(Units in Millions)

Mexico Light Vehicle Sales: Seasonally Adjusted Annual Selling Rate - SAAR

Monthly

Annual Average


70

80

90

100

110

120

700

800

900

1000

1100

1200

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 LV Sales (left scale) Consumer Confidence

Monthly Sales: Moving Average vs. Consumer Confidence

Thousand Units Index


-30%

-20%

-10%

0%

10%

20%

30%

600,000

700,000

800,000

900,000

1,000,000

1,100,000

1,200,000

1,300,000

1,400,000

1,500,000

1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Light Veh -L Annual Change -R

Mexico:Light Vehicle Sales

Units

Used car imports and credit availability limit growth


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2005 2007 2009 2011 2013 2015 2017 2019 Others Suzuki Daimler BMW Mitsubishi Mazda Honda Toyota Chrysler Ford Volkswagen General Motors Renault/Nissan

Percentage

Mexico: Market Share

Nissan grows in coming years


Mexico: Global Segmentation

0.00

0.10

0.20

0.30

0.40

0.50

0.60

A B C D E F HVAN

Mill

ions

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Units


Mexico: Bodystyle

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

0.40

0.45

0.50

Mill

ions

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Units


0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

PROD

Producing for Export

Mexico Light Vehicle Production (millions of units)

Forecast at risk due to Brazil


Mexico to Brazil –ACE 55

53

2009 2010 2011 2012 2013 2014 Imports from Mexico [US$] 947,500,00 1,260,900,000 2,070,000,000 1,450,000,000 1,560,000,000 1,640,000,000

Imports from Mexico [Units] 60,138 76,748 121,745 93,500 100,000 104, 500

Vehicle price per unit [US$] 15,755 16,429 17,003 15,500 15,600 15,700

•Very little impact YOY to 2012 figures, but we had expected 200-250K. Impact will be hardest for 2013 and 2014. •Difficult to compete after quota is hit, so far Asians are down 20-40%


Mexico Light Vehicle Production: By OEM

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

Renault/Nissan General Motors Volkswagen Ford Chrysler Fiat Mazda

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Units


Bottom Line • With the exception of Western Europe, global demand will

continue to gather momentum • BRICs will outsell TRIAD (USA, WE and Japan) within a

few years • Mexico has to explore new opportunities given this

scenario, South America presents great potential • The US has turned the corner, promising outlook for sales

and production • Mexican demand has broken the million unit mark! • Production is promising but big uncertainties lie in the

future

Thank You for Your Participation!

• Guido Vildozo • Manager, Latin America • IHS Automotive

• Contact: • 24 Hartwell Ave • Lexington, MA 02421 USA

• Ph: +1 781 301 9037 • Em: [email protected]

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