US –Light Vehicle Outlook/media/others/events/2012/... · 2014. 11. 11. · US –Light Vehicle...

US –Light Vehicle Outlook

George Magliano Senior Principal Auto Economist – Americas, HIS May 31, 2012

Copyright © 2012 IHS Inc. All Rights Reserved.

External Shocks to The Global Auto Industry - A Critical Timeline

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

?

Copyright © 2012 IHS Inc. All Rights Reserved. 3

(Percent unless otherwise noted / May 2012)

U.S. Economy -Probability of a Recession is now 20%

2010 2011 2012 2013

Real GDP Growth 3.0 1.7 2.2 2.4

Employment Growth -0.7 1.2 1.6 1.7

CPI Inflation 1.6 3.1 2.2 1.7

Oil Prices (WTI, US$/bbl) 79.4 95.1 103.9 114.8

Housing Starts - mm 0.59 0.61 0.74 1.01

Federal Funds Rate 0.2 0.1 0.1 0.1

Dollar (Major Trading 2005=1) 0.90 0.85 0.87 0.88


-4.0

-3.0

-2.0-1.0

0.0

1.0

2.03.0

4.0

5.0

1990 1995 2000 2005 2010 2015 2020Current Old History & Forecast Pessimistic - 20% Optimistic - 15%

(Percent Change)

Real Gross Domestic Product (GDP) Growth


(Percent)

0

2

4

6

8

10

12

1990 1995 2000 2005 2010 2015 2020

Federal Funds 10-Year Treasury 30-Year Mortgage Rate

The Federal Reserve Will Keep Short Term Interest Rates Low Through 2014


-2,000

-1,500

-1,000

-500

0

500

1980 1985 1990 1995 2000 2005 2010 2015 2020-12

-9

-6

-3

0

3

Unified Budget Deficit Deficit as % of GDP

(Billions of dollars, fiscal years) (Percent of GDP)

Long Term a Massive Fiscal Adjustment is Needed


(Millions of units)

0.0

0.4

0.8

1.2

1.6

2.0

2.4

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Single-Family Multi-Family

Housing Starts Will Not Rebound Until 2014


Payroll Employment

100

110

120

130

140

150

1990 1995 2000 2005 2010 2015 2020-5

-4

-3

-2

-1

0

1

2

3

4

Total Emloyment - L Percent Change - R

`

(Millions) (Percent Change)


1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

1980 1985 1990 1995 2000 2005 2010 2015 20203

4

5

6

7

8

9

10

11

Bank Card Delinquency Rate (Left) Unemployment Rate (Right)

(Percent) (Percent)

Rising Unemployment Puts Pressure on Consumers’ Balance Sheet


-3-2-10123456

1990 1995 2000 2005 2010 2015 2020

Real Consumer Spending Real Disposable Income

(Percent change)

Real Consumer Spending and Income Growth New long–term trend for consumption is 2% not 3%


• Pent – Up demand is driving the auto recovery • The recent sales numbers have exceeded expectations, the first

quarter (the high point for the year) was outstanding but unsustainable

• Retail, rather than fleet, remains the main driver, although February saw more fleet volume

• Sales have improved, as Japanese cars return to the showrooms, but there are still some issues of availability

• 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 • Auto credit availability is improving • Supply constraints are becoming a concern • The used car and truck market remains very strong • Cost pressures will return but industry profits are good Bottom Line – A weak economy will hurt the release of pent up

demand, slowing not derailing, the auto market recovery

US - Auto Market Overview


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 March 2012

Presenter

Presentation Notes


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


New Vehicle Buyers Average Credit Score

650660670680690700710720730740750760770780

Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-126%7%8%9%10%11%12%13%14%15%16%17%18%

FICO SCORE % UNDER 670

Avg. Score

Source: CNW Marketing


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 Subprime

Months

New Auto Loan Application Approvals



37

39

41

43

45

47

49

51

53

1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011

Months

(Years)

Median Age – New Vehicle Buyer

CNW Marketing


5.05.56.06.57.07.58.08.59.09.5

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


12

14

16

18

20

22

24

26

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

(Percent)

CNW Marketing

Months

Incentives to MSRP


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)

U.S. Light Vehicle Sales — Lease Penetration



U.S. Light Vehicle Inventory — Units

Months — Seasonally Adjusted

(Units in thousands)

1,500

2,000

2,500

3,000

3,500

4,000

4,500

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


U.S. Light Vehicle Inventory — Days Supply

30

40

50

60

70

80

90

100

110

120

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

(Days Supply)

Months — Seasonally Adjusted

Light Trucks

Cars


8

10

12

14

16

18

20

22

Jan-00

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Jan-12

Jan-13

Actual Forecast

Months

(Units in millions)

United States — Car & Truck 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

May 2012 Forecast July 2011 Forecast

(Units in millions)

U.S. Light Vehicle Sales

2008: 13.2M units 2009: 10.4M units 2010: 11.6M units 2011: 12.7M units 2012: 14.3M units 2013: 14.9M units 2014: 15.7M units 2015: 16.2M units


U.S. 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


U.S. Sales — European Manufacturers Market Share

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

BMW DAIMLER AG VW GROUP PORSCHE


U.S. Sales — By Car Segment (52.7%)

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)


U.S. Sales — By Light Truck (47.3%)

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)


• Lost volume due to Japan & Thailand disasters tempered growth in 2011, made up in 2012

• Demand strengthening

• Inventory rebuilding

• Production localization efforts bearing fruit, more NAFTA sourcing

• NA becoming an export hub, greater use of global platforms allows for more “export ready” product

• BMW, Hyundai, VW, Toyota & Honda drive additional capacity expansion

• Ford tweaks sourcing – on GM’s heels; Chrysler/Fiat potential, yet hurdles remain

Pro

duct

ion

in M

illio

ns

North American Light Vehicle Production

17.2

15.5

16.4

15.9

15.8

15.8

15.3

15.1

12.6

8.6

11.9

13.1

14.6

15.3

16.3

17.2

17.5

17.5

17.5

17.5

17.6

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Presenter

Presentation Notes

From a production perspective, we are currently looking at slow and somewhat steady growth this year to 13 million units as the Japanese OEMs rebuild inventories in the second half. With a few exceptions, we are sitting on a fairly favorable inventory position heading into the latter part of the year and into 2012, however, given the recent drama in the markets and the potential to negatively impact consumer and business sentiment there is some downside exposure to production in the 2nd half of this year and more importantly extending into 2012/2013. It will be important to see some further pickup on the demand front.


Light Vehicle Production - Americas

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

ions

Canada Mexico


Autos - The Bottom Line

• The auto industry is in its best shape to withstand economic adversity • Auto credit quality is outstanding, availability will improve this year • Industry pricing power will continue to improve • Leasing is on the way back • Small cars will gain market share but crossovers will remain very popular • Higher fuel economy standards are the next big challenge (opportunity) • The industry has done a great job reducing capacity and cost, but we can’t

rest on our laurels • Initially replacement demand drives volume, longer term demographics

sustain sales • Eventually the economy will support volume levels that are more normal for

the auto industry • The industry has become more profitable and once volume returns, it will

become even more so

Thank You for Your Participation!

George Magliano Senior Principal Automotive Economist, Americas 212 -884 -9509 [email protected] June 2012

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