2020 Automotive Recovery & 2021 Automotive Economic Policy OverviewKristin Dziczek

Vice President

17 November 2020

CENTER FOR AUTOMOTIVE RESEARCH

2020 Automotive Recovery(so far)

3CENTER FOR AUTOMOTIVE RESEARCH

Motor Vehicle Sales: Pre COVID-19 Pandemic to DateChina leading, Europe lagging, U.S. outlook varying by region

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

Jan

Mar

May Ju

l

Sep

No

v

Jan

Mar

May Ju

l

Sep

No

v

Mo

nth

ly S

ale

s in

Un

it

China

2008 - 2009 2019 - 2020

Jan

Mar

May Ju

l

Sep

No

v

Jan

Mar

May Ju

l

Sep

No

v

United States

2008 - 2009 2019 - 2020

Source: Marklines; CAAM

Jan

Mar

May Ju

l

Sep

No

v

Jan

Mar

May Ju

l

Sep

No

v

Europe

2008 - 2009 2019 - 2020

96.4%

108.0% 98.3%

4CENTER FOR AUTOMOTIVE RESEARCH

MV Production: Pre COVID-19 Pandemic to DateChina, Europe, and the U.S. production has mostly (or entirely) recovered

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

Jan

Mar

May Ju

l

Sep

No

v

Jan

Mar

May Ju

l

Sep

No

v

Mo

nth

ly S

ale

s in

Un

it

China

2019 - 2020

Jan

Mar

May Ju

l

Sep

No

v

Jan

Mar

May Ju

l

Sep

No

v

United States

2019 - 2020

Source: Marklines; CAAM

Jan

Mar

May Ju

l

Sep

No

v

Jan

Mar

May Ju

l

Sep

No

v

Europe

2019 - 2020

97.5%106.9%

94.5%

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Motor Vehicle & Parts Aggregate Weekly Hours, Employment, & Payroll Are Recovering Faster Than The Overall Economy

0

20

40

60

80

100

120

February Peak April Trough October

Ind

ex (

20

07

=10

0)

Aggregate Weekly Hours

Economy

Motor Vehicle & Parts0

0.2

0.4

0.6

0.8

1

1.2

120

125

130

135

140

145

150

155

160

165

February Peak April Trough October

Emp

loym

ent

(mill

ion

s)

Emp

loym

ent

(mill

ion

s)

Total Employment

Economy

Motor Vehicle & Parts

65%76%

0

0.0002

0.0004

0.0006

0.0008

0.001

0.0012

0.0014

1

1.05

1.1

1.15

1.2

1.25

1.3

February Peak April Trough October

Pay

roll

(tri

llio

ns)

Pay

roll

(tri

llio

ns)

Aggregate Weekly Payroll

Economy

Motor Vehicle & Parts

66%81%

81%86%

Source: U.S. Department of Labor, Bureau of Labor Statistics, Current Employment Survey, CAR analysis

6CENTER FOR AUTOMOTIVE RESEARCH

If past recessions are any guide, the overallU.S. employment recovery could take a while.

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76

Shar

e o

f Em

plo

ymen

t Lo

ss

Months Into the Recession

1948 1953 1957 1981 1990 2001 2008 2020

Source: Bureau of Labor Statistics

Accumulated Employment Losses as a Percent of Pre-Recession Employment

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Biden Priorities

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Control of the Senate will determine how much of Biden’s

agenda can get done inhis first 2 years

CENTER FOR AUTOMOTIVE RESEARCHhttps://apnews.com/article/virus-outbreak-business-jerome-powell-economy-52c9e406378c5acefc04af10621d40bb

Top Priorities:Contain the COVID-19 Pandemic & Pass a Comprehensive Relief Funding Bill

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Historical Motor Vehicle & Parts Employment1958-2020 (October)

0

0.2

0.4

0.6

0.8

1

1.2

1958 1963 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013 2018

Mill

ion

s

SIC NAICS

1.75M

Source: U.S. Department of Labor, Bureau of Labor Statistics, Current Employment Survey

13CENTER FOR AUTOMOTIVE RESEARCH

Core tenants of Biden’s automotive policy

• Reverse Trump’s deregulatory actions

• More “Made in America” policies:• USD 400B “Buy American” program

(redirected funding, not new)

• Reshoring tax credits

• Strengthen U.S. supply chains for critical technologies and raw materials

• Accelerate transition to a low-carbon future

• Invest more in education, infrastructure, and clean energy • 500K electric charging outlets by

the end of 2030 (currently 87,600 chargers)

• Federal fleet purchases of U.S.-made EVs

• “Cash for Clunkers” program to get older polluting vehicles off the road

• Expand EV tax credits for vehicles made in the United States and “middle class” consumers

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Trade Policy

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Goals of Biden’s trade policies

• More U.S. jobs

• Support & reform the WTO and the rules-based trading system

• Re-build alliances with trading partners like Canada, Mexico, EU, UK, Japan, and South Korea to counter China’s SOE, IP violations, and market restrictions

• Re-evaluate Trump’s tariffs (remove, allow greater exclusions, or even initiate new Section 301 or 232 cases)

• Strict enforcement of USMCA—especially labor provisions

16CENTER FOR AUTOMOTIVE RESEARCH

The United States cannot currently self-supply the vehicles American dealers sell to U.S. consumers.

Source: IHS|Markit data

FCA, Ford, & GM Represent 54%of Canada & Mexico Imports

Source: CAR; U.S. International Trade Administration

Sourcing of U.S. Light Vehicle Sales2019

U.S. Production

less U.S. Exports

plus U.S. Imports

U.S. Sales

10.7 million

- 1.9 million

+ 8.3 million

= 17.1 million

U.S. Sales of Imported Vehicles

47%

U.S. Sales of U.S. Produced

Vehicles

52%

U.S. Firms29%

International Firms25%

Mexico15%

Canada9%

Japan10%

South Korea5%

Germany2%

UK1%

Other4%

U.S. Sales of U.S. Produced

Vehicles

54%

U.S. Sales of Imported

Vehicles

46%

17CENTER FOR AUTOMOTIVE RESEARCH

https://www.piie.com/research/piie-charts/us-china-trade-war-tariffs-date-chart

18CENTER FOR AUTOMOTIVE RESEARCH

U.S. trade deficits have grown over the past 4 yearsBalance of trade with the World & China, 2008-2020YTD

-$950

-$900

-$850

-$800

-$750

-$700

-$650

-$600

-$550

-$500

-$450

-$400

-$350

-$300

-$250

-$200

-$150

-$100

-$50

$0

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 20192020 through

September

Bill

ion

s

U.S. -ROW Trade Balance U.S.-China Trade Balance

Source: U.S. Census Bureau, USA Trade

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U.S. motor vehicle & parts trade balance has worsened over the past 4 years, tooBalance of trade with the World & China, 2008-2020YTD

-$160

-$140

-$120

-$100

-$80

-$60

-$40

-$20

$0

$20

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Bill

ion

s

U.S.-World Motor Vehicle & Parts Balance of Trade

World MV World Parts

-$15

-$10

-$5

$0

$5

$10

$15

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Bill

ion

s

U.S.-China Motor Vehicle & Parts Balance of Trade

China MV China Parts

20CENTER FOR AUTOMOTIVE RESEARCH

The Consequences: Tariff Impacts on Chinese and the Rest of World Auto Imports 2018 vs. 2019

Source: CAR Research based on the trade data retrieved from USITC DataWeb. The data is consist of six-digit HTS automotive goods in three tranches effected on: July 6, 2018; August 23, 2018; and September 24, 2018.

-100%

-80%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

-100% -50% 0% 50% 100%

Tranche III - Auto Parts Tranche I - Cars and Trucks

% Change in Imports from China, 2018 – 2019

% Change in Imports from ROW, 2018 – 2019

Categories > 1% of total, covering 98% of vehicles and 95% of parts imports

21CENTER FOR AUTOMOTIVE RESEARCH

Still many open fronts

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Summary