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Aftermarket Trends: What will Drive Future
Aftermarket Repair Opportunities
in North America?
- Vehicles
- Powertrains
- Technology & How the OEM’s are
Coming After Our Customers
Mark Seng
Global Aftermarket Practice Leader
July 29, 2014
Key Driver: Vehicles Miles Traveled (VMT)
Change in Driving Volume
3 Source: IHS Automotive and FHWA
0
250
500
750
1,000
1,250
1,500
1,750
2,000
2,250
2,500
2,750
3,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Historical Vehicle Miles Traveled (billions)
First time seeing sustained flat miles driven
under 3 trillion miles since 2007
© 2014 IHS
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Change in Driving Volumes – Year-o-Year
Source: IHS Automotive and FHWA
• 2012 Up 0.3% • 2013 Up 0.6% • ‘07-’13 Down 2%
© 2014 IHS
Source: IHS Automotive, DOT and FHWA
• Total Miles Traveled 2013 = 2004
• Miles per Capita 2013 = 1996
• 1950 – 2004
• Miles traveled + 3.5% per year
• Milles per capita + 2.5%
• Since 2005
• Miles traveled Flat
• Miles per capita -1.0%
Vehicle Miles Traveled – per Capita
© 2014 IHS
Light vehicle sales continue their strong recovery.
The auto industry is back!
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
U.S. Light Vehicle Registrations
Source: IHS Automotive
Broke 15 million units last year – 1st time since 2007!
7.5% 15.4 Million
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
U.S. Light Vehicle Registration Trend
Source: IHS Automotive
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014F 2015F 2016F 2017F
Mill
ion
s
11.3%
10.2%
13.2%
-22%
-17.5%
7.5%
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Fueling the comeback…
Dramatic increase in number of new models and redesigns.
Winners are Offering the Most Options
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
New Launch Activity
30
43
24 23
20 19 19
25
16
35
27
39
27
33 32
27 27
0
10
20
30
40
50 North American Major Program Launches
Source: IHS Automotive Light Vehicle Production Forecast
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
150 new models &
redesigns
2010 2012
70%
260 new models &
redesigns
2013 2015
Winners are Offering the Most Options
Source: IHS Automotive
Includes all model changes
impacting US registrations.
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
210
220
230
240
250
260
270
280
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
MIL
LIO
NS
VIO will Increase 6.5% by 2019
History Forecast
Aftermarket
U.S. Vehicles In Operation
Source: IHS Automotive
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
40%
drop in new vehicle registrations
The market will begin to feel impact of the
Impact of New Vehicle Drop Off
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Vehicles
new to 5 years
old grow
32%
Vehicles
6-11 years old
decline
Impact on VIO Age Groups - by 2019
21%
Vehicles
12 + years old
grow
15%
Is the aftermarket “sweet spot” changing?
Source: IHS Automotive
Aftermarket must be ready for changing vehicles and consumers going into the future
As registrations recover, the vehicle mix continues to evolve
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
16.6%
15.9%
13.8%
12.1%
NON LUXURY TRADITIONAL MID SIZE
NON LUXURY TRADITIONAL COMPACT
NON LUXURY COMPACT CUV
NON LUXURY FULL SIZE PICKUP
4 Segments Emerging as Dominant: Represent over 58% of all new registrations in 2013
Source: IHS Automotive
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
4 Cylinder Engines – Smaller Size but
More Power
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
US New Vehicle Registrations:
4 Cylinder Engines Gaining in Popularity
All large vehicle segments in
decline except large pickups
Large trucks not
growing as fast as they
once did but segment
remains strong
Add pics of pickups
2012: 50% market share
2013: 55% market share
2008: 41% market share
Source: IHS Automotive
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
26.2% 21.3%
39.3%
38.1%
23.6% 26.5%
11.0% 14.1%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
2008 2009 2010 2011 2012 2013
% o
f V
eh
icle
s in
Op
era
tio
n
Domestic Car Domestic Truck Imp Car Imp Truck
Changing Mix – Domestic v Import
-5.1%
-0.8%
2.8%
3.1%
Source: IHS Automotive
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
-
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
80,000,000
2007 2008 2009 2010 2011 2012 2013
Ve
hic
le P
op
ula
tio
n (
x0
00
)
Domestic Cars Import Cars
Cars - Continued Import Strength
-23%
15%
Source: IHS Automotive
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
0
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
2007 2008 2009 2010 2011 2012 2013
Ve
hic
le P
op
ula
tio
n (
x0
00
)
Domestic Light Trucks Import Light Trucks
Trucks - Imports Gaining Share
-3%
38%
Source: IHS Automotive
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
-
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
140,000,000
160,000,000
180,000,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Ve
hic
le P
op
ula
tio
n (
x0
00
)
Domestic Import
VIO Import Growth - Forecast
-15%
89%
Source: IHS Automotive
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Are Millennials Losing Interest in Cars?
11.5%: Millennial
buyers % of total
Percent of Total New Vehicles Registered
Ages:18-34
0%
2%
4%
6%
8%
10%
12%
14%
16%
2008 2009 2010 2011 2012 2013
Source: IHS Automotive
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
The Younger Buyer is Broke…
-44%
-6%
+91%
Net worth decline between
2001 and 2010
Income decline between
2001 and 2010
Growth in student loan balance
between 2003 2012
Consumer
Source: Pew Research
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
The Younger Buyer is Delaying…
22%
20%
24%
Delayed having children
Delayed marriage
Moved back home after college
Consumer
Source: Pew Research
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
73.4
56.7
62.3
24
30
36
42
48
54
60
66
72
78
84
90
96
Q1
20
04
Q2
20
04
Q3
20
04
Q4
20
04
Q1
20
05
Q2
20
05
Q3
20
05
Q4
20
05
Q1
20
06
Q2
20
06
Q3
20
06
Q4
20
06
Q1
20
07
Q2
20
07
Q3
20
07
Q4
20
07
Q1
20
08
Q2
20
08
Q3
20
08
Q4
20
08
Q1
20
09
Q2
20
09
Q3
20
09
Q4
20
09
Q1
20
10
Q2
20
10
Q3
20
10
Q4
20
10
Q1
20
11
Q2
20
11
Q3
20
11
Q4
20
11
Q1
20
12
Q2
20
12
Q3
20
12
Q4
20
12
Q1
20
13
Q2
20
13
Q3
20
13
Q4
20
13
Ave
rag
e M
on
ths O
wn
ed
Quarter
Average Length of Ownership Trend
New Buyers Used Buyers Total (New and Used)
New & used combined > 22 month increase
in ownership over last 10 years
Length of Ownership Increasing
Source: IHS Automotive
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
13 vehicles in a lifetime
Length of Ownership & Delayed Purchase
Impact
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
9 vehicles in a lifetime
Length of Ownership & Delayed Purchase
Impact
Aftermarket must prepare for new technology entering service bays for years to come
As production grows, OEM powertrains are evolving
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Production Outlook North American Light Vehicle Production by Country
10.6
5.6
8.5
11.3
12.0
2.5
1.5
2.1
2.3 1.8
2.0
1.5
2.5
3.2 4.0
0
2
4
6
8
10
12
14
16
18
20
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Outp
ut (M
illio
ns)
Mexico Canada US
-451,000
CAGR = -3.1%
+1,258,000
CAGR = 4.9%
+656,000
CAGR = 0.8%
15.4 16.8
17.8
15.1
8.6
13.1
10.1
2.4
2.9
18.2
11.9
1.8
4.5
Source: IHS Automotive Light Vehicle Production Forecast
2014–2021
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Production Outlook North American Vehicle Exports by Region
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Europe
South America
Middle East/Africa
Greater China
Other
No
rth
Am
eri
ca
n V
eh
icle
Ex
po
rts
(M
illio
ns
)
North American Vehicle Exports by Region
0.67
0.91
0.74
0.93
0.78
1.12
1.33 1.39
1.44
1.60
• Greater use of global
platforms allows for
more “export ready”
product
• 40+ Free trade
agreements drive
Mexican output
• EU sovereign debt
crisis tempers EU
exports
• So. America & Middle
East/Africa markets
growing quickly
1.69
Source: IHS Automotive Light Vehicle Forecast
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
4.94.2
1.93.1 3.4 3.33.2
4.4
2.9
1.9
2.73.2 3.0
2.8
2.9
2.5
0.9
2.0
2.52.32.4
2.4
4.6
3.2
4.1
6.46.7
5.5
0.50.8
0.5
1.0
1.31.9
1.3
0
3
6
9
12
15
18
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
20
19
20
20
20
21
Millio
ns
• Production outlook follows demand recovery with import substitution and export
activity providing additional support
• Most manufacturers are poised to post gains; favors OEMs with further capacity
expansion plans: BMW, VW, Nissan, Toyota & Honda
• Global product/platform strategies enable competitive sourcing shifts
15.6 15.1 German 3
Asian 4
Chrysler/
Fiat
Ford
General
Motors
Others
8.6
13.1
17.3 18.2
15.4
17.2
5.6
4.7
2.9
2.9
0.6
Source: IHS Automotive Light Vehicle Production Forecast
Production Outlook North American Production Mix by Manufacturer
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
North American Outlook The Old ‘17’ ≠ the New ‘17’
Year 2000 2016
Volume 17.2 million units
(30% of global)
17.7 million units
(19% of global)
Location ~25% built south of Ohio ~50% built south of Ohio
Global Platform
Exposure
20% was deemed global –
mostly Japanese OEMs
62% is deemed global –
mainly pickups are regional
Design Base 72% of volume NA-designed 34% of volume NA-designed
Production
OEMs
Top 5 OEMs = 89% of total
(Largest = 32%)
Top 5 OEMs = 73% of total
(Largest = 19%)
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Evolving Powertrains in North America CAFÉ Standards Making an Impact
2016
2025
CAFÉ Standards 54.5 MPG
35 MPG
CAFÉ requirements dominate product and
powertrain planning in the new vehicle industry today
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
0.3%
Share
2.9%
Share
3.6%
Share
Alternative Powertrains:
Share of U.S. New Registrations - 2013
Source: IHS Automotive
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
The Traditional Internal Combustion Engine
• Gasoline direct-injection
• Turbo chargers
• Stop/start capability
• Cylinder de-activation
• AWD disconnect
• More efficient transmissions • more speeds and CVTs
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
0%
10%
20%
30%
40%
50%
60%
70%
Sto
p S
tart
Mild
Hybrid
Full
Hybrid
PH
EV
EV
GD
I-T
GD
I
DE
-Adv
DE
AC
2012 2025
(Mech. Tech) (Elec. Tech)
Far stronger push on
GDI-T and GAS-HEV
compared to Europe, as
the U.S exit’s 2016
CAFE and approaches
2025 targets
Barriers to diesel
(consumer, CNG, gas
fuel price) remain
‘Mechanical’ opportunity
centred on on re-
segmentation, gasoline
rightsizing and driveline
efficiencies
NAFTA Vehicle Production
– Powertrain Outlook
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Aftermarket has the Expertise!
OEM globalization becoming the new norm
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
million units
83
2013 2020
104 million units
Global VIO Growth – New Registrations
Source: IHS Automotive
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
billion units
1
2010 2020
1.5 billion units
Global VIO Growth – Total VIO
Source: IHS Automotive
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Accelerating use of global platforms
Global VIO Growth – Changing OEM
Production Model
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
2012
2020
Top 12 Manufacturers
212
147
Reducing Number of Platforms
Source: IHS Automotive
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
50% fewer platforms
40% fewer
platforms
Reducing Number of Platforms
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
More Vehicles per Platform
More than double
90% + increase
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
• Average platform volume to double, volume manufacturers have greatest opportunities
• Premium OEMs lack absolute scale but generate high efficiency
• Toyota, Fiat-Chrysler and GM lag in terms of consolidation
46
New Platform Metrics
3 3
4 4
3 3
6
2
7
3
6
3
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
Hyundai Honda VW Ford R/N PSA GM BMW Toyota Suzuki Fiat Daimler
Mill
ion
Un
its
Average volume per platform in 2012
Average volume per platform in 2020
Number of platforms to support 80% of volume in 2020
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
motortrend.co
m
• Largest single platform
• 6 million units by 2020
• New modular technology revolutionizes production
VW MQB Platform
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
motortrend.com
88% reduction in engine
transmission variations
20%-30% reduction in parts costs
Modular Architecture
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
• Lower production costs • Improving inventory efficiency • Reducing cataloging costs
Aftermarket Opportunity
OEM technology Providing both opportunity & challenges
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Dealer Service Retention at Record Lows
25%
30%
35%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Retail Non-Warranty Service Retention
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Service Retention & Repurchase
Consideration
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
NEW 1 YEAR OLD
2 YEARS OLD
3 YEARS OLD
4 YEARS OLD
5 YEARS OLD
6 YEARS OLD
7 YEARS OLD
8 YEARS OLD
9 YEARS OLD
10 YEARS OLD
11 YEARS OLD
Retail Service Retention (% of revenue returning to dealership for retail service)
Average New Buyer returns to market at
72.1 months:
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
OEM’s Focused on Service Loyalty KEY: Relationship with Driver of 3-7yr Old Vehicle
Positive connection in repeat buying among those who have vehicles
serviced by OEM dealer network
45.1%
OEM Brand Loyalty Among
Those Servicing with OEM Dealer
Network
28.4%
OEM Brand Loyalty Among
Those Servicing with Aftermarket
Based on actual results from OEM study provided by IHS Automotive. Brand loyalty was measured
among customers with vehicles that were just outside of the traditional warranty period.
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Maintenance Programs
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Extending Beyond the Basic Warranty
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Oil Service Indicator Light
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Growing as Part of U.S. VIO
10%
21%
Source: IHS Automotive
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Oil Changes Most common service
opportunity.
Why is This Important to the Aftermarket?
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Telematics Hello,
You are due for an oil change.
Touch here to schedule your
appointment.
Driver – Dealer Connectivity
© 2013, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Embrace Technology = Aftermarket Opportunity Aftermarket Must Also Leverage Technology
to Compete for Consumer Loyalty
1. The auto industry is back! Global light vehicle sales continue strong recovery
2. The vehicle mix & the consumer continue to evolve
3. OEM powertrains are evolving
4. OEM globalization becoming the new norm
5. Technology advances bring both challenge AND opportunity
Thank You
Mark Seng
Global Aftermarket Practice Leader
248.728.7350
Mark.Seng@ihs.com
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