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CAR’s U.S. Automotive Forecast
Yen Chen Senior Research Economist
Center for Automotive Research
Annual Economic Outlook Symposium Federal Reserve Bank of Chicago
December 4, 2015
A New Peak/Plateau?
U.S. Light Vehicle Monthly Sales and SAAR
Oct. 2013 – Oct. 2015
1.2 1.2 1.4
1.0
1.2
1.5 1.4
1.6
1.4 1.4 1.6
1.2 1.3 1.3
1.5
1.2 1.3
1.5 1.5
1.6
1.5 1.5 1.6
1.4 1.5 15.2
16.4 15.4 15.2 15.4
16.4
16.1
16.8 17.0 16.5 17.5
16.4 16.5 17.2 16.9 16.7
16.2 17.1 16.5
17.8 17.2 17.6 17.8
18.2 18.2
0
2
4
6
8
10
12
14
16
18
20
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0O
ct-1
3
No
v-1
3
Dec
-13
Jan
-14
Feb
-14
Mar
-14
Ap
r-1
4
May
-14
Jun
-14
Jul-
14
Au
g-1
4
Sep
-14
Oct
-14
No
v-1
4
Dec
-14
Jan
-15
Feb
-15
Mar
-15
Ap
r-1
5
May
-15
Jun
-15
Jul-
15
Au
g-1
5
Sep
-15
Oct
-15
Mo
nth
ly S
AA
R
Mo
nth
ly S
ale
s (M
illio
ns)
SALES SAAR
Source: Automotive News; CAR Research 2
3 Mil. Higher than 2013!
U.S. Light Vehicle Sales Percent Change YTD Through Oct. : 2015 vs. 2014
-1.6%
12.4%
5.8%
Passenger Cars
Light Trucks
Total
Source: Automotive News; CAR Research
+ 794,997
+ 896,868
+ -101,871
8,103,806
55.9%
6,404,637
44.1%
14,508,443
100%
Must Have a Hatch or a Bed! Segment Breakdown - U.S. LV Sales Percent Change
Oct. YTD 2015 vs Oct. YTD 2014
-12.0%
-2.0%
-0.8%
0.3%
1.7%
7.5%
9.3%
10.4%
13.6%
45.7%
5.9%
-20% -10% 0% 10% 20% 30% 40% 50%
Large Car
Middle Car
Small Car
Van
Luxury Car
SUV
Large CUV
Pickup
Middle CUV
Small CUV
Total
Source: Ward’s Automotive Reports 4
Market Share: Segment Breakdown –
U.S. LV Sales Oct. YTD 2015
1.8%
3.2%
4.7%
5.2%
7.0%
7.1%
14.0%
17.5%
17.7%
21.7%
0% 5% 10% 15% 20% 25%
Large Car
Large CUV
Small CUV
Van
Luxury Car
SUV
Pickup
Middle Car
Small Car
Middle CUV
Source: Ward’s Automotive Reports 5
U.S. LV Sales Market Share: Segment Breakdown –
2015 vs. 2007
1.8%
5.2%
7.0%
7.1%
14.0%
17.5%
17.7%
29.6%
4.3%
7.0%
7.6%
11.9%
16.6%
19.7%
15.8%
17.2%
0% 5% 10% 15% 20% 25% 30% 35%
Large Car
Van
Luxury Car
SUV
Pickup
Middle Car
Small Car
CUV
20072015 Through October
Source: Ward’s Automotive Reports
CAR Forecast Notes
• Full-time employment is back to pre-recession level and continue to trend up.
• Consumer credit continue to expand at a healthy 6% annual rate. But loan lengths are approaching 70 months: Over $1Trillion in auto debt.
• Motor vehicle price inflation is higher than the CPI and wage inflation, but is offset by customer incentives (14%), low interest rates, longer auto loan terms, and cheap gasoline.
• US economy is relatively good. 3Q ‘15 GDP growth was 2.1%. Full year GDP growth is expected to be 2.4+ %. The Fed is almost certain to hike the interest rate. This could affect cost of large auto loans and is bad news for exporters.
• Outside US, Chinese economy is weakening. Japan in recession. EU is trying to keep its economy away from another recession by using negative interest rates.
• Residential construction is recovering. New housing starts SAAR came back to 1.2 million.
• Millennials and younger generations (under 35) finally found jobs. But labor force participation rates are still low.
7
Back to Where We Were Full Time and Part Time Employment (thousands, seasonally adj.) - Jan’
2000 – Oct’ 2015
16.0%
17.0%
18.0%
19.0%
20.0%
21.0%
104,000106,000108,000110,000112,000114,000116,000118,000120,000122,000124,000
Full
Tim
e
Full Time Part Time %
Source: Bureau of Labor Statistics 8
U.S. Principal Means of Transportation to Work
1989 & 2014
Source: U.S. Department of Housing and Urban Development, American Housing Survey, 1989 , U.S. Census Bureau
U.S. Department of Commerce, American Community Survey, 2014, U.S. Census Bureau
Automobile 86%
Public Transportation
5%
Walks Only 3%
Work At Home 4% Other
2%
2014
Automobile 87%
Public Transportation
5%
Bicycle and Motorcycle
1%
Walks Only 3%
Work At Home 2% Other
1%
1989
And Households Are Carrying More Debt Household Non-Housing Debt* 1Q 2003 – 3Q 2015
-
500
1,000
1,500
2,000
2,500
3,000
3,500
-
200
400
600
800
1,000
1,200
1,400
1Q2003
1Q2004
1Q2005
1Q2006
1Q2007
1Q2008
1Q2009
1Q2010
1Q2011
1Q2012
1Q2013
1Q2014
1Q2015
Tota
l in
Bill
ion
$
De
bt
in B
illio
n $
Student Loans Auto Loans Credit Card Other Total
Source: FRBNY Consumer Credit Panel/Equifax
*Excludes mortgage and home equity line of credit
A Change in Mix Drives RA Prices NADA New Vehicle Selling Price
(Incentives now about $3,000 on average)
1978 – 2015 (As of September)
$24,900 $28,351
$ 33,073
-5%
0%
5%
10%
15%
20%
-
5,000
10,000
15,000
20,000
25,000
30,000
35,0001
97
8
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
Ve
hic
le P
rice
Infl
atio
n
Ve
hic
le P
rice
, $
NADA selling price Vehicle price inflation CPI Inflation
Source: NADA DATA; BLS 11
Gasoline Prices (Real)
Jan. ‘03 – Oct. ‘15
$2.19 $2.50
$3.47 $3.49 $3.61
$4.43
$2.91 $3.11
$4.12 $4.04 $3.79 $3.68
$2.92
$2.29
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
$5.00
Jan
-03
Jul-
03
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
Jan
-13
Jul-
13
Jan
-14
Jul-
14
Jan
-15
Jul-
15
Pri
ce P
er
Gal
lon
Source: EIA 12
Vehicle Sales Still Disconnected From Macro Economy U.S. GDP Growth Rate and Vehicle Sales Growth Rate
1956 – 2015
-30
-20
-10
0
10
20
30
40
-4
1
6
11
56 59 62 65 68 71 74 77 80 83 86 89 92 95 98 01 04 07 10 13
Ve
hic
le S
ale
s G
row
th R
ate
GD
P G
row
th R
ate
Sales Growth GDP Growth
Source: Bureau of Economic Analysis
Better than We Were . . . DOW JONES INDEX*
January 2000 – November 2015
5,000
10,000
15,000
20,000
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
Oct ’07 – Feb ’08: - 49%
Dec ’99 – Sep ’02: -34%
Feb. ’09 – November ’15: +152%
14 Source: Yahoo Finance
Consumer Confidence & Sentiment
January 2007— October 2015
0.0
20.0
40.0
60.0
80.0
100.0
120.0
Jan
-07
May
-07
Sep
-07
Jan
-08
May
-08
Sep
-08
Jan
-09
May
-09
Sep
-09
Jan
-10
May
-10
Sep
-10
Jan
-11
May
-11
Sep
-11
Jan
-12
May
-12
Sep
-12
Jan
-13
May
-13
Sep
-13
Jan
-14
May
-14
Sep
-14
Jan
-15
May
-15
Sep
-15
Consumer Confidence Index UofM Consumer Sentiment Index
Source: The Consumer Confidence Survey, conducted for the Conference Board; Federal Reserve Economic Data
UM Consumer Sentiment Index
Annual: 1978 - 2012
Monthly for Jan. 2013 – October 2015
October ‘15
10.011.012.013.014.015.016.017.018.019.0
60.0 70.0 80.0 90.0 100.0 110.0 120.0
Ligh
t V
eh
icle
Sal
es
(Mill
ion
)
Consumer Sentiment Index
Source: Automotive News 16
Not Back Yet . . .
U.S. Housing Starts and Auto Sales
Jan. 2001 –October 2015
0.0
5.0
10.0
15.0
20.0
25.0
0
500
1,000
1,500
2,000
2,5001/
1/2
001
7/1
/20
01
1/1
/20
02
7/1
/20
02
1/1
/20
03
7/1/
20
03
1/1
/20
04
7/1
/20
04
1/1
/20
05
7/1
/20
05
1/1
/20
06
7/1
/20
06
1/1
/20
07
7/1
/20
07
1/1
/20
08
7/1
/20
08
1/1
/20
09
7/1
/20
09
1/1
/20
10
7/1
/20
10
1/1
/20
11
7/1
/20
11
1/1/
20
12
7/1
/20
12
1/1
/20
13
7/1
/20
13
1/1
/20
14
7/1
/20
14
1/1
/20
15
7/1
/20
15
Ligh
t V
eh
icle
Sal
es
(Mill
ion
s SA
AR
)
New
Pri
vate
ly O
wn
ed
Ho
usi
ng
Un
its
Star
ted
(Th
ou
san
ds
SAA
R)
Housing Starts Auto Sales
Source: American Housing Survey for the United States, U.S. Census Bureau; BEA 17
Labor Force Participation Rate Is Falling
Even After the Last Two Recessions Labor Force Participation Rate 1978 – 2015
59%
60%
61%
62%
63%
64%
65%
66%
67%
68%1
97
81
97
91
98
01
98
11
98
21
98
31
98
41
98
51
98
61
98
71
98
81
98
91
99
01
99
11
99
21
99
31
99
41
99
51
99
61
99
71
99
81
99
92
00
02
00
12
00
22
00
32
00
42
00
52
00
62
00
72
00
82
00
92
01
02
01
12
01
22
01
32
01
42
01
5Lab
or
Forc
e P
arti
cip
atio
n R
ate
Women’s participation In labor force
Economy Boomed. GDP grew 3.8% per year
Lowest since 1978
Source: Current Population Survey, Bureau of Labor Statistics
Who is Dropping Out of Labor Force? Change in Labor Force Participation Rate by Age Cohort Since 2000
-15
-10
-5
0
5
10
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Pe
rce
nta
ge P
oin
t C
han
ge
16-24 25-34 35-44 45-54 55-64 65+
Source: Current Population Survey, Bureau of Labor Statistics
Location of Household by Householder’s
Age 2013 1989
45% 35% 31% 29% 31% 31%
36% 47% 49% 49% 46% 42%
19% 18% 20% 21% 23% 27%
0%
25%
50%
75%
100%
Under25
25-34 35-44 45-54 55-64 65 andabove
Center City Subrubs Rural
Source: American Housing Survey for the United States, U.S. Census Bureau.
42% 38% 32% 28% 27% 25%
36% 46% 51% 54% 52% 50%
22% 16% 17% 19% 21% 24%
0%
25%
50%
75%
100%
Under25
25-34 35-44 45-54 55-64 65 andabove
Center City Subrubs Rural
American Are Moving Into Suburbs
U.S. Occupied Housing Units
32%
31%
29%
30%
46%
47%
51%
50%
22%
22%
20%
20%
0% 20% 40% 60% 80% 100%
1989
1997
2009
2013
Central Cities Suburbs Outside MSAs
Source: American Housing Survey for the United States, U.S. Census Bureau.
CAR U.S. Light Vehicle Sales Forecast:
2015-2020
16.1
13.2
10.4 11.6
12.8 14.5
15.6 16.5
17.5 18.1 18.5 18.6 18.1 17.9
0
5
10
15
20
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
U.S
. LV
Sal
es
in M
illio
ns
Source: CAR Research, November 2015
6.1%
3.4% 2.2%
0.5% -2.6%
-1.1%
2018 Downturn-1: Sales, -12% Prices, -13% Revenue: -24%
22
2018 Downturn-2: Sales, -33% Prices, -5% Revenue: -37%
N.A./U.S. Production Forecast: 2007-2020
15.4
12.9
8.8
12.2 13.5
15.8 16.5
17.4 18.1
19.3 19.7 19.9 19.7 19.7
10.8
8.7
5.7
7.7 8.7
10.3 11.1
11.7 11.9 12.1 12.2 12.2 11.8 11.5
70%
67% 65%
64% 64% 65%
67% 67% 66%
63% 62% 61% 60%
58% 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
Mill
ion
NA Prodution US Production US Share of NA
Production includes HD Trucks. Source: CAR Research, November 2015 23
3.9% 6.6%
2.1% 1.0%
+2.1% 1.7% 0.8%
0.0%
-0.9% -0.1%
-3.3%
-2.5%
Automaker Investment Announcements, Jan 2010-May 2015
Canada $5.4 billion
United States $53.4 billion
Mexico $24.2 billion
U.S. Great Lakes
$ 28.2 billion
South $12.0 billion
Note: U.S. Great Lakes includes: IL, IN, KY, MI, MO, and OH while South includes: AL, FL, GA, MS, SC, TN, and TX
Total North America
$83.0 billion
Source: CAR Research, Book of Deals 24
Mexican Automotive Wages are One-Eighth to One-Fifth the
Wages Paid to U.S. Hourly Auto & Parts Workers
$0
$5
$10
$15
$20
$25
$30
200
7
200
8
200
9
201
0
201
1
201
2
201
3
Motor Vehicles Parts
$0
$5
$10
$15
$20
$25
$302
00
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
U.S
. D
olla
rs/H
ou
r
Motor Vehicles Parts
Average Hourly Wages for Production and Non-Supervisory Workers in Motor Vehicle and Parts, 2007-2014
Sources: U.S. Department of Labor, Bureau of Labor Statistics; Mexico National Institute of Statistics and Geography (INEGI: Instituto Nacional de Estadística y Geografía) 25
In Dollar We Trust MX/USD
October 2000 – October 2015
8.00
10.00
12.00
14.00
16.00
18.00
Pe
sos/
USD
23% depreciation since 2011
26 Source: Federal Reserve Economic Data
Bigger Than Germany! Mexican Capacity, Production, and
2015-2018 Production Forecast
2.0 2.1 1.5
2.3 2.6 2.9 2.9 3.2 3.4 3.6
4.1 4.8
5.2 5.5 5.6 5.5
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Mill
ion
s
Mexican Production and Forecast Mexican Production Capacity
Sources: LMC Automotive 27
Some Mexican Advantages
US/MEX Difference in Hourly Labor Cost on a Subcompact Car
$674 a car
US/MEX FTA advantage on a Q5 Export to Europe
$4,500+ per vehicle
28
Imported From ____
Summary
• New US vehicle sales records set a new higher plateau.
• Have to have a hatch or bed to sell now with low fuel prices.
• Auto market having the best year in 15 years—Jobs , credits, interest rates, gasoline price, household wealth, etc. are all in favorable conditions—but for how long?
• Sales downturn is coming—but when?
• Even the US sales are held, US vehicle production will not.
30
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