around the world presentation global sales and...

ihs.com

© 2017 IHS

Presentation

28 March 2017

Colin Couchman

Peter Nagle

Sarah Kingsbury

Mike Jackson

Roberto Barros

Around the World

Global Sales and Production Forecast

Europe and the Americas

IHS AUTOMOTIVE

© 2017 IHS

Next Global Sales and Production WebcastTuesday, 25 April 2017

Around the World / March 2017

• The 2017 and historical audio webcast can be downloaded at:

automotive.ihs.com under the webcast archive section.

2

http://automotive.ihs.com/

© 2017 IHS

Next Global Sales and Production WebcastTuesday, 25 April 2017

• The February 2017 PDF webcast can be downloaded on AutoInsight

under the standard e-files section.

3


To ask a question, please type your question in the “Ask a Question” box within the webcast system

and click “Send.”

© 2017 IHS

Questions and answers

4


© 2017 IHS

Contents

Macroeconomic outlook

Global sales and production outlook

Europe outlook

North America outlook

The rest of the world


5


© 2017 IHS

-6.00

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World UnitedStates

Japan Eurozone Brazil Russia India China UnitedKingdom

2016 2017 2018 Avg. 2019–24

World economic growth rates

Source: IHS © 2017 IHS

Avg. growth of 2.9%

Global growth is expected to rise in 2017 as the US

economy strengthens and Brazil/Russia start to recover

6


© 2017 IHS

0.0

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China Japan Russia UnitedStates

Brazil Eurozone UnitedKingdom

World unemployment rates


Employment remains relatively strong, improving

consumer spending in many markets

7

January

2017


© 2017 IHS

0

0.5

1

1.5

2

2.5

3

China India Japan Russia Brazil Eurozone UnitedKingdom

Currency vs US dollar (indexed to January 2013)


Strong dollar is now weakening—Exchange rates are

coming down from recent lows

8

February 2017


© 2017 IHS

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UnitedStates

Russia Japan India UnitedKingdom

Eurozone China Brazil

World industrial production (three-month average)


Manufacturing remains muted around the world as

weakness in many markets limits demand

9

January

2017


© 2017 IHS

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Brazil China Eurozone India Japan Russia UnitedStates

UnitedKingdom

World inflation rates


Inflationary pressures are easing in emerging markets,

rising in developed markets

10

January 2017


© 2017 IHS

The House Republicans’ plan for US corporate tax

reform: A border-adjusted cash-flow tax

• The principal goal of US corporate tax reform is a reduction in the

federal corporate tax rate from 35% to 20% or lower.

• The House Republicans’ plan would transform the corporate income

tax into a destination-based cash-flow tax that exempts the full value of

exports but includes the full value of imports in the tax base.

• This is essentially a tax on domestic consumption. It differs from a

value-added tax (VAT) by allowing a deduction for domestic wages and

salaries—resulting in a smaller tax base.

• Border adjustment (BAT) would raise tax revenues (about USD100

billion per year), helping to finance a reduction in the corporate tax rate.

• A major uncertainty is the extent to which the dollar would appreciate to

offset the price effects from border adjustment.


© 2017 IHS

Pros and cons of a border-adjusted cash-flow tax

Arguments in favor

• Taxes domestic consumption

• Neutrality regarding location of

production

• Removes incentive to shift profits

or activities outside the United

States

• Currency appreciation would offset

price effects

• Raises tax revenue since US

imports exceed US exports

Arguments against

• Tax burden falls on consumers if

exchange rates do not adjust

• Low-income households hit hardest

by rise in import prices

• Disruption of supply chains

• Dollar appreciation changes asset

and liability values

• May violate World Trade

Organization rules, which allow

border adjustment for indirect taxes,

not direct taxes

12


© 2017 IHS

Implications of BAT—Who pays for it?


Current ATPs around USD31,500; 20% BAT to add USD6,300 to imported vehicle

costs

55.8%

11.4%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

United States Canada Japan Mexico Germany South Korea RoW

US sales by production country


© 2017 IHS

HVAC

• 9% of cost

• 39% import content

Electrical

• 14% of cost


Powertrain

• 22% of cost


Seating

• 13.8% of cost


Chassis

• 22% of cost


Implications of BAT—Who pays for it?

BAT impact on vehicle cost

2016 Pre-BAT Post-BAT Increase

ATP USD31,534 USD31,534

TC USD19,138 USD22,037 15.1%

Source: IHS Markit © 2017 IHS Markit


© 2017 IHS

Contents



Europe outlook




15


© 2017 IHS

Global sales

16


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2014 2015 2016 February 2017 YTD 2017 2018 2019

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Global Change

• For February 2017, global auto sales posted 6.76 million units—up 6.4%—as moderating demand in the United States combined

with a decent month for China. Chinese demand came back following January’s distortions to working days from the Chinese New

Year holiday. For the United States, we can highlight reduced OEM “push” and believe the market is experiencing a pre-Trump-

stimulus pause for breath. Europe, the third big sales region, had a slow month (up 0.2%) with one less working day. We maintain

Europe should continue to prosper from an ongoing release of pent-up demand, with a possible upside for some key markets.

• Total 2017 global auto growth is set at 1.8%, to 93.8 million units, a mild upgrade. Chinese-targeted auto excise duty incentives

are to continue through 2017, albeit at a lower rate of 7.5% for qualifying vehicles (up from 5% for 2016). Our 2017 China forecast

is set at 28 million units (up 1.7%). However, in 2018, when we assume a complete removal of the tax cut, the market is expected

to drop 0.8% without any incentives to prop it up. For 2017, we have set US sales at 17.4 million units, a slight moderation on

2016 levels (down 0.8%). The US market should return to growth for 2018 as the new Trump administration’s policies become

clearer (up 0.9%).

© 2017 IHS

Global light vehicle sales outlook2016–17 volume


17

92.2

93.8

+ 0.5

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+ 0.1

+ 0.1

+ 0.1 - 0.1

92.1

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92.9

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93.7

93.9

2016 Greater China South Asia MiddleEast/Africa

West Europe Central/EastEurope

South America Japan/Korea North America 2017

Mil

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+1.8%

© 2017 IHS

Global production

• Global production is estimated to have reached 7.43 million units in February 2017, a 4.1% year-on-year (y/y) increase. After two

months of the year, the year-to-date (YTD) comparison stands at 15.04 million units, or 3.3% above the same period in 2016. Full-

year 2016 is now estimated to have seen output levels reach 93.11 million units, 4.9% up on 2015 levels. The strong finish to 2016

reflects the surge in activity in China, especially in the final quarter.

• The full-year 2017 outlook is held effectively flat against January’s forecast and would represent growth of 1.8% to 94.81 million

units. Partial restoration of China's consumption tax, raised to 7.5%, policy forming from the Donald Trump administration, and

Indian demonetization will all shape the 2017 outlook alongside the emerging impacts of Brexit.

18


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Global Change

© 2017 IHS

Global light vehicle productionForecast variance, calendar year 2017


-84,303

-17,754

-12,597

-5,255

20,103

51,506

89,180

40,880

-250,000 -200,000 -150,000 -100,000 -50,000 0 50,000 100,000 150,000

South America

Middle East/Africa

North America

Greater China

South Asia

Europe

Japan/Korea

Global

Production variance (March 2017 vs. February 2017 forecast)

© 2017 IHSSource: IHS

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© 2017 IHS

Contents



Europe outlook




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© 2017 IHS

Europe sales outlook

21


• In February 2017, European sales increased 0.2% y/y to 1.42 million units. Western and Central European sales

posted a flat result with slight growth at 0.9% y/y. On the other hand, Eastern European volumes decreased again only

slightly after an improved January result, losing an estimated 4.7%, driven mainly by Turkey (down 11.2%) and Russia

(down 5.1%). The strong losses in Turkey and Russia compensated a bit for the 45.2% growth in Ukraine, which

brought the YTD performance down to 4.2%.

• On its current momentum, the market should stay on track, since it is just now starting to show signs of deceleration

(directly attributed to Brexit in October). The picture is less optimistic for the near future, notably 2017 and 2018 (during

which the exit should be negotiated between the involved parties). Of course, for the medium term, we maintain lower

expectations compared with our pre-Brexit views, but we also acknowledge that a lot of decisive parameters are

largely unknown as of today.

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2014 2015 2016 February 2017 YTD 2017 2018 2019

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West Europe East Europe Central Europe Change

© 2017 IHS

Germany and France sales outlook • German car sales decreased 2.5% y/y in February

2017 to 262,379 units. The small decline was the

result of one fewer working day compared with

February 2016, which was a leap year. IHS currently

forecasts stable development for 2017 as long as the

country's robust macro fundamentals remain in place,

with some key new model launches encouraging

private buying activity. In the longer run, we maintain

a cautious outlook. Despite a fundamentally sound

basis, the German economy and its auto industry

might suffer from a less supportive environment:

more restrained global demand, the migrant crisis,

Brexit developments, and, maybe even now, Donald

Trump’s election in the United States.

• The French light vehicle market fell during February.

Combined registrations of passenger cars and light

commercial vehicles (LCVs) up to 6.0 tons slid 2.0%

y/y to 195,920 units. The decline partly reflects the

month having one fewer working day than in 2016.

Taking this difference into account—20 days versus

21 days—the market improved 3.2% y/y. As a result

of the strong performance in January, light vehicle

registrations remain buoyant in the YTD, up 3.6% y/y

to 379,489 units. IHS anticipates light vehicle

registrations will further improve during 2017, with

passenger car demand up about 2.7% y/y to 2.06

million units and LCV registrations down 0.2% y/y to

409,309 units.

22


-4.0%

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2014 2015 2016 February2017

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Germany Change

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2014 2015 2016 February2017

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France Change

© 2017 IHS

Italy and Spain sales outlook

• Spain flattened out in February, with registrations

slightly up 1.8% y/y. This should not be surprising

given that the Spanish car market had been

benefiting from the eighth round of the Plan PIVE

scrapping incentive. The national statistical office

estimates real GDP grew 0.7% quarter on quarter

(q/q) during the fourth quarter, matching its third-

quarter gain. This illustrates the continued resilience

of the economy to domestic political risks, the fallout

from the Brexit vote, and continued deleveraging by

consumers and firms. The main upside appeared to

be stronger-than-expected employment growth

stoking up a firmer recovery in household real

incomes, allowing consumers to shrug off troubling

political uncertainties. IHS anticipates more modest

growth in the Spanish light vehicle market in 2017,

with an increase of about 4.5% y/y to 1.38 million

units.

23


• The Italian light vehicle market enjoyed another

buoyant month in February. The market was hit in

February with one fewer working day compared with

the same month in 2016. Nevertheless, registrations

in February solidly increased around 6% y/y to

198,672 units. As for the Italian passenger car

market, the continued growth in February came

despite an already-high base of comparison caused

by OEM incentives. IHS anticipates registrations will

reach broadly similar levels, hitting 2.15 million units

during the year.

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2014 2015 2016 February2017

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Italy Change

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2014 2015 2016 February2017

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© 2017 IHS

UK and Russia sales outlook • UK light vehicle registrations dipped during February.

After achieving record light vehicle registration levels

during 2016, the United Kingdom cautiously started

its account for 2017 with modest losses. Vehicle

registrations decreased 0.9% y/y during February to

96,767 units. During February, private customers slid

4.4% y/y to 36,018 units, which was not helped by

registrations by business customers falling 5.3% y/y

to 1,398 units. Fleet registrations have offset this,

though, with a gain of 3.3% y/y to 45,699 units.

• The Russian light vehicle market is yet to return to

growth in the early months of 2017 after a decline of

5.1% in February to just 106,658 units. This put YTD

sales volume down 5.4% y/y to 184,574 units. Since

November 2016, the market has been stuck in the

stagnation phase, which will continue another four to

six months. Going forward, supported by some gains

in oil prices and improvements in international

relations, the vehicle sales market is projected to

increase 8.7% in 2017, starting to really recover in

the second half of the year. We are more optimistic

for the following years with a return to growth as oil

prices and the larger economy start to regain some

impetus and postponed demand gives an additional

boost to sales.

24


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2014 2015 2016 February2017

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United Kingdom Change

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Russia Change

© 2017 IHS

Europe production outlook

• The European automotive industry, excluding Russia and the Commonwealth of Independent States (CIS), has already

passed pre-financial-crisis volume. However, the second half of 2016 has been the turning point between a recovery

cycle showing robust growth and a post-recovery cycle, when growth will be marginal. Output in the second half of

2016 grew only 1%, and we expect a similar pace of increase in 2017.

• In Russia, we expect output to rebound 9% in 2017 following four years of decreases. Thus, looking at total European

production, full-year growth is expected to reach 1.7% in 2017 after an increase of 2.8% in 2016. Damage from the

Brexit process to vehicle sales, especially in the United Kingdom, will be a key driver leading to flatter domestic

demand, despite the recovery in Southern and Eastern Europe. Meanwhile, product activity will allow for strong growth

in exports and support production increases.

25


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West Europe Central Europe East Europe Change

© 2017 IHS

Contents



Europe outlook




26


© 2017 IHS

United States sales outlook

• Light vehicle demand in February remained consistent with the month-earlier result; sales for the month came in at a

seasonally adjusted annual rate of 17.5 million units. Although the fundamentals that have supported light vehicle

demand—low fuel prices, available credit, expanding employment, and housing markets—remain, auto sales continue

to be pushed by historically high incentive levels, raising some concern about the robustness of the auto demand

environment. While we expect some potential month-to-month volatility through the next quarter, IHS maintains its full-

year sales projection of 17.4 million units.

• Light truck sales continue to dominate the demand conversation. February light vehicle sales were motivated by a 6.3%

increase in light truck demand, while passenger car sales were down 12.0%. Through the first two months of 2017,

passenger car sales are down more than 126,000 units from 2016. Light truck sales accounted for 63% of light vehicle

demand for the month, compared with the 59% share realized in February 2016.

27


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United States Change

© 2017 IHS

Canada and Mexico sales outlook • In Canada, light vehicle sales in February were up

3.2%, setting a new volume record for the month, the

second consecutive record month. The February

results reflected the dynamic trend of light trucks that

has been the most prevalent within the region, with

light truck sales up 7.4% for the month, while

passenger car sales were down 5.1%. We anticipate

light vehicle demand levels should be sustained

above the 1.9-million-unit mark in 2017, but they will

be down approximately 40,000 units from the 2016

volume of 1.95 million units.

• Amid a growing economy, rising consumer

confidence, improved credit availability, and a

reduced flow of used imported vehicles, Mexican

vehicle sales in 2016 grew considerably, up 18.6%.

As in January, February sales were up a more

moderate level, growing 6.5%. The threat of Mexican

demand falling precipitously after the strong 2015

and 2016 results continues to diminish, and

momentum should be sustained at more moderate

levels, especially if the flow of used imported cars

continues to moderate. However, there could be

some growing uncertainties as the new US

administration’s policies begin to unfurl in 2017. We

expect volume of 1.60 million units for 2017, with

sales projected to rise to 1.79 million units by 2019.

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Canada Change

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Mexico Change

© 2017 IHS

North America production outlook

• North American production in February 2017 declined 4.4% y/y, or 67,600 units, with 1.47 million units produced, which

translates to a seasonally adjusted annual rate (SAAR) of 17.60 million units.

• North American production is projected to decline 1.5%, or 276,000 units, to 17.55 million units, marking the first y/y

decline since 2009.

• Inventory levels at the end of February increased 48,100 units, or 1.2%, from January, totaling 4.04 million units, or an

above-average 73-day supply. With February inventory at a more-than-12-year high, an estimated 375,000 units of

inventory need to be shed from stock to align with ideal levels of between 60 and 65 days’ supply.

29


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© 2017 IHS

South America sales and production outlook

• Light vehicle output in South America is expected to

have grown 25.3% y/y in February 2017, reaching

232,000 units.

• Brazil built an estimated 194,584 units in February,

40.5% above February 2016. The outlook has

improved compared with conditions for most of 2016.

Some disruptions and efforts to address inventory

levels in the second part of 2016 should keep having

a more positive influence. The 2017 full-year outlook

for Brazil is forecast at 2.283 million light vehicles, up

9.1% from 2016, reflecting evidence of strengthening

build schedules as the region starts to hint it may be

ready to come off the bottom of the cycle.

31


• South America continues to show signs of stabilizing,

with February sales coming in nearly flat y/y after

posting a double-digit bump in January. Argentina

and Chile continue in positive territory, which is

compensating for the weakness we are seeing in

Brazil. Brazilian sales took a 6.8% dive in February,

thus marking the fourth month in a row of single-digit

contractions, after double-digit contractions for most

of the last two years.

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© 2017 IHS

Japan sales and production outlook • Japanese light vehicle sales increased 8.2% y/y in

February 2017 owing to strong nonminivehicle sales

with new model launches, whereas minivehicle sales

are still in the midst of gradual recovery momentum.

• The Japanese sales outlook for full-year 2017 is now

projected to increase 1.9% to 4.94 million units

because of the recovery trend generating positive

momentum, compared with 2016 when there was

much uncertainty stemming from Brexit and the fuel-

testing scandal, which hurt the minicar market.

Following the US presidential election, the near-term

Japanese economy shows slight optimistic growth

momentum owing to a weaker Japanese yen.

• In February 2017, regional production volume is

expected to skyrocket 10.5% y/y. Japanese output

has increased 10.7% y/y owing to a lower production

result in February 2016 due to partial production halts

for Toyota, as well as strong production for the latest-

generation models. Full-year 2017 output is expected

to reach 9.02 million units, increasing 3.1% y/y owing

to new domestic models as well as export models,

which will have production switched from overseas to

Japan. IHS will carefully watch US policies going

forward as a US pull-out of NAFTA and fuel efficiency

regulation changes will have significant impacts for

Japanese OEMs including future production trends.

32


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Japan Change

© 2017 IHS

South Korea sales and production outlook • Korean total light vehicle sales increased 7.6% in

February. South Korean sales for 2017 are expected

to reach 1.79 million units, a slight increase of 0.3%

y/y. The overall macroeconomic outlook will not easily

recover, and individual households will suffer a debt

burden and are likely to present lower purchasing

power with the recent political risk. In March 2017,

President Park Geun-hye was impeached, and as a

result, Korea will have its next presidential election in

May 2017. This abrupt decision became a turning

point.

• In Korea, light vehicle production also grew 9.9% y/y

in February thanks to new car releases such as the

Hyundai Grandeur and Samsung QM6 in domestic

sales and the recovery in emerging markets along

with a corresponding positive effect of two extra

working days. In 2017, we anticipate aggregate

output to be 4.29 million units, up 2.9% y/y mainly

because of a low base effect in 2016. Additionally,

overseas markets are expected to support growth as

the premium brand of Genesis broadens its existence

and emerging markets recover from a recession.

However, Brexit in Europe, the new Trump

administration’s trade policies, and interest-rate

increases by the US Federal Reserve in the United

States are risk factors that pressure South Korea’s

output.

33


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© 2017 IHS

Greater China sales and production outlook

34


• Light vehicle sales for Greater China in February

2017 reached 1.83 million units, surging 15.5%

compared with the same period in 2016. The surge

was due to mainland China light vehicle sales

jumping 15.7% y/y to 1.81 million units, recovering

from dampened sales thanks to the Spring Festival

holiday.

• From January to February 2017, Greater China light

vehicle sales climbed to 4.36 million units, reflecting a

y/y increase of 4.9%, among which mainland China

achieved 4.29 million sales in total, reporting a

relatively solid 5.1% y/y increase. Passenger vehicle

sales rose 10% y/y to 3.71 million units, while light

commercial vehicle sales plummeted 18.4% y/y to

580,000 units.

• Light vehicle production in February in Greater China is

estimated at 1.76 million units, an increase of 11.4% y/y,

while YTD production is up 1.4% y/y to 4.07 million

units. Light vehicle production in mainland China is

expected to have increased 11.4% y/y in February to

1.74 million units. The full-year 2017 forecast is now for

a 2.6% y/y increase to 28.08 million units.

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© 2017 IHS

India/Pakistan sales and production outlook

• In India, light vehicle sales jumped 11% y/y because

of the government’s steps toward remonetization,

which helped generate demand. We continue to see

a push by OEMs in lieu of anticipated pent-up

demand and new model launches, and our growth

projection for 2017 stands at 8% y/y.

• In February 2017, Indian light vehicle production

increased for the 15th consecutive month, jumping

5.2% compared with February 2016 on the back of

strong growth in utility vehicles. Since

demonetization, car manufacturers were forced to

work on their financial arms to attract customers to

showrooms. Schemes like zero down-payment, low

interest rates, and heavy discounting allowed them to

pull ahead demand as Indian consumers clinched the

best available deals of the year. In this round, IHS

has made minor adjustments to the 2017 forecast.

Production is expected to reach 4.4 million units (up

5.6% y/y) in 2017. Meanwhile, in Pakistan, with the

expected reintroduction of the taxi scheme in 2017,

we forecast production to jump 14.8% y/y to 236,000

units in calendar year 2017.

35


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© 2017 IHS

ASEAN/Oceania sales and production outlook

36


• In February 2017, light vehicle sales in the

Association of Southeast Asian Nations (ASEAN)

market increased 10.5% compared with February

2016. Thai light vehicle sales increased 20.0% in

February because of a low base stemming from a

new excise tax at the beginning of 2016. Meanwhile,

Indonesia’s car market increased 6.0% y/y and

consumer confidence remained upbeat. Low-cost

green cars (LCGCs) continued to drive demand.

• ASEAN light vehicle output rose 1.7% y/y in February

2017, with 310,394 units produced, and YTD

production output posted 3.1% y/y, with 627,306 units

produced. The full-year 2017 production outlook is

set at 3.9 million units, with mild growth of 1.1% y/y.

In February, Thai production dropped 11% y/y given

the slowdown in export demand and recovering

domestic demand. The country’s light vehicle

production outlook is set at 1.87 million units, a

decrease of 2.5%. Indonesian production in February

2017 was on pace for recovery with 9.5% y/y growth

driven by robust domestic demand for the LCGC

segment and improved consumer sentiments. Full-

year 2017 production is expected to grow at 3.4% y/y,

or 1.16 million units.

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© 2017 IHS 38


Contact IHS Customer Care

Need training?

For solutions to your business needs

Americas Europe, Middle East,

& Africa

Asia and the

Pacific Rim

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© 2017 IHS


39


© 2017 IHS

Save the date!

IHS Automotive Global Sales and Production Webcast schedule:

Tuesday, 25 April 2017

• Asia session

11:00 a.m. Japanese Standard Time

• Europe and the Americas session

10:00 a.m. Eastern Daylight Time (United States)

4:00 p.m. Central European Time

40


IHSTM

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