confidential. © 2020 ihs markit . all rights reserved. · 2020. 8. 27. · confidential. © 2020...

Confidential. © 2020 IHS Markit®. All rights reserved.

Presentation name | Month 2020

1


North America Light Vehicle OutlookChallenges amid transformation

September 1, 2020

Joe Langley, Associate DirectorNorth America Light Vehicle Production Forecasting & Analysis+1 248 465 [email protected]


US Light Vehicle Sales in Alternative Scenarios Could a “V-Shaped” Recovery Save the Day or Will a “Second Wave” Derail the Market?

3

Source: IHS Markit

US light vehicle sales

© 2020 IHS Markit

Baseline forecast: Efforts to contain COVID-19 shutter large swaths of the economy and create deeper recession than 2008-09. Inventory in the system offsets some of the plant disruption impact, yet also limits near-term growth prospects as we re-open the economy; OEMs expected to prioritize production of more profitable programs.

Optimistic forecast: Reflects a broader V-shaped recovery as stimulus measures are expanded to include light vehicle scrapping programs. Measures to gradually reopen shuttered economies are successful and not interrupted by a return of the virus. A stronger economic response in 2021–23 accelerates recovery in vehicle demand.

Pessimistic forecast: Assumes that virus-fighting efforts prove to be effective and allow for a temporary recovery. However, a second wave of the virus hits during the 4Q-2020. Another phase of lockdowns is required, although learnings from the initial experience mean the disruption is shorter in nature. Stimulus measures prove ineffective at backstopping the crisis. Economic recovery begins later and at a much slower rate.

2020 Automotive Parts Supplier Conference

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

2000 2005 2010 2015 2020

Millions

%∆ Y/Y Baseline (50%) Optimistic (20%) Pessimistic (30%)


US light vehicle salesSelf correcting inventory amid COVID-19

4

Source: IHS Markit

US light vehicle inventory

© 2020 IHS Markit

Inventory update§ Inventory: July 2020

§ Stock: 2.54M units or 54 days’ supply§ Inventory/Sales Ratio: 2.07§ Y/Y: -1.16M units or -31.3%§ M/M: -55K units or -2.1%§ Inventory to Sales Index: -21.9%

§ Sales increasing faster than inventory

§ 400- to 500K inventory shortage

§ Inventory continues to decline§ Better than expected demand and

lower inventory bolsters production outlook§ Upside to short-term forecasts under

review for August 2020 update


-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2008 2010 2012 2014 2016 2018 2020

Millions

Forecast Inventory/Sales Index US Inventory US Inventory (SA)


Source: IHS Markit

North America light vehicle production phases

© 2020 IHS Markit

North America ProductionInventory depletion bolsters short-term outlook

5

Inventory update§ Anatomy of current inventory

§ US sales between March and May 2020 totaled 2.84M units

§ North America production totaled 1.25M units in same period

§ Swift reduction of inventory due to 1.6M unit production deficit from COVID-19 shutdowns

§ Ideal inventory level between 2.7M and 3.1M units for 2020 and 2021

§ Restocking production expected to last several months, bolsters outlook

§ Migration from Restart phase to Alignment phase expected to being between 4Q 2020 and 1Q 2021§ No need to recover full 1.6M units due

to lower demand environment

1.6M unit gap

-0.4

-0.2

0.0

0.2

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0.6

0.8

1.0

1.2

1.4

1.6

Jan-20 Apr-20 Jul-20 Oct-20

Millions

US Sales to NA Production US Sales NA Production

Shutdown Restart Align



North America ProductionCOVID-19 erases outlook

6

Source: IHS Markit

North America light vehicle production

© 2020 IHS Markit

17.817.1 17.0 16.3

12.6

14.615.5 15.6 16.0 16.3 16.4 16.6

0.0

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2016 2018 2020 2022 2024 2026

Millions

July 2020 Forecast January 2020 forecast

-10.9 million units

Short term§ COVID-19 implications

§ -3.7M units in 2020§ Plant shutdowns§ Gradual restarts§ Align to new, lower demand§ Program delays

§ Inventory depletionLong term§ Sourcing decisions§ USMCA implications§ Capacity

§ Expansion and maximization§ BEV implications§ Second phase developments

§ Lifecycle pressure



North America ProductionTransplants driving growth

7

Source: IHS Markit


© 2020 IHS Markit

9.2 8.6 8.6 8.0

6.07.1 7.3 7.3 7.4 7.5 7.6 7.7

8.58.4 8.1 8.0

6.3

7.07.6 7.7 8.1 8.2 8.3 8.4

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2016 2018 2020 2022 2024 2026

Millions

US Three Startups Transplants

Divergent trajectories – 2019 to 2027 § Domestics

§ -238K units or -3.0%§ Offshoring to China§ Build where you sell§ Increasing shift to trucks§ More closely tied to US sales

§ Transplants§ +393K units or +4.9%§ Localization; build where you sell§ Capacity expansion§ Increasing exports§ Global sourcing

§ Start-ups§ +174K units or +47.7%§ Tesla offshoring slowing growth



North America ProductionIntra-regional production shifts

8

Source: IHS Markit


© 2020 IHS Markit

12.011.0 11.0 10.6

8.410.0 10.5 10.6 10.8 11.0 11.0 11.2

2.42.2 2.0 1.9

1.31.4 1.5 1.5 1.5 1.5 1.5 1.6

3.53.9 3.9 3.8

2.9

3.23.5 3.5 3.7 3.8 3.8 3.9

0.0

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2016 2018 2020 2022 2024 2026

Millions

USA Canada Mexico

Mexico: 2019 – 2027§ +2.7% growth§ 103K units at 3.9M§ 24% of regional output§ New plants:

§ Kia-Monterrey (2016)§ Audi-San Jose Chiapa (2016)§ COMPAS-Aguascalientes (2017)§ BMW-San Luis Potosi (2019)§ Toyota-Guanajuato (2019)

§ USMCA implications§ Resourcing risks

§ Plants§ Products

§ Exchange rates



North America ProductionGeneral Motors

9

Source: IHS Markit

North America production

© 2020 IHS Markit

Opportunities and risks§ Lack of portfolio expansion§ Overly focused on EV/AV§ Strategy issues; BEV3, BET§ Localization of EVs

Issues§ Excess capacity; Fairfax, Lansing

Grand River, Orion, Ramos Arizpe§ Profit diversion to new mobility§ China dependence§ FCA threat; Jeep, Ram

Vehicle 2019 2027Car 12% 9%Truck 41% 45%Utility 48% 47%

-659

-263

-106-58 -69 -49

-175-131

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-100

0

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2017 2019 2021 2023 2025 2027

Thousands

Millions

%∆ Jul-20 Jan-20

2019 to 2027-1.52M units



North America ProductionFord Motor Company

10

Source: IHS Markit


© 2020 IHS Markit


Opportunities and risks§ Escape in 2020 until CX430 arrives§ Rapid portfolio cadence amid delays§ Quick entrance into EVs; emotive§ Partnerships; Volkswagen, Rivian

§ Rivian-Lincoln cancelled

Issues§ Entry-level; gateway consumers§ Launch issues§ Program cancellations

-584

-72-108

-237-191

-153-108 -120

-700

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0

100

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0.5

1.0

1.5

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2017 2019 2021 2023 2025 2027

Thousands

Millions

%∆ Jul-20 Jan-20

2019 to 2027-1.57M units



North America ProductionFiat Chrysler Automobiles

11

Source: IHS Markit


© 2020 IHS Markit


Opportunities and risks§ PSA merger§ Ram DS/DT strategy§ Grand Cherokee, Grand Wagoneer§ Legacy volume ends

Issues§ Excess capacity; Belvidere, Toluca§ Global growth predicated on China§ Chrysler and Dodge brands§ Jeep threats; internal and external

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-333

-165 -161-102

-40 -59 -58

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2017 2019 2021 2023 2025 2027

Thousands

Millions

%∆ Jul-20 Jan-20

2019 to 2027-1.50M units



North America ProductionToyota Motor

12

Source: IHS Markit


© 2020 IHS Markit


Opportunities and risks§ Capacity maximization efforts§ GA-F trucks despite scale risk§ Toyota New Global Architecture 2.0§ Commitment to cars

Issues§ Partnerships flourishing with Mazda,

Subaru, and Suzuki§ Diversified global footprint, sales§ Lagging EV/AV; partnerships

-412

-277

-130-99

-77-99

-39 -46

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2017 2019 2021 2023 2025 2027

Thousands

Millions

%∆ Jul-20 Jan-20

2019 to 2027-1.18M units



North America ProductionHonda Motor Company

13

Source: IHS Markit


© 2020 IHS Markit


Opportunities and risks§ Capacity maximization efforts;

closure of El Salto§ Honda Architecture; aiming for

70% parts commonization§ Core vehicles under pressure

Issues§ Needs EV/AV partners; GM§ Limited portfolio; lack of success

with expansion efforts§ Luxury with Acura

-354

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2017 2019 2021 2023 2025 2027

Thousands

Millions

%∆ Jul-20 Jan-20

2019 to 2027-1.15M units



North America ProductionRenault-Nissan-Mitsubishi

14

Source: IHS Markit


© 2020 IHS Markit


Opportunities and risks§ Capacity maximization efforts§ Truck and utilities; reviewing

increased localization§ Mexico operations under pressure§ Portfolio rationalization efforts

Issues§ Status of alliance in turmoil§ Nissan restructuring§ Luxury with Infiniti

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2017 2019 2021 2023 2025 2027

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Millions

%∆ Jul-20 Jan-20

2019 to 2027-2.28M units



North America ProductionHyundai Motor Group

15

Source: IHS Markit


© 2020 IHS Markit

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2017 2019 2021 2023 2025 2027

Thousands

Thousands

%∆ Jul-20 Jan-20

2019 to 2027-516K units


Opportunities and risks§ Uneven capacity maximization

§ Montgomery with five products§ West Point underutilized

§ Trucks and utilities; increased localization

§ Phase II development in MexicoIssues§ Restructuring period; shifting

regional control§ High level of imported content



North America ProductionVolkswagen Group

16

Source: IHS Markit


© 2020 IHS Markit

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-84

-29 -24 -18

-56-76 -67

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2017 2019 2021 2023 2025 2027

Thousands

Thousands

%∆ Jul-20 Jan-20

2019 to 2027-597K units


Opportunities and risks§ ID models good fit for brand§ Exploring sourcing strategies;

batteries not included§ Additional activities with Ford§ Needs conquest buyers

Issues§ Overly focused on EV/AV§ Profit diversion to new mobility§ China dependence



North America ProductionBMW Group

17

Source: IHS Markit


© 2020 IHS Markit


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-43

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2017 2019 2021 2023 2025 2027

Thousands

Thousands

%∆ Jul-20 Jan-20

Opportunities and risks§ Offshoring is accelerating§ No immediate EV plans for US§ Reducing portfolio§ Explore new segments

Issues§ Existential threat: The Ultimate

Driving Machine in new-mobility§ Chasing “Number One”§ Economies of scale; needs partners§ High level of imported content

2019 to 2027-174K units



North America ProductionDaimler

18

Source: IHS Markit


© 2020 IHS Markit


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16 22

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2017 2019 2021 2023 2025 2027

Thousands

Thousands

%∆ Jul-20 Jan-20

Opportunities and risks§ Offshoring accelerating§ Localization of two EVs to support

global markets§ Reducing portfolio

Issues§ Economies of scale; needs partners§ Status of COMPAS amid ending of

partnership with Renault-Nissan-Mitsubishi

§ High level of imported content

2019 to 2027-13K units



North America ProductionTesla

19

Source: IHS Markit


© 2020 IHS Markit


Opportunities and risks§ Capacity expansion

§ USA§ China§ Europe

§ Product expansion; Cybertruck§ Market leadership; ecosystem

Issues§ Competition§ Vertical integration

-31

27

49

29

9

24

33

56

-40-30-20-10010203040506070

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2017 2019 2021 2023 2025 2027

Thousands

Thousands

%∆ Jul-20 Jan-20

2019 to 2027+196K units



North AmericaFrom cars to trucks and utilities

20

8 7 95 4 6

9 8 104 3

05 3

16 3

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1412 14

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1724

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1319

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3436

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2017 2019 2021 2023 2025 2027Cars Trucks Utilities

Robust product activity remains§ Launches amid industry slowdown

§ Quality volume versus quantity§ Down 21 programs since March

§ Utility vehicle expansion continues§ Competition weighs on leaders§ Splintering segmentation§ Pricing and margin pressure

§ BEV activity§ 39 all-new nameplates§ 6.2% or 1.0 million units of North

American production by 2027§ Tesla from 89% to 30% of total§ Product redundancy

§ Legacy programs as a hedge§ Extensions amid future costsSource: IHS Markit

North America light vehicle production launches

© 2020 IHS Markit

212launches



North AmericaLifecycle risk

21

Source: IHS Markit

Anatomy of current lifecycle environment

© 2020 IHS Markit

Shifting Resources• Regulations• Technology• Costs

Slowing Demand• Motivations• Affordability• Recession catalyst

Lifecycle Pressure• Cost structure• Competition• Launch activity

Program Review• Planning volumes• Investment• Collateral impact

Program Extension• Recoup investment• Implications• Actions



North AmericaLifecycle risk

22

Source: IHS Markit

North America production and lifecycle activity

© 2020 IHS Markit

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2000 2005 2010 2015 2020 2025

Years

Millions

Forecast Launch Age Market Age Production

Extensions

Metrics: 2019 to 2027§ Growth: 289,300 units or 1.8%§ CAGR: 0.2%Outlook§ Significant program extensions

surrounding previous recession§ Product implications

§ Extensions§ Capacity allocation§ Defer other investment§ Cut losses§ Recoup investment§ Delayed opportunities

§ Contingency planning; identify programs with above or below average chance for extensions

Extensions?


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Presentation name | Month 2020

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confidential. © 2020 ihs markit . all rights reserved. · 2020. 8. 27. · confidential. © 2020...

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