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Confidential. © 2020 IHS MarkitTM. All Rights Reserved.Confidential. © 2020 IHS MarkitTM. All Rights Reserved.

North America Light Vehicle OutlookAutomotive in the cross-currents

SAA Automotive Outlook Conference January 21, 2020

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

Confidential. © 2020 IHS MarkitTM. All Rights Reserved.

Source: IHS Markit

US light vehicle inventory

© 2020 IHS Markit

US light vehicle salesInventory correction in progress

2

Inventory update Inventory to Sale Index in negative for

6 of the last 8 months indicating inventory levels are being depleted Implications from GM-UAW strike

Lowest inventory since Sep. 2015 Alignment of production to continue No longer a car and truck mix issue Increasing concern surrounding

elevated truck and utility inventory No movement in inventory

Dec. 2019 = 3.45M units Down 352,850 units from Dec. 2018 Down 166,550 units from Nov. 2019

50- to 100,000 units of excess inventory at current levels

SAA Automotive Outlook Conference / January 2020


Source: IHS Markit

North America light vehicle production

© 2020 IHS Markit

North AmericaFlat and stable production environment

3


Short term GM-UAW skews metrics Weight of pricing and product mix Car to utility transition continues Maintain inventory alignment Strong product cadence

Long term Record production not in sight On- and off-shoring Capacity expansion and maximization Continued shift to trucks and utilities BEV implications Policy and regulatory uncertainty Exports grow 11% to 1.6 million units


North AmericaTransplants driving growth

4

Source: IHS Markit


© 2020 IHS Markit

Divergent trajectories – 2019 to 2026 Domestics

-43K units or -0.5% Offshoring to China Build where you sell Increasing shift to trucks More closely tied to US sales

Transplants +732K units or +9.2% Localization; build where you sell Capacity expansion Increasing exports Global sourcing

Start-ups +108K units or +30% Tesla largest component



North AmericaIntra-regional production shifts

5

Source: IHS Markit


© 2020 IHS Markit

Mexico: 2019 – 2026 +4.0% growth 150K units at 3.94M 23% 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 AmericaShifting portfolio mix

6

Source: IHS Markit


© 2020 IHS Markit

Vehicle Mix: 2019 – 2026 Shift in mix:

Car: down 14% or -624K units Truck: up 2.7% or 111K units Utility: up 17% or 1.3M units

Factors driving utility growth: Demographics Consumers Regulations

Further downside risk for cars Re-inventing the car strategies:

Strategy One: Acceptance Strategy Two: Futility

Electrification stems fuel price fears Trucks remain steady



Source: IHS Markit

North America light vehicle production and capacity

© 2020 IHS Markit

North AmericaCapacity

7

Doing more with less Pre-recession

Unions forced higher employment levels resulting in underutilization

2-shifts operating pattern the norm

Post-recession Detroit 3 capacity ‘right-sized’ with 3-

shift work patterns become the norm Labor now acts as variable capacity Detroit 3 can reduce labor footprint

amid weakness without plant closures German and Korea automakers also

leverage 3-shifts 3-shifts operating pattern accounts for

around 50% of production since 2013 Japanese automakers predominantly

operate on 2-shifts



US salesLaunches by vehicle type

8

Source: IHS Markit

US light vehicle launches

© 2020 IHS Markit

Strong launch activity: 2019 – 2026 Luxury activity 52% (15.5% of total)

Cars = 62% (5.4% of total) Trucks = 1% (0.2% of total) Utilities = 56% (9.9% of total)

Cars Disproportionate number of luxury and

exotic launches skew Average 10 mainstream car launches Legacy redesigns and EVs

Trucks Increasing activity in mid-size

Utilities Expansion across all segments Redesigns of legacy nameplates EV nameplates



US Three ManufacturersOffshoring takes a toll

9

Source: IHS Markit

North America production

© 2020 IHS Markit

Positive Trucks and utilities; margins Retail focus Capacity footprint

Negative Launches Global luxury Offshoring Portfolio diversification

OEM Notables GM: CUVs, Trucks, New Mobility Ford: Product cadence, Volkswagen FCA: Ram, Jeep, post Sergio



Source: IHS Markit


© 2020 IHS Markit

Asian Four ManufacturersOn-shoring and capacity expansion drive growth

10

Positive Retail focus Flexibility Capacity maximization efforts

Negative Trucks Portfolio expansion Global luxury

OEM Notables Toyota: Portfolio mix, partners, EV Honda: Portfolio mix, partners, EV Nissan: Restructuring, holding pattern Hyundai: Reset and restructuring



Source: IHS Markit


© 2020 IHS Markit

German Three ManufacturersGrowth at the crossroads

11

Positive Global scale and luxury Localization Image

Negative Offshoring Aggressive targets Over proliferation Distractions

OEM Notables VW: CUVs and EVs BMW: Capacity expansion, sourcing Daimler: CUVs and EVs



Other ManufacturersRisk versus reward

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Source: IHS Markit


© 2020 IHS Markit

Positive Localization Niche

Negative Conquest dependent Size and scale Financial and technology risks

OEM Notables Subaru: Measured growth, constraints Tesla: Scaling business, China, EU Mazda: JV with Toyota, CUVs Volvo: Long-term focus, trade Rivian: Niche EV, partnerships



US light vehicle salesConsumer shift to continue

13

Source: IHS Markit

US light vehicle share by vehicle type

© 2020 IHS Markit

Re-inventing the car Strategy One: Acceptance

Embrace being a car Greater design freedom Focus on driving dynamics

Strategy Two: Futility Give in, increase utility Bodystyles; wagon, hatchback Limited success, lack of authenticity

Demographics at play Regulations favor trucks and utilities Freedom from ‘Volume Trap’ Recapture consumer’s imagination

BEVs create new opportunities Unique skateboard packaging

2016 Pivot


IHS Markit Customer [email protected]: +1 800 IHS CARE (+1 800 447 2273)Europe, Middle East, and Africa: +44 (0) 1344 328 300Asia and the Pacific Rim: +604 291 3600

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