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Outlook

Jeff Schuster, President Global Vehicle Forcasts January 13, 2018

Global Auto Outlook Industry at Crossroads?


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Sales – Production – Powertrain Light Vehicles

Medium/Heavy Commercial Vehicles

2


• After 2018 contraction, slower global momentum may start to negatively impact individual markets

• China, US and WE could may not bel strong enough to support positive global volume growth and are ones to watch

• Global LV sales expected to return to positive growth but momentum risk is high.

Global short-term external risk factors

3

• EPA proposed freezing CAFE standard at 2020 level. States led by California suing EPA.

• EU CO2 emissions increased in 2017, putting 2021 target in Jeopardy.

• China NEV credit starts in 2019 (modified version of ZEV).

• Many moving parts but likely enables EV growth…if consumers buy.

• Tariffs and a trade war remain a significant concern for autos.

• USMCA , South Korea deals all but done, while China, EU, and Japan talks linger as a next steps.

• EU premium groups remain at greatest risk if not settled. 25% tariff on EU imported vehicles, could lower US sales by 200k.

• Brexit concern is back in focus after WLTP rolls out (CO2 emission test). Hard Brexit probability has increased to 40%.

• Could add £1.8bn to the cost of exports and £2.7bn to the cost imports, annually.

• UK LV market could shrink by nearly 15% and threaten domestic and continental plants while undermining JIT business models.

NEV


World 2019 forecast: 95.4 mn, Up 750k units from 2018.

2%

-4%

2%

China

5% 4% 1%

-2% 0% -2%

3%

0%

1%

8%2% 2%

13%8%

0%

North America

Asia Pacific minus China

C&E Europe Western Europe

South America

17 18 19F

2%

-1%

1%World

17 18 19F

17 18 19F

17 18 19F

17 18 19F

17 18 19F

17 18 19F

2019 outlook is clouded after decline in 2018

4


Global Segments – Trucks grow in 2019

5

SUV sales forecast to drive industry growth across sizes and markets

6%

3%

-3%

-1% Car segment under pressure after 5% decline in 2018, continuing decline

Pickups with Ranger and HD growth in NA + PSA/Renault LCV gains drive increase in trucks

Aging Hongguang and other Chinese MPVs pull down MPV segment offset by some stable FCA volume

Decline in NA Sporty drives global pullback as models age

Total Premium recovery continues globally, as SUVs grow by 9% (46% share) Cars contract by 3%

2% 5%


-200

0

200

400

600

800

China Other Asia Europe NorthAmerica

SouthAmerica

MEA

Global LV Sales – 2018 Out of the Gate Broad-based 2019 LV production growth to 95.6mn

Growth in LV production, 2018 from 2017 (000s)

1.9% 2.5%

-0.5%

0.5%

-0.2%

6

Global volume growth is 1% or up 1mn units from 2018, after weak 2H18

1.4%

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0

1

2

3

4

5

6

2016 2017 2018

Global Passenger Car and US Light Truck Market %

of N

ew C

ar S

ales

*

• Global BEV sales cross 1mn in 2018 to 1.2mn, up 55% from 2017. • Global xHEV sales were up 20% to 3.3mn in 2018. • Japan is by far the leader in electrification at 25% in 2018, almost all full hybrid.

3.0%

World: BEV & Hybrid markets 2018

BEV including EREV xHEV including PHEV

0

1

2

3

4

5

6

2016 2017 20180

1

2

3

4

5

6

2016 2017 20180

1

2

3

4

5

6

2016 2017 2018

4.2%

2.6%

2.3%

1.4% 1.0% 0.8%

3.9%

China World Europe USA


0

300

600

900

1200

12018

8

China (734)

World: China Dominates BEV Sales

Europe (180)

other (89)

USA (195)

• NEV subsidies continue to keep China on top with 61% of BEVs.

• Many more brands will take to the China BEV stage, but many will fail or be consolidated into larger groups/

• With tougher FE standards and (generally) better incentives, Europe is moving to BEV fast, but Tesla pre-orders kept US higher last year.

• Europe greatly exceeds USA in total electrified technologies, including conventional FHEV with nearly 1mn units, 250k more than the US.

BE

V S

ales

201

8, (‘

000s

) BEV Sales, Global PV and US Light Truck Market

BEV


Long-term demand – Emerging markets drive growth

42 44 43 44

47 51 58 69

-

20

40

60

80

100

120M

illion

s

9

Emerging

Mature

113 102 95 89

-1.1% -0.2% -0.3%

2.4% 2.6%

3.6% 6.1% 6.6%

JapanUS

GermanyBrazil

GlobalChina

RussiaIndia

CAGR ‘18-’25

Global CAGR 2.6% from 2018-2025, with all growth concentrated in emerging markets – 61% of demand by 2025.

Mature markets expected to be flat with CAGR at 0.2%

Emerging is the growth and the risk with CAGR 4.4% - India and Russia outperform.


17.5 17.2

17.016.7 17.2

15.714.9

16.4

17.3 17.6

14151617181920

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

Baseline – Flat post peak CAGR ‘17-25 of -0.3%. + and – variable offset . + = economy, replacement,

new households. - = used car prices, interest

rates, tighter credit, trade policy uncertainty.

Trade has marginal impact.

Negative – Mild auto recession Vol. down -11% from base –

CAGR -0.6%. Economic slowdown and could

turn negative. Negative trade impact or trade

war. Used car substitution severe, . Recovery hampered by lower

density growth.

Outperform – 2x boost CAGR still only +0.3%. Near-term boost from fiscal

stimulus and lease maturities.

Prolonged economic growth and wealth impact.

Technology driven increase in mid-term as market transitions.

US LV demand at crossroads

10


84%79% 82%79%

79%

83%

2017 2021 2025

NA WE

• Asia CAGR 3% - Outpaces slightly – Sourcing balance shifts to China, but trade risk impacting some decisions

• Europe CAGR 2% - EE and CE drive growth; WE flat.

• NA CAGR 1% - Growth restarts post 2020 with investment.

• SA CAGR 4% - Region expected to recover from lows, but risk remains.

• MEA CAGR 6% - Growth to fill capacity but sanctions lowering expectations?

63%65%

71%

63%

71%75%

2017 2021 2025

AP EE

Healthy

45% 51%59%48%

53%60%

2017 2020 2024

SA MEA

2017 2021 2025

Stable

Risk

Long-term global production growth favors emerging also

11

94.5 95.6 104.7

112.4

60

90

120

2018 2019 2022 2025

Global LV Production +2.5% CAGR 18-25

Capacity Utilization


NA capacity utilization is a concern for some

12

OEM NA Plants 2018 2019

GM 18 72% 76%

Ford 12 81% 75%

Toyota 12 95% 92%

FCA 11 92% 87%

Honda 9 89% 89%

RNM 6 79% 78%

Daimler 4 90% 96%

Hyundai-Kia 3 74% 68%

VW 3 71% 76%

BMW 2 81% 81%

Subaru 2 91% 100%

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New models drive production growth in North America

0.02.04.06.08.0

10.012.014.016.018.020.0

Milli

ons

Existing Entries Localized New Entries

-1.8mn

+2.2mn +0.8mn

0.0

0.5

1.0

1.5

2.0

Car SUV Pickup MPV

Milli

ons

2017-2025 Growth

0.00.10.20.30.40.5

Asian Domestic European

Milli

ons

2017-2025 Growth


90 220

372 430 462

0

100

200

300

400

500

2017 2019 2021 2023 2025

14

We have to build them…consumers don’t have to buy? #

of B

EV

Mod

els

on S

ale

• Acceleration of BEV launches is coming Recent years have not seen much BEV model activity, but this will change

• Significant jump 2019-21 as the next wave of BEVs arrives, many on platforms optimised for EV

Global BEV pipeline - model choice widens


0 2000 4000 6000 8000 10000 12000

0 2 4 6 8 10 12 14 16 1815

China (7.1)

World: China remains the biggest single BEV market Global PV and US Light Truck market

Europe (6.1)

USA (1.2)

2018 BEV Sales (‘000s)

other (3.6)

China: 734 Europe: 180 USA: 1953 Other: 89

In 2030: 18mn total BEV sales

17% of global market

China: 39% of BEV total

48% total electrification

52mn total electrified units

2030 BEV Sales (millions)


Global LV Sales – 2018 Out of the Gate Many things to be solved before shared AVs can work

Legal Liability Issues

Privacy Connectivity

Legacy Vehicles

Regulatory Standards

Industry Standards

Ethics & Morality

Sensor Fusion

Cyber Security

Mobility Provider Business Model

Cost of Mobility by Distance

Driver Intervention

User Expectations

Meeting Peak Demand

Acceptance (Safety)

Bad Weather, Poor Conditions

Sensor Arrays

Battery Tech and Charging

Complexity of Cities

3D Maps

Blackspots: GPS and Mobile

Human Driver Deterioration

Infrastructure Investment Cost Competing R&D (with Electric)

Vehicle Cost

Fleet Control Systems

AV ‘bullying’ or Gaming

Decision Making

Localisation

Vehicle External Human Commercial Frameworks

Other Infrastructure

Insurance

City Planning Policy

Resistance to Change

Transport Integration

16


L0-3 Still expected to account for 45% of global sales in 2050 – higher concentration in Emerging Markets.

Overall impact on LVs not expected to by more than 10% drop.

Central AV forecast through 2050

- 20 40 60 80

100 120 140 160

2020 2025 2030 2035 2040 2045 2050

Mill

ions

L0-3 Owned L4+ Owned L4+ Shared No AV World17

9% Decline


Concluding remarks

The global outlook tipped negative for first time since Great Recession, but some recovery is expected in 2019.

Increased level of uncertainty across the regions centered on trade, political risk and economic cycles.

US long-term picture is stable but market expected to decline at topline.

NA production growth expected to restart, but still capacity issues as new localization and entries launch.

Evs will feed Avs as both technologies grow, but Avs for masses still much further out.

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