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Automotive Industry Outlook:

Navigating a Volatile Global Environment

January 2015

Mike WallDirector, Automotive AnalysisIHS Automotive

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Information | Analytics | Expertise

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Global Economic OutlookGlobal Growth / Emerging Market Volatility

• Global growth will pick up in 2015, supported by lower oil prices.

• The US economy will benefit from accelerations in consumer spending and homebuilding, along with continued strength in capital spending.

• The Eurozone’s recovery will proceed at a slow pace.

• China’s growth will slow further, to 6.5% in 2015, restrained by imbalances in credit, housing, and industrial markets.

• Falling oil prices, sanctions, and capital flight are sending the Russian economy into a severe recession.

• Growth paths in emerging markets will depend on structural reforms that raise productivity and allocate capital more efficiently.

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World Economic GrowthRecovery Continues but Downgrades Slow Pace; U.S. Led Growth

World United States

Japan Eurozone Brazil Russia India China-2.0

0.0

2.0

4.0

6.0

8.0

10.02011 2012 2013 2014 2015 2016-2021

Source: IHS Data Insight

Ann

ual R

eal G

DP

Gro

wth

(in

pe

rcen

t)

World Average 2015 = 3.0%

Growth slows in China, yet remains

constructive

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2000 2003 2006 2009 2012 2015 2018 20210

20

40

60

80

100

120

140

Q3 Forecast

Dec '14 Forecast

Brent Blend Crude Oil Price ForecastStrong Supply Plus Weak Demand Causes Recent Drop in Price

Source: IHS Energy Forecast

Bre

nt c

rude

pric

e pe

r ba

rrel

in U

SD

Qua

rter

ly a

vera

ge

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Global Light Vehicle ProductionEmerging Asia Recovery Expected in 2015, yet Risks Remain

2013 2014 Greater China

South Asia

North America

Europe ME/ Africa

South America

Japan/ Korea

201560,000,000

65,000,000

70,000,000

75,000,000

80,000,000

85,000,000

90,000,000

95,000,000

84.7million

87.2million

90.1million

+3.4%

1.9 million 816,000 420,000 286,000 111,000 -7,000 -528,000

Pro

duc

tion

(m

illio

ns)

Source: IHS Automotive Light Vehicle Production Forecast

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2007

2009

2011

2013

2015

2017

2019

2021

50000000

60000000

70000000

80000000

90000000

100000000

110000000

59,529,452

87

106

Beyond the RecoveryGlobal Production Growth

27million

19million

Greater China

South Asia

Europe

North America

South America

Middle East/Africa

Japan/Korea

-2000000

2000000

6000000

10000000

8.6

4,834,184.0

2,972,942.0

1.9

1,271,856.0

610,928.0

-1.6

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20052006

20072008

20092010

20112012

20132014

20152016

20172018

20192020

202110.0

11.0

12.0

13.0

14.0

15.0

16.0

17.0

18.0Crisis and Incentives

Fall Back and Payback

Cyclical Recovery with Fiscal Drag

Euro 6+ Compliance Costs

Driving Age Pop. Growsat >1.3 million/year

Driving Age Pop. Growsat 0.5 million/year

Replacement Demand & New Mobility Dynamics

RECOVERY

CO

LLAP

SE

SLIDE

PAUSE

Ligh

t V

ehic

le S

ales

(m

illio

ns)

RELA

PSE

Debt and confidence crises

Source: IHS Automotive Light Vehicle Sales Forecast

West European Light Vehicle SalesAssessing the Big Picture Phases

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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20210

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

16.011.8

13.713.2 14.1

6.0

4.76.5

6.8 7.3

Eastern/Central Western Change

Ou

tpu

t (M

illio

ns)

Y-O

-Y %

Ch

an

ge

19.3 20.0

21.422.0

16.5

20.2

12.6

6.7

22.6

14.4

8.3 CAGR3.4%

CAGR1.3%

2014 – 2021

CAGR2.0%

Source: IHS Automotive Light Vehicle Production Forecast

European Light Vehicle ProductionEuro Crisis Abates; Slow Recovery in Process

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2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20210.0

1,000,000.0

2,000,000.0

3,000,000.0

4,000,000.0

5,000,000.0

Production

Sales

Pro

du

cti

on

(M

illio

ns

)

Sales down in 2013/2014 due to strong IPI incentive comps, higher interest rates and weak growth

Near-term outlook constrained by lackluster economic environment and consumer confidence; situation in Argentina impacts Brazil exports; longer term growth more measured given volatile nature of the market

Import gap narrows as Inovar Automotive plan incentivizes local production and as more OEMs deploy global platforms; including premium brands

Prod Sales

2010 7.7% 10.4%

2011 -0.1% 2.8%

2012 0.8% 6.4%

2013 8.9% -1.5%

2014 -13.6% -9.0%

2015 1.6% 0.7%

Emerging Market TrendsBrazil Sales and Production

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2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20210.0

500,000.0

1,000,000.0

1,500,000.0

2,000,000.0

2,500,000.0

3,000,000.0

3,500,000.0

Production

Sales

Pro

du

cti

on

(M

illio

ns

)

Market declined in 2013 - payback for recent growth; near-term outlook remains extremely challenged as market faces a difficult economic outlook; broader outlook dominated by oil and gas pricing

Ongoing Russia/Ukraine situation and resulting economic sanctions, as well as the collapse in oil prices, create uncertainty and further downside risk for Russia

Local production cannot serve demand and has only limited export potential at this stage

Prod Sales

2010 102.0% 29.6%

2011 41.3% 41.2%

2012 12.7% 9.6%

2013 -2.1% -5.4%

2014 -16.3% -12.4%

2015 -3.4% -11.9%

Emerging Market TrendsRussia Sales and Production

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Emerging Market TrendsIndia Sales and Production

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20210.0

1,000,000.0

2,000,000.0

3,000,000.0

4,000,000.0

5,000,000.0

6,000,000.0

7,000,000.0

Production

Sales

Pro

du

cti

on

(M

illio

ns

)

Weaker macro outlook, high fuel prices, interest rates and negative sentiment impacted 2013 and early 2014 performance

Recent results indicate some stabilization is in process; newly elected government is expected to revive industry sentiment in the near term, although decisive action is needed

Production serves large domestic market for small cars and trucks; strategic exports: Honda, Hyundai, Nissan and others to follow

Prod Sales

2010 31.8% 32.0%

2011 10.9% 9.6%

2012 5.6% 8.5%

2013 -3.9% -8.3%

2014 -1.5% -1.6%

2015 9.3% 10.9%

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Emerging Market TrendsChina Sales and Production

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 202110,000,000.0

15,000,000.0

20,000,000.0

25,000,000.0

30,000,000.0

35,000,000.0

Production

Sales

Pro

du

cti

on

(M

illio

ns

)

Prod Sales

2010 31.1% 31.1%

2011 2.7% 3.6%

2012 5.5% 5.7%

2013 14.7% 15.0%

2014 7.8% 8.0%

2015 8.5% 7.0%

Sales and production growth following a “soft-ish” landing; economic volatility, bubbling real estate and Tier 1 city registration pressures offset by penetration into Tier 3-6 cities, access to financing and ongoing Yellow-Label vehicle scrappage

New Energy Vehicle (NEV) Policy remains intact; focused on fuel efficiency technologies and greater local autonomy; NEV demand still a concern

As headline growth slows and congestion increases new internal markets will need to expand to support development; typically served by local OEMs but global players attracted

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Source: Conference Board Survey of intention to buy within 6 months

Not just a “needs”-based recovery, but also “wants” driven

Per

cent

of r

espo

nden

ts s

ayin

g “Y

es”

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

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

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0Six-month moving average

Actual

U.S. Consumer BehaviorIntention to Buy a New Vehicle on the Rise

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U.S.: Light Vehicle Sales OutlookNew Housing Starts and Full-Size Pickup Sales

0

500

1,000

1,500

2,000

2,500

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Thou

sand

s

U.S

. F

ull-

Siz

e P

icku

p S

ales

New

Housing S

tarts (000s)

New Housing StartsFull-Size P/U Sales

• Strong correlation between housing starts and Full-Size Pickup sales• Housing starts are recovering (slowly) – not expect to reach previous peak; Full-Size

Pickup sales starting to recover with improving commercial fleet sales and redesigned vehicle offerings (with more forthcoming)

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• Sales growth rate moderates somewhat in the near term, yet we are expecting the market to the pre-crash peak in 2017

• Average vehicle age of 11.4 years provides some sales support – market transitions from those who “need to buy” to those who “want to buy”; credit availability is a further enabler

• Improving economy, expanding population, wave of new products and favorable demographics bolster the longer term outlook; engagement of Gen Y is in the spotlight

• Baby boomers ration auto purchases; priorities shift to a retirement lifestyle

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

0

4

8

12

16

20

17.3 17.1 16.8 16.6 16.9 17.0 16.6 16.2

13.2

10.411.6

12.8

14.515.6

16.5 16.9 17.2 17.5 17.2 17.0 16.9 16.9

Uni

ts in

Mill

ions

Source: IHS Automotive Light Vehicle Sales Forecast

U.S.: Light Vehicle Sales Outlook

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North America Light Vehicle Production2015 vs. 2014

OEM2015F(000s)

2014F(000s)

% ∆∆ Units (000s)

GM 3,304 3,369 -1.9% -65

Ford 3,142 2,952 6.4% 190

Chry/Fiat 2,692 2,770 -2.8% -78

Detroit 3 9,138 9,091 0.5% 47

Toyota 2,015 1,991 1.2% 24

Honda 1,963 1,815 8.2% 148

Ren/Nissan 1,745 1,756 -0.6% -11

Hyundai 788 768 2.6% 20

Asian 4 6,511 6,330 2.9% 181

VW 577 604 -4.5% -27

BMW 381 348 9.5% 33

Daimler 302 249 21.3% 53

German 3 1,260 1,201 4.9% 59

Others 529 396 33.6% 133

Total 17,438 17,018 2.5% 420

• Production growth slows as region digests recent gains

• GM – Transitions to car focused launches (Camaro, Volt, Malibu, etc.)

• Ford – F-Series ramp-up remains key focus

• Chrysler – Limited new product launch activity

• Key New Domestic launches include Honda Civic, HR-V, Pilot; Nissan Maxima; Hyundai Elantra; Lexus ES & RX

• Mexico capacity additions ramp up in advance of next wave in 2016/2017Source: IHS Automotive Light Vehicle Production Forecast

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Production OutlookNorth American Vehicle Exports Bolster Prospects

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20160.0

200,000.0

400,000.0

600,000.0

800,000.0

1,000,000.0

1,200,000.0

1,400,000.0

1,600,000.0

1,800,000.0

2,000,000.0

Europe

South America

Middle East/Africa

Greater China

Other

Nor

th A

mer

ican

Veh

icle

Exp

orts

(M

illio

ns)

North American Vehicle Exports by Region

0.68

0.920.74

0.94

0.78

1.13

1.39 1.45 1.50

1.57

• Greater use of global platforms allows for more “export ready” product

• 40+ Free Trade Agreements drive Mexican output

• Expansion of luxury segment capability across the region into Mexico

• EU crisis tempered EU exports; relief is in sight helping offset South America weakness

• Sourcing patterns favor NA expansion as a safe haven; with currency hedge & export prospects

1.63

Source: IHS Automotive Light Vehicle Forecast

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2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20210

2000000

4000000

6000000

8000000

10000000

12000000

14000000

16000000

18000000

20000000

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

10.6

5.68.5

11.4 12.3

2.5

1.5

2.1

2.42.0

2.0

1.5

2.5

3.24.0

Mexico Canada US Change

Ou

tpu

t (M

illio

ns)

Y-O

-Y %

Ch

an

ge

2014–2021

+896,000CAGR = 1.1%

-550,000CAGR = -3.7%

+1,594,000 CAGR = 5.9%

15.4

17.018.3

15.1

8.6

13.1

10.1

2.4

2.9

18.9

12.3

1.8

4.8

Source: IHS Automotive Light Vehicle Production Forecast

Production OutlookNorth American Light Vehicle Production by Country

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Supplier DynamicsMega Platforms Drive Production Growth

2005 2007 2009 2011 2013 2015 2017 2019 20210

20000000

40000000

60000000

80000000

100000000

120000000

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

14%

20% 20%

33%

39%

44% 42%

47%

52%

1M+ Platform < 1M Platform Share

Mill

ion

Un

its

% S

ha

re o

f Glo

ba

l Ou

tpu

t

Consolidation Accelerates

with Greater Cross

Segment Application

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Supplier DynamicsTop 10 Global Platforms – 2021

VW - MQB A/B

Ren/Nissan - CMF-B

Hyundai - HD/AD

Ford - C1/C2

Ren/Nissan - CMF-C/D

VW - MQB A0

Toyota - NGA-C

Honda - CCA

Honda - GSP/GSP(2)

Hyundai - PB/PB(2)

0 1 2 3 4 5 6 Millions

• Nine of the Top-10 global platforms have or will have exposure to North America in 2021

• The march of global platforms into developing markets accounts for overall growth.

• Volume expansion also driven by major OEM platform consolidation in B- through D-segments.

• Platform consolidation alters competitive dynamic toward larger, more diversified players.

Segment (Top Nameplate)

North America Exposure

B (Accent)

B (Fit)

C/D (Civic/Accord)

C (Corolla)

B (Polo)

C (Sentra)

C/D (Focus/Fusion)

C (Elantra)

B (Versa)

C (Golf)

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Supplier DynamicsCapital Needs Intensify with New Launch Activity – Next Wave is Coming!

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

0

10

20

30

40

50

30

43

24 2320 19 19

25

16

34

21

26

36

47

38

21 21

North American Program Launches

Source: IHS Automotive Light Vehicle Production Forecast

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Summary

• North America serves as a critical offset to the volatility and lackluster growth presented by key Emerging Markets

– North American output surges by over 800,000 units in 2014. Growth rate subsides going forward, yet long term production volumes approach 19.0 million units in the longer term.

– Surge of new product offerings creates margin pressure for weaker players – competition will only intensify!

– Emerging market growth varies by country; more measured in near term

• Technology serves as a key differentiator for automakers and suppliers alike

– Opportunities exist in the areas of ADAS, Infotainment, Powertrain and Lightweighting, among others.

• Robust long-term prospects remain

– Local output of all-new entries surges, serving as gateways to secure growth

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© 2015 IHS. No portion of this report may be reproduced, reused, or otherwise distributed in any form without prior written consent, with the exception of any internal client distribution as may be permitted in the license agreement between client and IHS. Content reproduced or redistributed with IHS permission must display IHS legal notices and attributions of authorship. The information contained herein is from sources considered reliable but its accuracy and completeness are not warranted, nor are the opinions and analyses which are based upon it, and to the extent permitted by law, IHS shall not be liable for any errors or omissions or any loss, damage or expense incurred by reliance on information or any statement contained herein. For more information, please contact IHS at Customer Care (see phone numbers and email addresses above). All products, company names or other marks appearing in this publication are the trademarks and property of IHS or their respective owners.

Thank You!

Mike Wall Director, Automotive AnalysisIHS Automotive

mike.wall@ihs.com+1 616 222 4480 Direct+1 616 446 6885 Mobile

IHS Customer Care:• Americas: +1 800 IHS CARE (+1 800 447 2273); CustomerCare@ihs.com • Europe, Middle East, and Africa: +44 (0) 1344 328 300; Customer.Support@ihs.com • Asia and the Pacific Rim: +604 291 3600; SupportAPAC@ihs.com

© 2015 IHS. No portion of this report may be reproduced, reused, or otherwise distributed in any form without prior written consent, with the exception of any internal client distribution as may be permitted in the license agreement between client and IHS. Content reproduced or redistributed with IHS permission must display IHS legal notices and attributions of authorship. The information contained herein is from sources considered reliable but its accuracy and completeness are not warranted, nor are the opinions and analyses which are based upon it, and to the extent permitted by law, IHS shall not be liable for any errors or omissions or any loss, damage or expense incurred by reliance on information or any statement contained herein. For more information, please contact IHS at Customer Care (see phone numbers and email addresses above). All products, company names or other marks appearing in this publication are the trademarks and property of IHS or their respective owners.

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