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© 2015 IHS Presentation ihs.com IHS AUTOMOTIVE The Outlook for the Global Economy and Automotive Demand IHS Automotive Customer Briefing Frankfurt | 17 June 2015 Tim Armstrong, VP Forecast Planning IHS Automotive

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Page 1: The Outlook for the Global Economy and Automotive … - The Outlook for the Global Economy... · • The plunge in the price of oil and other ... •Rising production and weak demand

© 2015 IHS

Presentation

ihs.com

IHS AUTOMOTIVE

The Outlook for the Global Economy and

Automotive Demand IHS Automotive Customer Briefing – Frankfurt | 17 June 2015

Tim Armstrong, VP Forecast Planning IHS Automotive

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© 2015 IHS

World Light Vehicle Selling Rates Low oil will help weak global market; China remains the key to industry growth

World

World Without

China

Source: IHS Automotive Analysis, monthly data with X12 Seasonal Adjustment

Global market, without

China, finally back to

pre-recession levels

2

LV

Sa

les

SA

AR

, M

illio

ns S

old

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© 2015 IHS

The “Great Divergence”

• Over the past four years global growth has been remarkably stable –

between 2.5% and 3.0%

• However, the composition of growth has changed fundamentally – with

a gradual growth acceleration among the advance economies and a

sharp deceleration in the emerging world

• Four trends have driven this divergence:

• Debt and deleveraging

• The plunge in the price of oil and other commodities

• Central banks moving on different paths

• The rise of the dollar and the fall in other currencies

3

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© 2015 IHS

Implications

• The net effect of the “Great Divergence” is that the momentum of the

global economy will improve modestly in the second half of 2015 and in

2016

• Better prospects will be the result of solid growth in the US and a slight

pickup in the pace of Eurozone and Japanese economic activity

• The plunge in oil prices will add 0.3 to 0.5 percentage point to global

growth over the coming year

• More stimulus by the Bank of Japan, People’s Bank of China and the

European Central bank will also support growth

• A stronger dollar is a lifeline to Europe and Japan, but is a challenge to

many emerging markets – and US exporters

• China’s growth will slow further, and for other large emerging markets it

will be a good news (India), bad news (Brazil and Russia) story

4

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© 2015 IHS

-4

-2

0

2

4

6

8

10

1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020

Perc

en

t ch

an

ge

World Advanced countries Emerging markets

Global real GDP growth: divergent paths

Real GDP

Source: IHS © 2015 IHS

5

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© 2015 IHS

-1

0

1

2

3

4

5

6

7

NAFTA OtherAmericas

WesternEurope

EmergingEurope

Mideast-N. Africa

Sub-Saharan

Africa

Japan OtherAsia-

Pacific

An

nu

al

perc

en

t ch

an

ge

2013 2014 2015 2016 2017-21

Asia-Pacific (excluding Japan) and Sub-Saharan Africa

will achieve the fastest growth in real GDP

Real GDP

Source: IHS © 2015 IHS

6

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© 2015 IHS

Oil and other commodity prices have tumbled in

response to structural excess supply

• Rising production and weak demand growth have left the global oil

market oversupplied, driving down prices

• A mismatch between fundamentals, on the one hand, and financial

market expectations and inventory building, on the other, caused the

recent price rally – this may not last

• As oil production growth slows in the second half of 2015, prices will

begin to recover

• IHS expects the price of Dated Brent crude oil to average $59 in 2015

and $66 in 2016

• Big difference: the US is now a swing producer – driven by market

forces

• Other commodity prices have fallen mostly because of weak demand

from and excess capacity in China

7

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© 2015 IHS

US crude oil prices: A big drop – but for how long?

Crude oil and natural gas prices

0

2

4

6

8

10

12

14

0

20

40

60

80

100

120

140

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Do

llars

/millio

n B

tu

Do

lla

rs/b

arr

el

Crude oil, WTI (Left scale) Natural gas, Henry Hub (Right scale)

Source: IHS Energy © 2015 IHS

8

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© 2015 IHS

Winners and losers from low oil prices

• Winners:

• US consumers are the biggest winners – especially low-income families

• European consumers benefit proportionally less because of high gasoline taxes

• Emerging-market consumers will also benefit less because of large fuel subsidies

• Energy-intensive industries, such as agriculture and transportation

• Governments in oil-importing countries with large fuel subsidies

• Losers:

• Oil producers, especially those with high costs

• Major oil exporters, especially those at a “fiscal break-even point” above USD100 per

barrel such as Iran, Russia, Venezuela, Ecuador, and Angola

• Net effect:

• In the United States and worldwide, the net effect on consumers and producers is

positive, boosting real GDP growth by roughly between 0.3 and 0.5 percentage point

in late 2015 and 2016

• A 40% drop in oil prices represents a transfer of about USD1.4 trillion from oil

exporters to oil importers—the latter have a higher marginal propensity to spend than

the former

9

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© 2015 IHS

0

1

2

3

4

5

6

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Perc

en

t, e

nd

of

qu

art

er

United States Eurozone Japan United Kingdom

11

The US Federal Reserve will lead in raising policy

interest rates, followed by the Bank of England

Policy interest rates

Source: IHS © 2015 IHS

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© 2015 IHS 12

The dollar: Rising but still competitive

Real trade-weighted dollar index

0,6

0,8

1,0

1,2

1,4

1,6

1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020

Ind

ex,

2009 =

1.0

Major trading partners Other important trading partners

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© 2015 IHS

IHS expects the Euro/$ rate to strengthen again, moving

back to its long(er) term trend-value

13

0,8

0,9

1,0

1,1

1,2

1,3

1,4

1,5

1,6

1,7

Jan 99 Jan 01 Jan 03 Jan 05 Jan 07 Jan 09 Jan 11 Jan 13 Jan 15 Jan 17 Jan 19 Jan 21 Jan 23 Jan 25

History Forecast

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© 2015 IHS

US real GDP growth and the unemployment rate: ignore

the first quarter data

Real GDP and unemployment

4,0

5,2

6,4

7,6

8,8

10,0

-9

-6

-3

0

3

6

2006 2008 2010 2012 2014 2016

Perc

en

t

An

nu

al

perc

en

t ch

an

ge

Real GDP growth (Left scale) Unemployment rate (Right scale)

Source: IHS © 2015 IHS

15

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© 2015 IHS

The Eurozone recovery looks a little stronger; and UK

growth remains robust

• Growth will be better in 2015 (1.5%) thanks to lower oil prices, a weak euro,

reduced fiscal headwinds, and an accommodative monetary policy – but slow

progress on deleveraging is a problem

• A weak euro has helped exporters, but reduced the purchasing power of

consumers

• The ECB’s QE program has already led to easing credit conditions – even

Greek bond yields remain relatively low (compared with 2011/12)

• While the risks of a Greek exit are still elevated, the contagion effects will

probably be small

• Low inflation and (very) gradually improving labor market conditions will support

consumer spending, especially in Northern Europe

• Stronger export growth and growing pent-up demand boost capital spending

• Meanwhile (much like the US), UK growth will be solid (around 2.5%) – the

strong election results will help

16

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© 2015 IHS

-2

-1

0

1

2

3

Germany United Kingdom France Italy Spain

An

nu

al

perc

en

t ch

an

ge

2013 2014 2015 2016 2017-21

Real GDP growth in Western Europe

Real GDP

Source: IHS © 2015 IHS

17

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© 2015 IHS 21

Can Greece de-stabilise Europe?

• Greece’s real GDP growth was

beginning to recover …

• … And public finances were

headed in the right direction

• The renewed uncertainty

discourages investment and

caused a further tightening of

credit conditions

• The spill-over effects of a Grexit

on the rest of Europe will be

limited …

• … if there is no contagion to

Spain, Portugal and Italy

-12-10

-8-6-4-202468

Greece real GDP, %chya

-20%

-15%

-10%

-5%

0%

5%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

201

3

2014

201

5

Govt balance as a share of GDP

Primary surplus as a share of GDP

Government balance as a share of GDP, %

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© 2015 IHS 22

Financial contagion is unlikely

EFSF EU Bilateral Loans Bonds (ECB/NCB)

Bonds (No-ECB) IMF Other

Most of Greece’s public debt is

held by the official lenders

Manufacturing

13,3% Tradeable services 10,1%

Non-tradeable services 76,6%

Manufacturing only accounts for 13.3% of

Greece’s Value Added. Tradeable

services account for another 10%

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© 2015 IHS

Should Greece exit the Eurozone, its economy would fall

back for another 4 years before partly recovering – Real GDP

23

-12

-10

-8

-6

-4

-2

0

2

4

6

8

2007 2009 2011 2013 2015 2017 2019 2021

Baseline

Grexit

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© 2015 IHS

The impact on Europe and the world depends on the

reaction of financial markets and the Euro/$ rate

24

-1,5

-1,0

-0,5

0,0

0,5

1,0

1,5

2,0

2,5

3,0

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Baseline

Grexit

Greece Exit With Contagion

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© 2015 IHS

China’s growth rate will decelerate more

• The recent deceleration in the Chinese economy is due mostly to weak

domestic demand (because of the real estate bust)

• The government is trying to balance concerns about weak jobs growth and

social unrest with its desire to tackle the glut of debt and industrial over-

capacity in the Chinese economy – although it is providing modest stimulus and

has lowered the target growth rate from 7.5% to 7.0%

• Since November, the People’s Bank of China has cut interest rates three times

and reduced the required reserve ratio – but real interest rates are still high and

the PBoC will likely ease more again

• Lower borrowing costs and the new debt swap program will help ease debt

servicing costs but have done nothing to cut the stock of debt

• The vast (and growing) excess industrial capacity in China, financed by an

explosion of debt, is the biggest threat to China’s growth prospects

• Bottom line: limited support from fiscal and monetary policy will not be enough

to prevent growth from weakening further, from 7.4% in 2014 (the weakest

since 1990) to around 6.5% in 2015 and 6.3% in 2016

27

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© 2015 IHS

China’s economic growth will downshift in the long run

Real GDP

Source: IHS © 2015 IHS

28

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© 2015 IHS

50

60

70

80

90

100

110

120

`04 `05 `06 `07 `08 `09 `10 `11 `12 `13 `14 `15 `16 `17 `18 `19 `20 `21 `22 `23 `24 `25

Millio

ns

Apr 14

Apr 15

1.5 million unit

downgrade in

2015

30

Long term forecast has been lowered by around 2.3% on average

Global Light Vehicle Sales: How did the forecast change? Downgrade builds across forecast

Lig

ht V

ehic

le S

ale

s

Vol % Chg

2014 86.3 3.5%

2015 87.5 1.4%

2016 90.7 3.6%

Mismatch with the cheap oil

price environment !

Although mature markets

have been upgraded in line

they cannot offset the big

corrections in Russia and

Brazil.

2.39 m unit forecast

downgrade in 2021

By early 2020’s World

GDP is approx. $2

trillion smaller than we

forecast one year ago

- Impacting autos

growth path via a lower

long term motorisation

and resulting annual

auto sales volume

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© 2015 IHS

Consumer boon from low oil is being more than offset by

downgraded economic performance in the BRICs

-2000000

-1500000

-1000000

-500000

0

500000

2015 2016 2017 2018 2019 2020 2021 2022

China

India

Russia

Brazil

WE

US

Forecast changes to LV sales volume over the last 6 months (March 2015 vs Sept 2014) –

i.e. the period of the oil price collapse

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© 2015 IHS

80

81

82

83

84

85

86

87

88

89

90

86.3

Million

+1.4%

Sa

les in

Mill

ion

s

87.5

Million

Global Light Vehicle Sales (IHS Total Market for LV’s) 2015 Outlook by Region

1.63m 493k

475k 420k 33k

-24k -145k -228k

-784k

+6.9%

+3.6%

+3% +5%

-3% -9%

-23%

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© 2015 IHS

1.8% 3.6%

-40%

-30%

-20%

-10%

0%

10%

20%S

pa

in

Tu

rkey

Th

aila

nd

India

Chin

a

Mexic

o

Italy

Ira

n

Mala

ysia

Germ

any

UK

Fra

nce

US

A

Can

ada

World

Indo

nesia

Au

str

alia

South

Afr

ica

South

Ko

rea

Sau

di A

rabia

Japan

Bra

zil

Russia

2015 2016

Fo

rec

as

ted

Ch

an

ge

in

LV

Sa

les

Country Light Vehicle Sales Growth Among the largest markets, Russia/South America will have a tough year

Source: IHS Automotive 2015 and 2016 LV sales forecasts

11

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© 2015 IHS

6

8

10

12

14

16

18

20

Millio

nen

West & Central Europe – LV Sales

Gre

at R

ece

ssio

n

Eu

rozo

ne

Crisis

Pe

aks

Buyin

g P

ropensitie

s R

ebound

Em

plo

ym

ent

Fundam

enta

ls

and R

epla

cem

ent

dem

an

d

We

ak r

ep

lace

me

nt d

em

an

d –

Ech

o o

f C

risis

We

ak E

uro

pe

an

De

mo

gra

ph

ics ta

ke

ho

ld

Structural adjustments from crisis =lower long

term purchase propensities

+4.9% (15)

+5.8% (14)

The Bottom line – Europe's Auto Market Phases

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© 2015 IHS

Europe Light Vehicle Sales Outlook

In April 2015, European sales reached 1.61 million units, a 1.3% y/y increase. Western and Central Europe kept a good

rhythm in April (up 7.3% y/y) while the situation in Eastern Europe kept deteriorating (down 21.9% y/y). YTD through April,

the European continent has grown 2.7% y/y, slightly decelerating over the first quarter.

Western and Central Europe seem to be on the road to recovery, up 8.5% y/y up to April. The general environment is

increasingly supportive (with, notably, quantitative easing from the European Central Bank and lesser pressure on

households’ wallets thanks to relatively low resources prices). Meanwhile, Eastern Europe remains in dire straits. Despite

the rebound in Turkey (correcting from previous tax-related distortions), the subregion is embroiled in a vicious cycle

centered on the collapsing Russian economy. The subregion was down 22.7% y/y in the first four months of the year.

Consequently, we anticipate an awkward situation in 2015 for the continent: a strong recovery in the West totally wiped out

by the effects of the Russian crisis.

0

2

4

6

8

10

12

14

16

18

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

5,0C

Y 2

00

5

CY

2006

CY

200

7

CY

200

8

CY

200

9

CY

201

0

CY

201

1

CY

201

2

CY

201

3

CY

201

4

CY

201

5

CY

2016

CY

201

7

CY

201

8

CY

201

9

CY

202

0

Millio

nen

Millio

nen

Central Europe

East Europe

West Europe (RHD)

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© 2015 IHS

Germany and France sales outlook

German sales remained solid in April, increasing

6.3% y/y. This maintained the year-to-date

performance at a satisfying level, with 6.6% y/y

growth. Tactical (dealer, rental) sales channels, a

typical feature of the German market, remain

strong (up 11%). We anticipate this situation to

continue throughout 2015, with an increase of

around 3.0–3.5% y/y.

In the longer run, despite very sound macro

factors, we confirm Germany as essentially a

replacement-only market—mostly stable and no

longer passing the 3.5-million-unit threshold on a

regular basis.

French sales decelerated neatly in April, up 3.2%

y/y. This brought the year to date below 5% y/y.

The actual potential of the market lies in the return

of private buyers (currently still very cautious). We

continue to expect this to happen in the second part

of the year (amid a better economic climate and

some product activity). In this context, we have

slightly raised our outlook for 2015 to around 2.5–

3.0% y/y.

-6,0%

-4,0%

-2,0%

0,0%

2,0%

4,0%

6,0%

8,0%

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

2012 2013 2014 April 2015 YTD 2015 2016 2017

Year-o

n-y

ear c

ha

ng

e

Mil

lio

n u

nit

s

Germany sales

Germany Change

-15,0%

-10,0%

-5,0%

0,0%

5,0%

10,0%

0,0

0,5

1,0

1,5

2,0

2,5

2012 2013 2014 April 2015 YTD 2015 2016 2017

Year-o

n-y

ear c

ha

ng

e

Mil

lio

n u

nit

s

France sales

France Change

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© 2015 IHS

Italy and Spain sales outlook

The Italian market accelerated markedly in April,

up 23.1% y/y. The remarkable fact is that for the

second month in a row, private buyers made

strong contributions to growth (increasing 28% y/y

in April).

Italy is on the recovery track but artificial support

(discounts, incentives, etc.) is definitely a part of

the equation. We expect the current scenario to

continue into 2015, with growth of nearly 6% y/y.

Spain slowed down in April, up 4.9% y/y after

months of double-digit progressions. The YTD

gain was brought back to 25.3% y/y. The PIVE

scrapping incentive funds ended in April with

immediate consequences. Consequently, officials

confirmed the renewal of the scheme (PIVE 8) in

May for a last round that will end with the current

year. This strategy will help sustain sales and,

consequently, will improve our expectations for

full-year 2015.

-25,0%

-20,0%

-15,0%

-10,0%

-5,0%

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

30,0%

0,0

0,2

0,4

0,6

0,8

1,0

1,2

1,4

1,6

1,8

2,0

2012 2013 2014 April 2015 YTD 2015 2016 2017

Year-o

n-y

ear c

ha

ng

e

Mil

lio

n u

nit

s

Italy sales

Italy Change

-20,0%

-15,0%

-10,0%

-5,0%

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

30,0%

0,0

200,0

400,0

600,0

800,0

1000,0

1200,0

1400,0

2012 2013 2014 April2015

YTD 2015 2016 2017

Year-o

n-y

ear c

ha

ng

e

Th

ou

san

d u

nit

s

Spain sales

Spain Change

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© 2015 IHS

UK and Russia sales outlook

Sales in the United Kingdom remained strong in

April, up 6.6% y/y (8.0% y/y for the YTD). The

market increased on robust fleet and private

demand (rising 9% and 3%, respectively).

In addition, customer confidence in April reached

its highest level since 2002. The very attractive

lease offers and incentives by OEMs also help

maintain the momentum. Nevertheless, we

anticipate some leveling off during the year as

pent-up demand should dry up. For the full year,

we currently expect growth around 3.0–3.5% y/y.

In April, the Russian market kept nose diving,

with sales down 41.5% y/y.

Consequently, our forecast for 2015 calls for a

36% y/y decline to barely 1.6 million units; by

comparison, the market reached nearly 3.0

million units in 2012.

Under our present assumptions, the Russian

market will not reach the 3-million-unit mark

before the next decade—far later than previously

envisioned.

-6,0%

-4,0%

-2,0%

0,0%

2,0%

4,0%

6,0%

8,0%

10,0%

12,0%

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

2012 2013 2014 April 2015 YTD 2015 2016 2017

Year-o

n-y

ear c

ha

ng

e

Mil

lio

n u

nit

s

United Kingdom sales

United Kingdom Change

-50,0%

-40,0%

-30,0%

-20,0%

-10,0%

0,0%

10,0%

20,0%

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

2012 2013 2014 April 2015 YTD 2015 2016 2017

Year-o

n-y

ear c

ha

ng

e

Mil

lio

n u

nit

s

Russia sales

Russia Change

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© 2015 IHS

US: Status of Automotive Market Consumer buying desire remains high; stronger wages will improve ability

• Since August SAAR hit 17.5m units some momentum has been lost, but many positive factors

contribute to strong outlook and March’s 17.1 SAAR a modest surprise.

• The cyclical nature of autos is kicking in – growth rate slowing now as pent-up demand has now

been spent and want based demand replaces need based.

• Low oil prices will help consumer spending, and autos in particular, but oil volatility may make

consumer skeptical thus moderating potential gains.

• Housing market has much more recovery to come which will help sales through jobs and wealth.

• Transactions prices are strong, and will remain strong in the long-run.

• Manufacturing cost pressures will remain low over near-term due to weak commodity prices.

• Credit and jobs will bring the younger buyers into the showrooms.

• Auto credit availability may be slowing - lengthening loan maturity is an issue.

• The US sales forecast peaking at 17.7m units in 2017 before sales growth declines.

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8

10

12

14

16

18

20

22

1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

US: Light Vehicle Sales SAAR Strong recovery since 2009, expected to continue

40

“Keep America

Rolling” “Employee Pricing

For All”

“Cash For

Clunkers”

Mo

nth

ly S

ale

s (

mill

ion

s)

Source: IHS Automotive, light vehicle sales forecast

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© 2015 IHS 41

5,4%

0%

2%

4%

6%

8%

10%

12%

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

53

40

45

50

55

60

65

70

75

80

85

90

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

20

20

20

21

20

22

New/Refresh Nameplate Counts New/Refresh Sales Market Share

US: Product Launches New/refreshed nameplates will drive showroom traffic; OEMs need products to be liked

Source: IHS Automotive, current light vehicle sales forecast

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Total Light Vehicle Sales

China 2012 - 2025 (in thousands)

Comments:

• China GDP forecast for 2015-2017 was downgraded

in line with lower acceptable government target

growth and policy

• Despite slowdown 2014 sales came in line with last

years forecast

• Slowdown in investment sectors rather than

consumer sector which has bounced up to over 52%

of GDP. Changes in components of economic

growth reflected in still strong passenger sales

• China provincial level analysis increased our long

term forecast (2020-2025) by 250k-400k units per

year using bottom up approaches which uplifted base

demand before slower economic growth rates were

pulled back – leaving net impact smaller at just -1.1%

(i.e. less than implied by simple adjustment

modeling)

• IHS expects anti-trust campaign could alter the

relationships among consumer, dealer and OEMs.

The campaign is expected to have a long lasting

effect on premium parts/vehicle prices in China.

Coupled with anti-corruption campaign, the

momentum could lead to faster downward adjustment

in premium pricing which helps provide another boost

to premium penetration to further increase in China in

the next decade. Consequently, we raised our outlook

for premium TIV by 3%-4 in the forecast horizon.

15.000

17.000

19.000

21.000

23.000

25.000

27.000

29.000

31.000

33.000

35.000

`12 `13 `14 `15 `16 `17 `18 `19 `20 `21 `22 `23

Apr 2014 FC Apr 2015 FC

China

General Market Developments

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© 2015 IHS

Total Light Vehicle Sales

Russia 2012 - 2025 (in thousands)

Comments:

• 3 rounds of significant downgrade of Russian TIV in 2014

• Short-term downgrade based on underperforming

economy

• Short-, mid- and long-term downward revision due to

influence of sanctions against Russia on its economy

• Short-term downgrade owing to liquidity crisis, oil price

slump and substantial currency depreciation

• Russian stimulus program has been launched in Sep.

‘14 and is highly appreciated by consumers. The

program should end in Sept. 2015. Additionally, 3rd

round of loan subsidy program was introduced in Apr.

2015. However, their scale won’t be enough to save the

market from notable decline.

• Much slower recovery compared to the crisis in 2009 is

expected. Lack in growth of disposable incomes and

significant increase in vehicle prices together with

postponed reduction of import tariffs will not allow

market to post impressive growth rates in the near

future.

• Rebound in 2017/18 is mainly based on improving

energy prices, abolishment of sanctions and new pre-

election initiatives of the government. Replacement

demand from years 2008 and 2012 will spur Russian

sales volumes in this time frame.

• Further very strong downward potential comes from weak

currency and possible escalation of Ukrainian conflict

1.500

2.000

2.500

3.000

3.500

4.000

`12 `13 `14 `15 `16 `17 `18 `19 `20 `21 `22 `23 `24 `25

Apr 2014 FC Apr 2015 FC

Russia

General Market Developments

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© 2015 IHS

Total Light Vehicle Sales

Brazil 2012 - 2025 (in thousands) Comments: Key Information:

• Short-term: Full IPI tax has been restored,

gasoline/ethanol prices are up and consumer

confidence is at all time low.

• Short-term: Government is focused on increasing

revenues and has removed several subsidies (IPI

being among them). April GDP for 2015 is now -0.9%

(not reflected in forecast) as SELIC is now at 12.75%

whereas consumer confidence is hitting lows.

• Medium-term: Without exports or strong consumer to

rely upon we expect weak GDP growth in the medium

term. Inflation remains stubbornly high making credit

more expensive and currency continues to devalue.

• Long-term: GDP outlook saw serious downward

revision:

GDP in US$ Trillion

Feb ’14 Feb ‘15

2020 US$ 3.26 US$ 2.59 (-20.6%)

2025 US$ 4.53 US$ 3.44 (-24.1%)

• Long-term: GDP per Capita has also been revised

downwards

1.500

2.000

2.500

3.000

3.500

4.000

4.500

5.000

5.500

`12 `13 `14 `15 `16 `17 `18 `19 `20 `21 `22 `23 `24 `25

Apr 2014 FC Apr 2015 FC

Brazil

General Market Developments

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© 2015 IHS

• Lower global economic growth projections– across the forecast horizon.

• EM’s - Downgraded again. Almost all key emerging market economies have decelerated , some are

forecast to enter recession and even medium term trend growth has been shaved due to inadequate

evidence on progress of structural reforms

• Stronger recovery phase for Western mature markets. Overshoot with dip or uplifting the longer term

trend?

• How much to adjust car demand forecasts for new ‘price’ environments

• Oil Price collapse

• Currency adjustments

• China - a new normal and new reform policy approach

Key themes of this year’s forecast