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SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED SMMT, the ‘S’ symbol and the ‘Driving the motor
industry’ brandline are trademarks of SMMT Ltd
SMMT Webinar
Vehicle Production Outlook and Economic Forecast
8 December 2011
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 2
Paul Everitt
Chief executive
SMMT
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 3
• During presentations (14.30am – 15:00) everyone will
be muted so that only the presenters will be heard.
• There will be a Q&A session straight after
presentations (approx 15:00).
• If you are experiencing any technical problems please
call 0207 344 1611
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED SMMT, the ‘S’ symbol and the ‘Driving the motor
industry’ brandline are trademarks of SMMT Ltd
Trends and the Outlook – UK economy and markets
Robert Baker, Chief Economist, SMMT
8th December 2011
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 5
Disappointing outcome for 2011, but a reality check (1)
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Monthly Poll independent forecasts of growth in key UK economic indicators in 2011
Real GDP Consumer Manufacturing
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 6
Disappointing outcome for 2011, but a reality check (2)
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Monthly Poll of forecasts of base interest rate & growth in Consumer Prices in 2011
CPI (Q4) RPI (Q4) base repo rate (Q4)
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 7
More constraints and challenges expected to restrain growth for 2012 too (1)
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Monthly Poll of forecasts of growth in key UK economic indicators in 2012
Real GDP Consumer Manufacturing
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 8
More constraints and challenges expected to restrain growth for 2012 too, but high inflation likely to abate (2)
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Monthly Poll of forecasts of base interest rate & growth in Consumer Prices in 2012
CPI (Q4) RPI (Q4) base repo rate (Q4)
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 9
The unfinished recession – major economic changes; big uncertainties certain
UK real GDP volumes 1996 – 2015: Forecasts OE 2011 – 2015 (Nov 11)
real G
DP
vo
lum
e 2
00
8 b
ase y
ear -
£ m
n
UK GDP growth - 1996-2010: 2011F-2015F Forecasts from Oxford Economics (Nov11)
real GDP market prices
Oxford Economics - Nov 11
Growth trend 1997-2006: 3.2%pa
Growth trend 2011-2015: 2.0%pa
Growth trend 2006-2015: 1.1%pa
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 10
reticent recovery – growth erratic, sags, stalls may go in the red 2011Q4 - 2012Q2
percen
tag
e c
han
ge -
sam
e q
uarte
r p
revio
us y
ear
UK GDP growth quarterly - cash & real - 2005 to 2010: 2010 to 2015F Forecasts Oxford Econ (Oct 11) and from OBR Mar Budget 23/03/11
OBR Budget 2011(23/03): Cash GDP - Annual Ave.
OBR Budget 23/03/11: Real GDP - Annual Ave.
UK GDP, cash value at market prices
real GDP market prices
OE Fore - Oct 2011 (real)
OE Fore - Oct 2011 (cash)
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 11
Untypical recession; so too into recovery and on to sustainable growth
UK GDP growth a slow burner; high inflation expected to abate, could return
• quarterly GDP volume down 7.1% 2008Q2 to 2009Q2
• by 2011Q3 quarterly GDP volume up 3.3% on 2009Q2
• 2013Q4 for real GDP to be at 2008Q1 level, when UK
first went into recession – 18 quarters from Q3 2009
• inflation rates volatile, still high; a constrictive drag on
household & business spending, but a passing phase
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 12
On quarterly GDP growth then; now; to 2012; on to 2014
perc
en
tag
e c
han
ge -
pre
vio
us q
uart
er
UK real GDP growth - Q2 2009 to Q3 2011 and Forecasts Q4 2011 to Q4 2014
Actual OE Nov 11
OBR Nov11 OBR Mar11
Bank of E Nov 11 mean trend - Q11997-Q42006
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 13
Major adjustments for UK and global economy – flexible; will take time
Enabling support of UK monetary policy is unique
• £ devaluation (25%); base rate 0.5% (to 2014) QE
£275bn (20% GDP and rising); Credit Easing too
• Strong countervailing forces of public sector austerity
& UK’s myriad of modest pro-growth enabling policies
• Euro Zone’s debt and integrity issues sets the financial
volatility agenda – a drag on confidence, credit & trade
• UK recovery will take hold; it may not feel like recovery
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 14
Total UK new vehicle sales volumes stabilised, but very varied trends in the mix; more volatility and possible weakness ahead again
-50.0%
-25.0%
0.0%
25.0%
50.0%
75.0%
100.0%
125.0%
150.0%
Dec 2006 to date
UK car sales private & fleet buyers: month and rolling 3 months; changes on same periods year before
FLEET Month: percentage change year before
FLEET rolling 3 months (quarter): percentage change year before
PRIVATE Month: percentage change year before
PRIVATE rolling 3 months (quarter): percentage change year before
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 15
UK total new car registrations and confidence – where next near term and 2012?
private sales stable at 0.82mn and initially thought may grow in 2012; but….
• CBI DTS results since July track weaker activity and
sales trends; outlook is for falling retail sales ahead
• Consumer confidence low and going lower; surveys of
business confidence (recent EEF) also very downbeat
• UK growth stalls; outlook very uncertain, at best very
sluggish in 2012 even with EZ instability eased
• B2B and fleet markets have grown and may be stable,
but how much support for how long and of what kind?
• Diversity and variability of trends in the headline sales
total and in the mix reflects the nature of this recovery
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 16
Some clues on TIV sustainability above 1.9mn from sales types? (1)
perc
en
tag
e s
hare
s o
f to
tal
car
reg
istr
ati
on
s
UK car registration volumes - sales type shares of totals
Fleet other
All Business
Private retail
Demonstrator & Daily Rental
Private captive & others
Fleet Motability
Lease/ContractHire
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 17
Sustainable support from Motability, Captives and Leasing into 2012? (2)
index v
alu
es:
regis
tration t
ota
ls a
t 2002 -
2007 =
100
UK car registration volumes - sales types totals index values ( 2002-2007=100)
Private captive & others Lease/ContractHire Fleet Motability All Cars
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 18
Firm, durable recovery needs broadly-based ability and confidence to buy (3)
index v
alu
es:
regis
tration t
ota
ls a
t 2002 -
2007 =
100
UK car registration volumes - sales types totals index values ( 2002-2007=100)
All Business Fleet other Demonstrator & Daily Rental Private retail All Cars
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 19
The Forecast view from SMMT at September 2011
2012 TIV 1.964mn; B2B stable and B2C rising slightly at last?
Probable that 2011 will finish at 1.94; positive variance of 25K, if current trends hold
UK car registrations and the 2009/10 Scrappage Incentive Scheme - registrations in millions
All Cars excluding SIS Par 1996-2008
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 20
the link to output and production – investment, trade and competiveness
CV
pro
du
cti
on
Car
pro
du
cti
on
UK Car and CV output volume annual trends - actual 1997 to 2010; forecasts to 2015
Car Total Car Export CV Total
Forecasts: Autoanalysis/SMMT at 10/11
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 21
UK auto’s stream of good news in 2011 – a set back or time-out on rebalancing?
vehicle output at 1.7mn in 2012, 1.9mn by 2015 and stable at 1.9 to 2.0mn to 2019 Over to Ian…………………………………..
• Probably sound prospects for motors, manufacturing,
engineering and exporting longer term…………….
• tempered by the sector’s restructuring experiences of
the past, role of FDI, skill base, future of the euro zone
and trade or plant flows to developing markets
Indices 2008=100 2007 2008 2009 2010 2011P 2012P 2015P
GDP 101.1 100.0 95.6 97.3 98.1 99.2 107.4
Manufacturing 102.7 100.0 90.4 93.7 96.1 97.0 105.0
Engineering 102.8 100.0 87.3 95.9 99.5 101.5 110.0
Motor Vehicles 105.0 100.0 70.8 84.4 85.0 97.6 106.0
Table: trends & projections of UK output volumes – indices 2008 = 100
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED SMMT, the ‘S’ symbol and the ‘Driving the motor
industry’ brandline are trademarks of SMMT Ltd
European Car and Light Commercial Vehicle
Production Outlook - SMMT webinar
Ian Henry, AutoAnalysis
8 December, 2011
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 23
European automotive manufacturing is something
of a conundrum …
• Economic and financial crises abound
• Recession looms, policy makers lack decisiveness
• But VMs continue to invest and expand:
• Are they wisely planning for the long term?
• Or wandering blindly into the abyss?
• EU production to 10/11 up 5.6%, although Oct. 2011 was
actually down slightly over Oct. 2010
• Year-to-date risers include:
• BMW +16%, Hyundai-Kia + 23%, Nissan +17%, Land Rover +
23%, Audi +19%, Skoda + 18%, VW +13% and Volvo +26%
• But fallers include:
• Fiat grp -17%, Ford -8% and Jaguar – 24%
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 24
Production Outlook overview
• 2010 = 18.2mn cars & LCVs made in Europe
• We now expect 2011 to reach 19.16mn units:
– Demand driven by German premium brands, Hyundai-Kia, Nissan and strength of LCV market
– UK heading to 1.95mn upa by 2016, possibly over 2mn thereafter, depending on success of new models at JLR and Nissan
– UK exports strong (c85% in October), plus rising exports from Europe as a whole
– Robust demand from China, Russia, Brazil and other emerging markets yet to show signs of slowing
• 2012 European production should actually be above 2007 (pre-recession) peak; assuming no global economic collapse, the real recovery in production will be seen from 2013 – driven by major new model programmes and rising demand from Russia
• Production growth to 2016 will feature increasing sales of small cars, EVs and hybrids – and increased production in Russia
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 25
Assuming we do not have a complete collapse,
Russia will help drive European production growth
European car and LCV production by country, 2007-2016
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
UK
Turkey
Sweden
Spain
Slovenia
Slovakia
Serbia
Russia
Romania
Portugal
Poland
Netherlands
Morocco
Italy
Hungary
Germany
France
Finland
Czech Rep
Bulgaria
Belgium
Austria
• Germany will remain Europe’s production hub – but despite adding c600k
units 2010-2016, its share of European production falls, from c31% to c27%
• Russian production of developed world brands grows nearly 6x, from 375k to
almost 2.25mn, or from 2% to 8.6% share of production
• Other rising production locations = Czech, Slovakia, Romania, UK – even
Italy (albeit from a very low base)
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 26
Significant investment in UK
• BMW and Nissan confirmed c£700m new investment in new Mini and Qashqai
• JLR expanding model range, increasing UK sourcing, and has also confirmed it will be build its own engine plant
• GM retaining Luton van plant
• Honda confirmed new Civic 5-door to start in late 2011, new CRV in late 2012 – but with slight delay owing to Thai floods
• Toyota won Japan export contract for Avensis, started production of revised Avensis and centralisation of Auris production in UK
• Aston Martin repatriating production to UK
• Bentley increasing UK R&D and widening product programme, backed with modest government aid
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 27
BMW & Daimler
• BMW: very impressive 2011 results, record monthly sales in September (nearly 400k) and year-to-date figures (>1.23mn). Financial restructuring should enable company to remain profitable if 2008 downturn is repeated. Major cost savings through 1- and 3-series sharing components
• 2010 European production = 1.22mn; 2016 = 1.64mn
• Future growth from:
– New 1-series (production has now started) and new 3-series from 2012
– Start of JV with PSA in electric powertrains; collaboration with Toyota
– Expansion at Mini, launch of i3 and i8
– Expansion in China – including exports of 5-series
• Daimler: very profitable in H1, after excellent 2010:
• Q3 saw slowing of profits, so successful launch of expensive new model programme will be essential to maintain momentum
• New B-class showcases more technology than any other Mercedes …will include series production of fuel cell and natural gas powered versions
• 2010 European production = 1.31mn; 2016 = 1.59mn – overtaken by BMW/Mini
– Major investment in Unterturkheim powertrain operations
– Expanding production line-up in China
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 28
Fiat & Ford
• Fiat now has majority stake in and effective control over Chrysler: – Ambitious shared model, platform and manufacturing plans proceeding, with Jeeps to be
made in Italy, although at lower volumes than expected!
– 2010 European production = 1.69mn; 2016 = 2.44mn – assuming success in Russia and with Chrysler/Jeep in Europe …
– Return of Alfa to North America delayed, and several Alfa model launches delayed
– Labour problems on the horizon? Announced cancellation of labour contracts from December 2011 …
• Ford’s European operations profitable in 2010, but back into the red in Q3/2011: – Slowdown in southern European sales led to production cuts at Saarlouis
– Spanish factory on short time for H1/2012
– Possible problems with Romanian government – Ford has not hit “agreed” production targets there
– New models and expansion in Russia cannot come soon enough – will this be enough?
– 2010 European production = 1.76mn; 2016 = 1.97mn
– Russian JV will involve production of Explorer SUV and Transit van
– In June, announced reorganisation of European footprint:
• Transit Connect & Kuga move to Spain
• 2nd B-segment vehicle to be made in Romania – timing tbc
• 2nd LCV to be added to Turkey – believed to based on Fiesta, tbc
• 4th generation Focus confirmed for Saarlouis
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 29
GM Europe
• Likely still to be loss-making in 2011:
– But breaking even at operating level
• Has completed reorganisation of European operations, but Bochum transmissions plant will remain until 2013
• Existing Zafira to be upgraded and retained alongside all-new model to give Opel/Vauxhall direct competitors to Ford in MPVs
• Production of Buick Regal (rebadged Opel Insignia) switches from Russelsheim to US this year:
– Astra added to Russelsheim in recompense
• Freed capacity for Corsa and Meriva in Spain by sub-contracting Combo replacement to Tofas, Fiat’s partner in Turkey
• Future of Luton van plant confirmed – through to mid 2020s
• Formal export strategy in place for markets beyond Europe
• Rumours of future reorganisation of Astra production between UK and Poland
• Press reports of GME trying to win Antara and Agila replacement production from Korea
• 2010 European production = 1.31mn; 2016 = 1.54mn
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 30
Honda, Hyundai-Kia, Mitsubishi
• Honda:
– New Civic SOP in late 2011, slight delay due to Thai floods;
Swindon will be the sole production location for 5-door
hatchback version
– UK and Turkey plants should double production 2010-16, 150k to
nearly 300k
• Hyundai-Kia:
– 3rd shift started in Czech Republic, production swap between
Slovakia and Czech plants completed, full scale production in
Russia under way
– 2010 European production =506k; 2016 = >910k
• Mitsubishi:
– Long term future of Born factory remains uncertain
– Colt replacement will be made in Thailand
– Outlander volumes for EU27 markets insufficient to justify factory?
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 31
PSA & Renault
• PSA: strong 2010 financials, moving from loss to €1.5bn profit, with record global sales of 3.6mn units:
– Still profitable in H1, but by Q3 PSA was sounding pessimistic
– Automotive unit may only break even for the year, suggesting H2 loss
– 50 cost cutting teams set up to find significant savings in structural fixed and purchasing costs
– Increasing focus on hybrids, EVS, crossovers/MPVs and Citroen DS brand – DS brand the main growth element in PSA
– 2010 European production = 2.36mn; 2016 = 2.62mn – still below 2007 peak
– Will build 300k upa plant in India – widening Asian focus beyond China, but China on target to be PSA’s largest market
• Renault: 2010 revenue up 10%, significant profit vs. loss in 2009; trend continued in Q1/2011, but H1 and Q3 figures suggest slowdown in growth:
– Was less pessimistic than PSA, but recently announced production cutbacks and layoffs in Spain for H1/2012 – 200 units a day being cut
– Main growth will be outside Europe, ie Brazil and Russia
– Leading the market in purpose designed EVs – Fluence and Leaf launched, Kangoo EV, Twizy and Zoe to follow soon
– Nissan UK: record production in 2010 ;pre-earthquake continued in similar vein; new Nissan Qashqai will be designed, developed and built in UK, for worldwide markets
– Dacia production rising – not just in Romania, but Russia too; demand led to new group factory in Morocco being allocated initially to Dacia
– Combined Renault-Nissan-Dacia production growth from 2.45mn in 2010 to nearly 3.5mn in 2016 – increase due to Nissan UK, Dacia Morocco and Renault/Dacia in Russia – not core Renault brand in EU
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 32
Tata JLR: • Confirmed UK engine plant – to eliminate engine dependency on Ford
• CKD production in India imminent; production in China soon, once partner secured
(hopefully by end of 2011)
• Model line-up growing – Range Rover Evoque the first of many new models; new
Range Rover will represent a major technological and performance leap forward
• If all goes well, production should double 2010-2016 from c242k to c495k
Toyota: • Hardest hit of all Japanese VMs by earthquake
• European plants stopped overtime and weekend working; have been mostly on
reduced production rates – but Valenciennes in France resumes 3 shift working in
January
• Had hoped to be back to normal by year end, although full recovery may take until
2012 following Thai floods
• Auris production to be concentrated in UK, with additional £100mn investment and
1,500 new jobs; Avensis export contract; revised Avensis in production
• Will mothballed assembly line come back on stream?
• Total Euro production should grow: from 477k in 2010 to c643k in 2016
Tata JLR and Toyota
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 33
• Continues to go from strength to strength
• 2010 European Group production = 4.28mn; 2016 = 5.86mn
• Record turnover and global sales in 2010; strong performance continued through to Q3: 46% increase in operating profit and 25% increase in revenue!
• Heavy investment in European plants, ie €62bn and >€10bn in China JVs by 2016; 2 new Chinese plants confirmed. China is now Audi’s biggest market
• Volkswagen, Audi and Skoda all contributing to profits – but SEAT and Bentley still loss-making: Bentley will add an SUV in effort to raise volumes in pursuit of profitability. SEAT halved losses in Q3. Merger with Porsche delay, may actually not take place
• Success of Audi product range had led to capacity problems, with increased capacity required in Germany and Hungary, and bringing forward of decision re North American plant; Audi acquiring development companies to reduce in-house engineering capacity shortage; SEAT factory required to make Q3 SUV
•Skoda model range widening significantly – will become a truly global brand with its own models in India; Audi expanding Q range of SUVs. Small Up! range now in production – should lead to a further boost in production volumes
• Alliance with Suzuki coming to an undignified end following corporate fall-out
Volkswagen group
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 34
The Chinese in Europe …
Geely Volvo:
• Limited new model plans and platform strategy information released so far –
certainly less than had been expected
• Focus will be on China – c400k upa capacity being added there
• Uddevalla JV plant will close
Saab:
• Possibly in final stages of its existence – currently under court protection;
• GM threatening to block takeover by Chinese; production stopped since June
Chery & Great Wall:
• Chery’s Turkish factory will be in low volume production by end of 2011, with 200k
upa capacity by 2015
• Great Wall has started kit assembly in Bulgaria
DR Motors
• Taking over Fiat’s Sicily plant … details to be confirmed
SAIC – MG:
• Low volume production back under way in UK …
SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 35
In conclusion...
• Outlook still assumes no double-dip recession
• Strong production growth of 2010 has continued in 2011, but slightly slower
than previously expected
• 2011 expected to reach 19.2mn units in Europe – but lower than previous
Outlook due to slowdown in France, delayed model launches at Fiat,
disruption at Japanese VMs due to Thai floods and economic uncertainty
• Overcapacity issue has been pushed to one side in Europe – but will arrival
of Chinese and growth of production in Russia mean it once again comes to
the fore? Ironically, Audi has not got enough capacity – will BMW and
even Mercedes have the same problem soon?
• Russia will be the focus for many VMs in the next few years – Renault,
Ford, Fiat, GM and VW will help European, Korean and Japanese VMs
produce c2.25mn vehicles in the country by 2016
• Strong production growth also expected in the UK, Germany and Italy,
each of which will see at least 500k more vehicles pa produced by 2016.
Czech, Morocco, Hungary, Serbia and Slovakia will each add >200k pa
by 2016
THE SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED PAGE 36
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