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© 2011 J.D. Power and Associates,The McGraw-Hill Companies, Inc. All Rights Reserved.

Automotive Market:Where Do We Go From Here?

June, 3rd 2011

Federal Reserve Bank of ChicagoEighteenth Annual Automotive Outlook Symposium

Jeff SchusterExecutive Director, Forecasting and Analysis

[email protected]

© 2011 J.D. Power and Associates,

The McGraw-Hill Companies, Inc.

All Rights Reserved.2

Agenda

Global Environment

U.S. Light Vehicle Outlook

Alternative Powertrain Trend

Summary

0

0

0

0




76.0 70.4

66.0

66.7 64.1

61.8

58.7 57.1

56.6 56.7

54.8

51.4

72.3

63.9

50

52

54

56

58

60

62

64

66

68

70

72

74

76

78

80

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Monthly (S.A.) Smoothed Annual Total

Apr '11

Jan '09

C

Feb '08

Source: J.D. Power Automotive Forecasting

Global Light Vehicle Sales Trend

The Global selling rate has pulled by from the highs at the beginning of the year, with impact from the Japan disaster and a slowing China




2011 Global LV Sales Growth Stabilizes

Global: 76.0M

6%

India: 3.2M

17%

USA: 13.0M

12%

Brazil: 3.6M

8%

N. America: 15.5M

11%

Europe: 18.6M

2%

S. America: 5.2M

7%

Asia: 31.0M

3%

Russia: 2.1M

11%

China: 18.4M

7%

Germany: 3.4M

10%

Japan: 4.0M

(18%)





Tohoku Earthquake: Short-Term (through 2Q) Impact on the Production

North America

- 450K

(March – June 2011)

South America

- 11K


Asia/Pacific

- 1.6M


TOTAL

- 2.2M



Europe

- 100K





Production Forecasts 2011 – Impact on Year

Europe

19.9M, +200K

(not Japan related)

Risk ~ -50K

North America

12.8M, -40K

Risk ~ -100K

South America

4.6M, No change

Risk ~ -20K

Asia/Pacific

38.4M, -450K

Risk ~ -690K

The risk figure represents our current take on potential impact to 2011 volume if production is not returned to near

normal levels by 4Q11. There is additional risk in supplier capacity constraints in 2H11.

This is not a “worst case” risk assessment. Source: J.D. Power Automotive Forecasting

TOTAL

77.9M, -490K

Risk ~ -860K




6467 66

74

103

92

97

82

64

7270

50

60

70

80

90

100

110

120

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Global LV Sales Expected to Cross 100M by 2015

Millions

76


85




Growth Has Become Strongly Dependent on Emerging Markets

0

10

20

30

40

50

60

70

2007 2008 2009 2010 2011 2012 2013 2014 2015

Mature

Emerging

Mature markets are expected to recover former levels, but not until 2015!

Emerging markets – with China at the forefront – have overtaken the mature markets and

won’t look back!

Global Light Vehicle SalesMillions


Emerging

51%




Ru

ssia

Ko

rea

Iran

Au

stra

lia

Ch

ina

US

A

Jap

an

Bra

zil

Germ

an

y

Ind

ia

Fra

nce

UK

Italy

Can

ad

a

Sp

ain

5

10

15

20

25

30

Top 15 Global LV Markets Continue to Shift by 2015

UK

Ca

na

da

Ko

rea

Me

xic

o

Sp

ain

Iran

Italy

Fra

nc

e

Ru

ss

ia

Ge

rma

ny

Ja

pa

n

Bra

zil

Ind

iaU

SA

Ch

ina

5

10

15

20

25

30

Top 15 LV Markets - 2010 Top 15 LV Markets - 2015

Top 15 = 58M (80%) Top 15 = 84M (82%)


Millions Millions





Agenda

Global Environment


Alternative Powertrain Trends

Summary

0

0

0

0




11.613.0

1.6

1.6.8

.9

10.4

14.7

1.5

1.7

.8

1.0

0

2

4

6

8

10

12

14

16

18

20

22

2009 2010 2011 2012

USA Canada Mexico

North American LV Sales Climb Toward Pre-crisis Levels

Millions

+10%

+12%

12.613.9

15.5

17.4

U.S. strong through April but hits speed bump in May - upside potential vaporizes

Canada’s slightly ahead of expectations YTD, growth in 2011 expected at 3%

Mexico posted an 9% increase in 2010 and is expected to grow at a similar pace in 2011,

heavily dependant on the US economic recovery

+11%





Retail Sales SAAR Shows Momentum Through April

4

6

8

10

12

14

16

Jan-

08

Mar-

08

May-

08

Jul-

08

Sep-

08

Nov-

08

Jan-

09

Mar-

09

May-

09

Jul-

09

Sep-

09

Nov-

09

Jan-

10

Mar-

10

May-

10

Jul-

10

Sep-

10

Nov-

10

Jan-

11

Mar-

11

May-

11

Millions

CARS Peak

Payback

Trough


Speed bump?




9.28.6

2009 2010 1.

Disposable

Income

2.

Unemp. Stock

Market

4.3.

Housing

Market

5.

Fuel

Prices

6.

Credit

Avail.

10.

Product

Activity

7.

Vehicle

Equity

2011

JDPA

Vo

lum

e

Vehicle

Price

8. 9.

Incentive

Actions

2011 U.S. Retail Sales: Recovery’s 2nd Gear?

Total Sales

11.610.6

10.4

Risk15%

YoY

13.0

Total Sales

Macro Factors Consumer Internals & OEM Drivers


Risk variables increasing: no increase to forecast

and 150K of further downside




North America – Imported Inventory Challenges

Imported models seeing inventory shortages in some regions due to the recent Japan

earthquake/tsunami. Highlights of select models include:

Days Supply - 10 Days Supply - 23 Days Supply - 19

Toyota Prius Honda Civic Nissan Juke Subaru Legacy

Days Supply - 34

Brand Days Supply

Toyota 48

Lexus 39

Scion 43

Honda 36

Acura 51

Nissan 64

Infiniti 85

Subaru 36

Some Japanese OEM’s have reduced incentives in

May as their vehicle inventory lessens — lower

incentives are expected to continue though the

summer

Select North American produced models also could

face shortages into June — as volume starts to

normalize

Some models, such as the Toyota Prius and Lexus

CT-200H virtually ran out in May

Source: J.D. Power Automotive Forecasting, Ward’s Automotive




12.7

13.9

11.8

10.0

11.0

12.0

13.0

14.0

15.0

2010 2011 2012

Japan Disaster - North America Production Impact

2.5

2.8

3.0

3.3

3.5

3.8

4.0

1Q11 2Q11 3Q11 4Q11 1Q12 2Q12

Pre-crisis Forecast Revised Production Risk

Short-Term Production Impact

2011/2012 Production Impact


Impact on North American Japanese OEM

production has been more severe than initially

expected. Current short-term is projected at -450K

in 2Q; we expect most of this to be made up in 3Q

and 4Q (loss of 40K).

The topline volume to be made up is now

expected to split between the Japanese and non-

Japanese OEMs through the remainder of the

year, but capacity constraints come into play in the

small segments.

Our forecast now assumes that a majority of the

cuts have been announced or planned, so further

risk has been reduced.

Inventory started May at a 54-day supply –

unchanged from early April; Expect it to be in mid-

40s at end of May.

Our NA topline now rounds down to 12.8M from

12.9M and there remains an additional 100K of

risk through the summer.

12.8

Risk:

~ -100K

Millions

Millions




14.0 13.813.2 13.0 12.8

10.6

8.69.2

10.6

12.113.513.312.9

16.7 16.9 1716.5

16.1

10.4

11.6

15.716.3

14.7

13.0

16.5

13.2

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

U.S. Light Vehicle Sales Forecast – Slow, Progressive

Recovery!

Base Case Forecast Trend – Fleet mix expected to settle around 18%

Total Sales

Retail Sales-21% 11%

12%

14%





0

5

10

15

20

25

30

35

40

45

50

2006 2007 2008 2009 2010 2011 2012 2013

New Entry Redesign Facelift Drops

Net: -4 -26 12 1 -22 -3 26 10

Mo

dels

Model Activity Reignites Hyper-competitive Market





Product Activity Skews Toward Small

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2008 2009 2010 2011 2012 2013

Small Share of Model Activity





Small Car Share Will Grow, But…

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

A/B/C Car Segment Share of Industry

Global

US

• Small car demand grows as fuel prices rise and availability increase (push and pull)

• Product activity skews toward small vehicles over next three years

• Regulations will continue to force the issue, but still 6-10 years out and is it what

consumers want?

• Demand in U.S. expected to remain significantly below rest of world

Brazil

Western Europe

Japan





U.S. Future Size/Price Landscape Remains Balanced

Sub-

Compact

1%

Premium

12%

Large 27%

Midsize

38%

Compact

23%

Premium

13%

Sub-

Compact

3%

Compact

29%

Midsize

35%

Large 20%

Shift to non-premium small will be more pronounced and will likely lead to

additional body types

Premium growth is expected, but at smaller end of market with new products

Large (including pickup trucks) will suffer continued decline, but will not be extinct

Sub-

Compact

6%

Premium

15%

Large 17%

Midsize

32%

Compact

31%

2005

2010

2015





Agenda

Global Environment



Summary0

0

0

0




Global Hybrid/EV Sales by Type

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

FHEV PHEV EREV FCEV MHEV BEV

Hybrid BEV

Global Hybrid/EV Sales to Top Four Million by 2018




U.S. Hybrid and Electric Vehicle Forecast

0

2

4

6

8

10

12

14

16

18

2009 2010 2011 2012 2013 2014 2015

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%IC ONLY HEV/BEV Hybrid and EV share

Millions

Hybrid sales peaked at 353,000 units in 2007

Hybrid and EV sales finished 2010 at 275,000; Toyota Prius continues to dominate, accounting

for 50% of hybrid sales

2016 CAFE requirements will help hybrid sales reach 1.4m units by 2015, representing 8% of

light vehicle sales

Less than 100k BEVs by 2015, but 150k PHEVs.




U.S. Light Vehicle Demand Breakdown by Fuel Type

Flex fuel vehicles currently have the highest share of the alternative fuel market, but consumers

mostly power them with gasoline

We expect about 1/4 light vehicles sold in the U.S. to be an alternative fuel vehicle by 2015 and

27.5% by 2020

Gasoline-electric hybrids are expected to grow at a faster rate than diesels

Electric vehicle share is expected to remain below 1% until 2020

2010 2015 2020

Gas

72.5%

Electric

1.0%

Flex

8.0%Hybrid

10.0%

Diesel

8.5%

Gas

74.0%

Electric

0.50%

Flex

10.0%Hybrid

7.7%

Diesel

6.8%

Gas

86.0%

Electric

0.02%

Flex

8.7%

Hybrid

2.4%

Diesel

2.6%




Agenda

Global Environment



Summary0

0

0

0




Summary

Global automotive environment split between emerging and

mature

U.S. market continues recovery, but not without risks!

Supply and demand discipline is holding

Volume will return to 16 million level, but long road ahead

Small and Alternative Power will grow, but balance is key




Real-Time Market Intelligence

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