auto 2020

COPYRIGHT 2009, A.T. KEARNEY, INC. ALL RIGHTS RESERVED.

Auto 2020

Expert Perspective

January 2009

- Passenger Cars -

2THE FUTURE FOR AUTO

As automotive executives plan for the future, they are faced with unprecedented uncertainty

How will customer behavior and regulations influence global car markets?

Which segments are the most attractive for growth?

How must the companies’ footprints evolve and what are the consequences?

What role will Asian OEMs play?And what "Newcomers" are to be watched?

What will distinguish the automotive landscape in 2020?


Customer behavior becomes a "mystery": segments and diverse expectations make forecasts almost impossible

Number of Car ModelsCustomer Segments and Demands

Legislation, global changes, technology trends and uncertainty on the customer side redefine automotive landscape

Emerging market buyers generate ultra low-cost cars (ULCCs) segment

Senior citizens play increasingly important role in mature markets

"Me generation" ask for more tailored products even at higher price

New mobility concepts – non-buyers, instead car sharing and new rental formats

Note: Passenger car models sold in Europe

Source: A.T. Kearney analysis; J.D. Power & Associates

60%

Long-term

6,000

2000 2020

3,700

2008 2010

5,200

4,400

-15%

Short-term


ULCC is the fastest growing segment, adding 13 million vehicles to the market and cannibalizing the "small" segment

Global Passenger Car Sales Forecast2003 – 2020 (in million units) including ULCC

Market Trend

The ultra low cost car segment (ULCC) will grow by 24.3% per year to 14 million units in 2020

Strong trend towards downsizing (e.g. 4-instead of 6-cylinder) in existing vehicle classes

E-vehicles and hybrids will play a significant role

Luxury

Large

Medium

Small

ULCC

Unclassified

Utility

SUV

0

20

40

60

80

100

2017 2018

87

2019

89

202020092005

65

2006

68

2007

65

2008

55

60

2010

68

2011

75

2012

77

2013

79

2014

81

2015

86

57

2003

60

2004

62

82

2016

84

4846

45

Gap bet-weenbest and worst case

49 50

65

Opportunities from uncertainly, e.g.• Elimination of old style production

facilities• Inventory clearing• Push to pull


In 2020 pure alternative powertrains will have a market share above 40%

80%

19%

Plug-in Hybrid/Electric vehicle

Full-Hybrids

Natural Gas

Diesel

Gasoline

46%

14%

12%

18%

9%

Americas Europe AsiaWorldwide

Average

Note: "Moderate drive for change" scenario

Source: A.T. Kearney study “Powertrain of the future”

Powertrain landscape 2007 vs. 2020

Powertrain Landscape2020

Powertrain Landscape 2007

29%

28%14%

19%

10%

51%

14%

11%

15%

8%


Source: A.T. Kearney analysis; Global Insight

E-vehicle Development

OEM Model Type Launch

BYD F3DM, F6DM Plug-in 2008

BYD E6 EV 2009

Tesla Roadster EV 2008

Toyota Prius Plug-in 2009

Mitsubishi MiEV EV 2009

GM Volt Plug-in 2010

PHEV/EV Status Quo

(excerpt)

Asian players and start-up companies are

currently leading on electric vehicles

In addition, Asian suppliers control 90% of the

Lithium-Ion battery market

US and European OEMs are still in prototype

and field testing stages

Example: BYD F3DM

Worldwide first plug-in Hybrid

Price in China at market introduction on

December 15, 2008: 15.000 Euro

Use of state-of-the art lithium-ion

technology (iron phosphate cathodes)

Asian players are currently leading in the electric vehicles

segment


Global vehicle overcapacity will remain an issue while Japan and Korea must continue their focus on exports

787877767574

60

4645454446

68747473

0

10

20

30

40

50

60

70

80

90

100

2011 2012 2013 2014 2015 2016 2017 2018 2019 20202005 2006 2007 2008 2009 2010

Global Utilization remains poor

through 2020 – OEMs need to

close facilities

Japan and Korea must

continue to be heavy

exporters or they will face

significant capacity

underutilization

31.431.631.832.032.033.0

27.021.322.423.223.124.0

34.236.539.941.7

29.930.230.530.830.931.025.1

19.619.619.719.018.925.023.923.7 25.5

0

10

20

30

40

50

60

70

80

90

100

2007 2008 2009 2010 2011 2012 20132005 2006 2014 2015 2016 2020

Japan

Korea

2017 2018 2019

Global Vehicle Plant Utilization1) (%)

Note: 1) If no counter measures are takenSource: A.T. Kearney analysis; Global Insight, J.D. Power

Japan and Korea – Domestic Sales / Production Capacity (%)


The shift of innovation hubs towards Emerging Markets is a

logical trend, automotive is just the next industry

1970s:

Automotive industry

2000s:

Semi-conductors

1990s:

Shipbuilding

1960s:

Optical systems

2010s: “Big Bang”

Automotive Industry

Shift of Innovation Leadership: Past and Future

1980s:

Consumer electronics

1990s:

Automotive industry

Source: A.T. Kearney analysis


As OEMs from emerging markets dominate the new ULCC segment, their global market share will grow to over 30%

Note: Scenario does NOT include potential mergers and acquisitions between established OEMs and OEMs from emerging countries

Source: J.D. Power, A.T. Kearney analysis

Global Market Split 2006 (%) Global Market Split 2020 (%)

OEMs Emerging Markets (China, Russia,

India, Iran, Malaysia, etc.)

Traditional OEMs (Germany, France,

UK, Italy, US, Japan, Korea, etc.)

9%

91%

32%

68%


This growth (organic and external) will allow OEMs from emerging markets to challenge established players

Growth of Emerging Market OEMs

Source: J.D. Power Sales Forecast Global and for Chinese Market, A.T. Kearney analysis

Sales (mil. units) organic growth

China

JAC ChanganSAIC BAICChery FAW Mitsubishi FiatTata Suzuki Isuzu

2006 2020 Sales (mil units) Growth by acquisition

0.60.60.71.0

1.4 0.5

2.01.9

3.2

0.6

1.3

1.7

3.2

1.4

3.9

0.4

1.41.5

2.2

0.4

1.11.2

1.9

0.30.30.30.50.5

0.40.3

2.3

3.7

1.6

2.6

1.2

1.9

1.1

1.7

1.0

1.6

Volvo

India

Mazda Daimler BMW

Group

Units sold by selected established OEMsUnits sold by Top Emerging OEMs

Japan Europe

http://www.changan.com.cn/144115188075855872/index.htm

http://www.isuzu.de/


Despite the many changes by 2020, we still anticipate a general dominance of regional OEMs in their home markets

Passenger Car Market Share of OEM Groups

39%

70%

43%

77% 23%

57%

30%

61%

95%5%

43%

49%

53%

77%

90%

57%

51%

47%

23%

10%

Western

Europe

US

Japan

China

India

Japan and Europe – strong

position of regional OEMs although

foreign OEMs can increase their

share

China – market increasingly

dominated by regional OEMs

U.S. – strong growth of foreign

OEMs mainly from Japan, Korea,

and China

India –an exception with regard to

dominance of foreign OEMs

(Suzuki-Maruti JV expected to gain

more than 30% of total market)

2005 2020

Regional OEMs Foreign OEMs

Source: J.D. Power, A.T. Kearney analysis


Government investment would be better spent by scrapping older vehicles than supporting industry contraction

Incur >$300 Billion cost for Industry Contraction (4 year period)

Invest $300 Billion in Vehicle Parc Replacement (4 year period)

20 Million older vehicles (>15 years age) replaced - $15,000 per vehicle subsidy

Employment of 2.1 million workers including direct, indirect, and spinoff to support 5 million vehicles per year production

Decrease CO2 emissions by 76 Billion kg

Enable auto companies time to:

Develop Technology

Increase agility

Move from push to pull

Eliminate incentives

Total Impacts After 4 Years

Personal Income ($ billions) $ 272

Combined loss of tax receipts and

increase in government welfare$ 106

Source: J.D. Power, CAR, BLS, A.T. Kearney analysis

Benefits for CO2 emissions not realized

Impact on health care costs transferred to government not represented

Total Negative Impact = $380 Billion

Example


Financial fitness and technological strength are essential to survive in times of reduced revenues

Ability to Refinance in Times of Reduced Revenues

Capitalize on Technological Strength

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So

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General Recommendations for Suppliers in Times of Crisis

Reduce variable costs to

keep EBIT positive

Ensuring financial fitness

through cash

optimization

Capitalize and further

improve technological

strength

Suppliers in Times of Crisis

auto 2020

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