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Haig Stoddard, Industry Analyst

WardsAuto U.S. Automotive Industry Outlook – 2015

Federal Reserve Bank of Chicago

Annual Economic Outlook

Symposium December 5, 2014


U.S. Light-Vehicle Sales – Vehicles to People

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Annual New Light-Vehicle Sales (millions) 10-Yr. Sales Roll (millions)

Parc (vehicles on road)/Driving-Age Population (right scale) New Vehicle Sales Per Household (right scale)

Dip due to scrappage

peaking after record

sales volumes in

1998-99

Vehicles-per-

driving age

peaked during era

of “subsidized”

sales

Sales growth continues

despite lower projected

household and parc

ratios

• Population still

growing

• A lot of vehicles on

the road will need

replacing

Source: WardsAuto and publically available sources .

Forecasts: WardsAuto and U.S. Census Bureau.


• Assume economic growth averages between 2% and 3% annually through 2020.

• Assume interest rates stay in line with economic growth.

• Growing population in general - even though growth rates have slowed

• Used-vehicle prices could trend down but should remain relatively strong overall – good in long run for new-vehicle sales (trade-in value)

• Heavy lease replacement at least through 2018-19

• More content on lower-price vehicles – there is some blurring between premium-priced and non-premium

• Even if there is a cost penalty to meeting fuel efficiency mandates, there will be more smaller (or less robust) and lower-priced vehicles available - trucks from CUVs to full-size pickups already have undergone major improvements in fuel efficiency in just the last year, with more improvements to come

• THE BIG ONE: Replacement – the next five years will be a good time to be in the car and truck scrappage business; a lot of vehicles on the road for 10-plus years.

Millennials eventually will need vehicles (more will strike out on their own as long as economic and job growth continue)

More seniors, because they’re living and driving longer, will replace vehicles that would not have been replaced in prior times

U.S. Light-Vehicle Sales – Why Bullish


U.S. Sales – Seasonally Adjusted Annual Rate (SAAR) (Light vehicles in millions)

15.7

16.5

16.8

16.6 16.6

16.8 16.9

17.0

17.2

14.5

15.0

15.5

16.0

16.5

17.0

17.5

14.5

15.0

15.5

16.0

16.5

17.0

17.5

Q1 Q2 Q3 Q4 (Estimate Q1 (Forecast) Q2 (Forecast) Q3 (Forecast) Q4 (Forecast) Entire Year(Forecast)

2014 2014 2014 2014 2015 2015 2015 2015 2016

Quarter 12-Mo Roll

Annual U.S. Light-Vehicle Sales

2013 Actual: 15.5 million

2014 Estimate: 16.4 million

2015 Forecast: 16.8 million

2016 Forecast: 17.2 million


• There is still pent-up demand created from the recession that should last through 2016 – scrappage should accelerate.

• Economic growth expected to be good

• Off-lease volume will continue gaining steam

• Competitive pressure expected to push up retail incentive activity, though not necessarily to out-of-control levels

• Fuel prices expected to remain relatively low

• The specter of rising interest rates should not have much of a negative effect in 2015 or 2016 – subprime lending continues to expand

• New offerings and key redesigns in the fast-growing cross/utility segment

• Pickups and large sport/utility vehicles boost industry volume through fresh product and competitiveness – Last stand of the traditional truck?

Short-Term Sales Outlook – cont.


81% 79%

80%

66%

48%

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86%

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100%

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100%

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4,000,000

6,000,000

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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014(Estimate)

2015(Forecast)

U.S, Light Vehicle Production Annual Capacity Utlization (right scale)

U.S. Light-Vehicle Production vs. Capacity Utilization


2.86

2.97

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Production Production (Forecast) Capacity Utilization (right scale) Capacity Utilization (Forecast: right scale)

U.S. Light-Vehicle Production and Capacity Utilization by Quarter (Production in millions)

Source: WardsAuto

Annual U.S. Production/ Capacity Utilization

2013 Actual: 10.9 million/94.1%

2014 Estimate: 11.4 million/98.2%

2015 Forecast: 11.8 million/100.0%


• Jan.-Feb 2014

inventory pushed up

because of the

winter-related crimp

on sales

• March 2014 sales

included holdover

from Jan-Feb, thus

inventory declined

month-to-month

• Q2 2014 sales

included some

holdover from Q1

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2,700,000

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JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Volume 2014 (Unadjusted)

Volume 2015 (Unadjusted - Optimum, based on forecasted quarterly SAARs)

Optimum Days' Supply in a perfect world (right scale)

• Q3 2014 inventory

started to get ahead

of demand – some

inventory buildup for

upcoming tooling

shutdowns partly

why

• August 2014 surge

to 17.3 million

annual rate

alleviated much of

the overflow

• Q4 2014 inventory in

balance with demand –

sales growing largely

based on economic

fundamentals (though

retail and dealer

incentives are ticking up

2015 Forecast SAAR: 16.6mm

2014 Actual SAAR: 15.5mm 2015 Forecast SAAR: 16.8mm

2014 Actual SAAR: 16.5mm 2015 Forecast SAAR: 17.0mm

2014 Estimated SAAR: 16.6mm

2015 Forecast SAAR: 16.9mm

2014 Actual SAAR: 16.8mm

NOTE: End of Q1 2015/beginning of Q2 2015 inventory likely lower due to tooling shutdowns mostly at plants in

Canada and Mexico

NOTE: December 2015 should be highest

volume sales month of year, possibly including

SAAR

U.S. Light-Vehicle Inventory Assessment


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SMALL CAR MID CAR LARGE CAR LUXURY CAR CROSS/UTILITY SPORT/UTILITY PICKUP VAN

2013 (Actual) 2014 (Estimate) 2015 (Forecast)

U.S. Light-Vehicle Sales by Segment Group


U.S. Light-Vehicle Sales: % Share by Segment (Including projected segment best-sellers 2015 Calendar Year)

2009 2010 2011 2012 2013 2014 2015 2015 Segment Best Sellers SMALL LOWER 3.8 3.6 3.9 4.0 4.0 4.2 3.9 Nissan Versa, Kia Soul SMALL UPPER 15.3 13.9 13.7 14.2 13.8 13.2 12.8 Honda Civic, Toyota Corolla SMALL SEDAN TOTAL 19.0 17.4 17.6 18.2 17.8 17.4 16.7 MIDDLE LOWER 15.6 14.6 14.6 16.3 15.5 14.8 14.5 Toyota Camry, Honda Accord MIDDLE UPPER (near-premium) 3.2 3.2 3.0 3.0 2.6 2.4 2.4 Toyota Prius, Nissan Maxima MIDDLE SEDAN TOTAL 18.8 17.8 17.6 19.3 18.1 17.2 16.9 LARGE CAR 4.2 4.0 3.2 2.8 2.6 2.1 2.0 Chevrolet Impala, Dodge Charger LARGE SEDAN TOTAL 4.2 4.0 3.2 2.8 2.6 2.1 2.0 LUXURY LOWER 4.5 4.4 4.4 4.4 4.9 4.3 4.1 BMW 3-Series, Mercedes C-Class LUXURY MIDDLE 1.6 1.7 1.5 1.5 1.6 1.7 1.6 Mercedes E-Class, BMW 5-Series LUXURY UPPER 0.4 0.5 0.5 0.5 0.6 0.5 0.5 Mercedes S-Class, Tesla Model S LUXURY SEDAN TOTAL 6.5 6.5 6.4 6.3 7.1 6.5 6.3 SMALL SPECIALTY 0.9 0.6 0.8 1.3 1.2 1.0 1.0 Fiat 500, Volkswagen Beetle MIDDLE SPECIALTY 1.9 1.9 1.6 1.5 1.4 1.3 1.5 Ford Mustang, Chevrolet Camaro LUXURY SPECIALTY 0.3 0.3 0.3 0.3 0.3 0.5 0.6 BMW 4-Series, Audi A5 SPECIALTY CAR TOTAL 3.0 2.7 2.7 3.1 2.9 2.9 3.1 LUXURY SPORTS CAR 0.4 0.3 0.3 0.3 0.4 0.5 0.5 Chevrolet Corvette, Porsche 911 SPORTS CAR TOTAL 0.4 0.3 0.3 0.3 0.4 0.5 0.5 SMALL CROSS/UTILITY 2.1 2.1 2.7 2.1 2.6 3.0 3.5 Subaru XV Crosstrek, Jeep Patriot MIDDLE CROSS/UTILITY 14.2 15.9 15.6 15.5 16.1 17.4 17.6 Honda CR-V, Ford Escape LARGE CROSS/UTILITY 2.6 2.6 2.4 1.9 2.5 2.2 2.1 Chevrolet Traverse, GMC Acadia TOTAL NON LUX. CROSS/UTILITY 18.9 20.6 20.7 19.5 21.2 22.6 23.2 SMALL LUX. CROSS/UTILITY 0.2 0.2 0.2 0.3 0.4 0.4 0.9 Mercedes GLK, Audi Q3 MIDDLE LUXURY CROSS/UTILITY 2.6 2.9 3.0 3.1 3.0 3.1 3.2 Lexus RX, Cadillac SRX LARGE LUXURY CROSS/UTILITY 0.6 0.8 0.7 0.8 0.9 0.9 0.9 Acura MDX, Infiniti QX60 TOTAL LUXURY CROSS/UTILITY 3.4 3.9 3.9 4.2 4.3 4.4 5.0 SMALL SPORTS/UTILITY 1.7 1.5 1.7 1.6 1.0 1.1 1.0 Jeep Wrangler (only offering) MIDDLE SPORTS/UTILITY 2.0 2.4 3.3 3.3 3.3 3.5 3.3 Ford Explorer, Jeep Grand Cherokee LARGE SPORTS/UTILITY 2.2 2.1 2.1 1.6 1.7 1.8 2.0 Chevrolet Tahoe, Chevrolet Suburban TOTAL NON LUX. SPORTS/UTILITY 5.9 6.0 7.0 6.5 6.0 6.4 6.3 MIDDLE LUXURY SPORT/UTILITY 0.5 0.5 0.3 0.3 0.3 0.3 0.3 Lexus GS, Range Rover Sport LARGE LUXURY SPORT/UTILITY 0.5 0.5 0.5 0.4 0.4 0.4 0.4 Cadillac Escalade, Cadillac Escalade ESV TOTAL LUXURY SPORTS/UTILITY 1.0 1.0 0.8 0.7 0.7 0.8 0.7 SMALL PICKUP 2.6 2.3 2.3 1.9 1.6 1.5 1.8 Toyota Tacoma, Chevrolet Colorado LARGE PICKUP 10.7 11.6 11.7 11.2 12.1 12.1 12.0 Ford F-Series, Chevrolet Silverado TOTAL PICKUP 13.3 13.9 14.0 13.1 13.6 13.6 13.8 SMALL VAN (mostly minivans) 4.1 4.2 4.0 4.0 3.7 3.7 3.9 Chrysler Town & Country, Dodge Caravan LARGE VAN 1.5 1.7 1.8 1.7 1.7 1.7 1.6 Ford Transit, Chevrolet Express TOTAL VAN 5.6 5.9 5.8 5.8 5.3 5.4 5.5

Car share

will turn up

if pump

prices rise

(>$3.50 for

significant

turnaround)


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SMALL LIGHTVEHICLES (Cars,CUVs, SUVs)

MIDDLE SEDANS

LARGE TRUCKS(CUVs, SUVs,Pickups, Vans)

LUXURY LIGHTVEHICLES

LUXURY SEDANS

LUXURY TRUCKS(CUVs, SUVs)

Small vehicles are sensitive to swings in gas prices; sales of cars are down but trucks (CUVs and Jeep

Wrangler – the lone small SUV now in the market – are pushing share back up. Small CUVs include new

luxury versions

Midsize sedans losing out the most to surge in CUV demand; also negatively impacted to small extent by

softening demand for hybrids

Excludng vans, share for large trucks would rise in 2015; new F-150, relatively new Chevrolet Silverado, GMC Sierra , will prime pickups; GM’s new big SUVs will pump the large SUV segment. Big vans losing

volume to onslaught of new small commercial vans

Luxury vehicles are undergoing some softening after strong growth – cars are the weakness; trucks,

including new small CUVs, will lead an increase in luxury share one more year

U.S. Light-Vehicle Sales by Selected Segment Groupings


Monthly U.S. Sales vs. Gasoline Retail Price ($US per gallon)

$2.90

$3.10

$3.30

$3.50

$3.70

$3.90

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% LIGHT TRUCK OF TOTAL MARKET Gas ($) - right scale

$2.90

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$3.30

$3.50

$3.70

$3.90

2.5%2.7%2.9%3.1%3.3%3.5%3.7%3.9%4.1%4.3%4.5%

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% HYBRID/ELECTRIC OF TOTAL MARKET Gas ($) - right scale

34 42 46 49 54 56 58

Gasoline Prices: U.S. Energy Information Administration

Number of Hybrid/Electric Offerings on Sale

• Lower fuel prices help

total volume but are

having a greater effect

on the mix – MORE

TRUCKS

• Helping sales of pickups

and SUVs, but it’s really

the small and midsize

crossovers supplanting

small and midsize cars

that is pushing up truck

penetration

• Lower fuel prices is

capping demand for

alternative fuel vehicles


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GM FORD TOYOTA FIAT CHRYSLER HONDA NISSAN HYUNDAI/KIA VOLKSWAGEN/AUDI OTHER

2013 2014 (Estimate) 2015 (Forecast)

Forecast U.S. Light-Vehicle Market Share by Manufacturer

GM: share rises on sales of big

trucks – pickups, SUVs, CUVs

Toyota: temporary decline

while it transitions to

some new product and tries to fix Scion brand

Ford: share drops again –

transitioning to new pickup and

Edge CUV; higher gas prices would help share (cars)

Fiat Chrysler: share rise again as it

continues replacing old product and bringing another

new Jeep

Honda: One more year of softening until new Civic,

Pilot, HR-V in full availability in

2016

Nissan: Riding new product

wave and recent increases in

capacity to meet demand; pickups and SUVs cause

flattening in 2015

Hyundai/Kia: Kia brqnd will keep

share from declining;

Hyundai portfolio gets a jumpstart

in 2016

VW/Audi: All Audi – even bucking the

softening in luxury cars. VW brand

portfolio generally old and missing a

mid-CUV

Other: Increased share in 2015 mainly due to

Subaru; BMW and Mercedes helping with luxury trucks


Thank You

Lisa Williamson Bus. Development Director

1-248-799-2642 [email protected]

Amber McLincha Bus. Development Manager

1-248-799-2622 [email protected]

Haig Stoddard

Industry Analyst

1-248-799-2619

[email protected]

mailto:[email protected]



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