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© 2018 LMC Automotive Limited, All Rights Reserved. Arthur Maher, Director of Research October 2018 European Trade Flows : Planning for the Unexpected
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Page 1: European Trade Flows : Planning for the UnexpectedPresentation Outline Global Shocks have, over time…. Increased in severity Increased in frequency How do we plan for such shocks

© 2018 LMC Automotive Limited, All Rights Reserved.

Arthur Maher, Director of ResearchOctober 2018

European Trade Flows : Planning for the Unexpected

Page 2: European Trade Flows : Planning for the UnexpectedPresentation Outline Global Shocks have, over time…. Increased in severity Increased in frequency How do we plan for such shocks

© 2018 LMC Automotive Limited, All Rights Reserved.

3,500

4,000

4,500

5,000

5,500

6,000

6,500

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

European Sales-Production Dynamics

Lehman Bro’sScrapping Inc’t

Sovereign Debt CrisisRenewed Eurozone Crisis

Euro’ Prodn Global Sales Euro’ Built LVs

BREXIT ?

US Tariffs

Turkey Crisis

000s

Page 3: European Trade Flows : Planning for the UnexpectedPresentation Outline Global Shocks have, over time…. Increased in severity Increased in frequency How do we plan for such shocks

© 2018 LMC Automotive Limited, All Rights Reserved.

Presentation Outline Global Shocks have, over time….

Increased in severity

Increased in frequency

How do we plan for such shocks ?

Have Good, Clear and Concise data

Today I’m going to discuss our new European Trade Flow database which traces Model Line sales (past, current and future) back to the originating plant.

The main area I will discuss today is BREXIT

Page 4: European Trade Flows : Planning for the UnexpectedPresentation Outline Global Shocks have, over time…. Increased in severity Increased in frequency How do we plan for such shocks

© 2018 LMC Automotive Limited, All Rights Reserved.

BREXIT: UK-EU Two-way LV Trade (‘000)

400450500550600650700750800

2017 2018 2019

2017

UK exports    710k

UK imports 1,910k

Total            2,620k

Hard Brexit Threat

2019 Q1

UK market weakens further.

‘Hard border’ threat from Q2

Contingency stocks rise Q1?

Too High? Too High? 

Page 5: European Trade Flows : Planning for the UnexpectedPresentation Outline Global Shocks have, over time…. Increased in severity Increased in frequency How do we plan for such shocks

© 2018 LMC Automotive Limited, All Rights Reserved.

European Days Supply Rebound in Q2…Again in 2019?

Days Benchmark

Days Supply WLTPContingency plans prompt stock cover from 2019 Q1. 

+200k (?) boost Days supply to 63 days.

Which OEMs/Plants Exposed?

UK‐EU disruption

‐1.7 mn!

Page 6: European Trade Flows : Planning for the UnexpectedPresentation Outline Global Shocks have, over time…. Increased in severity Increased in frequency How do we plan for such shocks

© 2018 LMC Automotive Limited, All Rights Reserved.

UK Exports to EU 27 : 2017 UK Plant

Models

(Source: Compass, ELVTFF.)

Page 7: European Trade Flows : Planning for the UnexpectedPresentation Outline Global Shocks have, over time…. Increased in severity Increased in frequency How do we plan for such shocks

© 2018 LMC Automotive Limited, All Rights Reserved.

UK PlantUK Exports to EU 27 : 2018

(Source: Compass, ELVTFF.)

Page 8: European Trade Flows : Planning for the UnexpectedPresentation Outline Global Shocks have, over time…. Increased in severity Increased in frequency How do we plan for such shocks

© 2018 LMC Automotive Limited, All Rights Reserved.

EU 27 Exports to UK : 2017Source Country  Destination :  UK

(Source: SMMT, Compass, ELVTFF.)

Page 9: European Trade Flows : Planning for the UnexpectedPresentation Outline Global Shocks have, over time…. Increased in severity Increased in frequency How do we plan for such shocks

© 2018 LMC Automotive Limited, All Rights Reserved.

EU 27 Exports to UK : 2018Source Country  Destination :  UK

(Source: Compass, ELVTFF.)

Page 10: European Trade Flows : Planning for the UnexpectedPresentation Outline Global Shocks have, over time…. Increased in severity Increased in frequency How do we plan for such shocks

© 2018 LMC Automotive Limited, All Rights Reserved.

…drilling down to German Exports to the UK : 2017

(Source: Compass, ELVTFF.)

Opening up German Plants

Page 11: European Trade Flows : Planning for the UnexpectedPresentation Outline Global Shocks have, over time…. Increased in severity Increased in frequency How do we plan for such shocks

© 2018 LMC Automotive Limited, All Rights Reserved.

…again German Exports to the UK : 2018

(Source: Compass, ELVTFF.)

Page 12: European Trade Flows : Planning for the UnexpectedPresentation Outline Global Shocks have, over time…. Increased in severity Increased in frequency How do we plan for such shocks

© 2018 LMC Automotive Limited, All Rights Reserved.

….and now BMW German Exports to UK 2018 : 147KPlant Destination

(Source: Compass, ELVTFF.)

Dual Sourcing

ModelModel

Page 13: European Trade Flows : Planning for the UnexpectedPresentation Outline Global Shocks have, over time…. Increased in severity Increased in frequency How do we plan for such shocks

© 2018 LMC Automotive Limited, All Rights Reserved.

….and now BMW German Exports to UK 2018 : 130KPlant Destination

(Source: Compass, ELVTFF.)

ModelModel

Page 14: European Trade Flows : Planning for the UnexpectedPresentation Outline Global Shocks have, over time…. Increased in severity Increased in frequency How do we plan for such shocks

© 2018 LMC Automotive Limited, All Rights Reserved.

05

101520253035

Share of EU Production allocated for Export to UK : 2017

Core Model :Fiesta      Corsa          Focus    Sprinter       Kuga      3/4 Series    Sportage   

German Plants !EU Average of Plants Trading with the UK

Page 15: European Trade Flows : Planning for the UnexpectedPresentation Outline Global Shocks have, over time…. Increased in severity Increased in frequency How do we plan for such shocks

© 2018 LMC Automotive Limited, All Rights Reserved.

Share of UK Production allocated for Export to EU 27 : 2017

020406080

UK Average of Plants Trading with EU 27

Core Model :Auris   Astra    Vivaro     Qashqai   RR      Mini     Civic       XE        LR 

Page 16: European Trade Flows : Planning for the UnexpectedPresentation Outline Global Shocks have, over time…. Increased in severity Increased in frequency How do we plan for such shocks

© 2018 LMC Automotive Limited, All Rights Reserved.

Highlights : Brexit Risk

‘18-’22 UK LV Sales lower by 1mn vs base

Pre-Brexit view: prevailing EU/world trade arrangements

Base forecast : transitional arrangement delivering new UK-EU FTA

Hard Brexit: UK follows WTO rules 04/2019

UK LV Sales Scenarios

Page 17: European Trade Flows : Planning for the UnexpectedPresentation Outline Global Shocks have, over time…. Increased in severity Increased in frequency How do we plan for such shocks

© 2018 LMC Automotive Limited, All Rights Reserved.

Highlights: Brexit Risk

Impact on rest of EU LV production: 310K

In the ‘Hard Brexit’ scenario, German LV production is 125K lower than in our ‘Pre-Brexit vote’ view

Impact on UK LV production: 50K

Total 2020 ‘Hard Brexit’ UK market scenario is 450K lower than our Pre‐Brexit vote view

Locations of Production Volume Loss, 2020‘Hard Brexit’ Scenario:

Page 18: European Trade Flows : Planning for the UnexpectedPresentation Outline Global Shocks have, over time…. Increased in severity Increased in frequency How do we plan for such shocks

© 2018 LMC Automotive Limited, All Rights Reserved.

Summary Shocks have increased in intensity and frequency.

Planning requires :-

Understanding your ‘base case’ and thus exposure to risk

Tracking the evolution of events down to plant specifics

Scenario planning a useful tool!

Page 19: European Trade Flows : Planning for the UnexpectedPresentation Outline Global Shocks have, over time…. Increased in severity Increased in frequency How do we plan for such shocks

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