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© 2017 IHS Markit. All Rights Reserved.© 2017 IHS Markit. All Rights Reserved.
Presentation to MBS 2017 –Forecast Panel
Michael RobinetManaging Director, Automotive Advisory Solutions
© 2017 IHS Markit. All Rights Reserved.
AUTOMOTIVE
The automotive sector is one of the biggest and most competitive markets in the world and relies on in-depth analysis for its daily operations.
Our extensive global team of automotive analysts located in 15 key markets supplies the depth of information and level of comprehension needed for a competitive edge.
IHS Markit automotive solutions span the entire value chain, from product inception to sales, marketing andthe aftermarket.
We scale our insights to address virtually any domain or enterprise, improving the speed, accuracy and impact of business strategy and tactics.
2
MBS 2017 Conference / August 2017
© 2017 IHS Markit. All Rights Reserved.
Past IHS Markit Forecast Panel Themes
• 2012: Constant Structural Change
> Global platforms, pressure to add capacity while building profitability
• 2013: Opportunities and Bottlenecks
> Rise of non-Detroit 3, need to look outside the traditional structures
• 2014: A Proactive Supplier
> No longer wait for RFQs and ‘innovation ideas’ from customers – find the right business
• 2015: The Next Stage
> Describing a market with faster cadence, driven by regulations and production localization
• 2016: Foresight Reigns
> Need for suppliers to take greater control of their destiny
• 2017: Focus On The Journey ….
> Level 5 & BEVs are the destination – The journey will separate winners from losers
MBS 2017 Conference / August 2017
© 2017 IHS Markit. All Rights Reserved.© 2017 IHS Markit. All Rights Reserved.
Focus on the JourneyPresentation to MBS 2017 – Forecast Panel
Michael RobinetManaging Director, Automotive Advisory Solutions
© 2017 IHS Markit. All Rights Reserved.
Improving US Economy Will Keep Vehicle Market Steady
-3%
-2%
-1%
0%
1%
2%
3%
4%
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
Real GDP Growth Rate
Real GDP Growth Rate
5
• Real GDP – Economic signals mixed; Consumer confidence and many sectors improving, but strong dollar hurting trade. Growth improving this year, 2.2%, and next year towards 3% before declining.
• Monetary Policy – FED expected to continue to raise interest rates, weak global conditions causing delays. US labor market key; do rising wages support tightening?
• Fiscal Policy – Spending will rise in 2017 thanks to proposed infrastructure and military outlays, contributing to growth for first time in years. Impact of 2017 Tax rate cut viewed as positive though replacing declining revenues will be an issue.
• Consumption – Real consumer spending improving – stronger labor markets, falling energy prices and improved household balance sheets all contributing.
• Housing – Plenty of recovery left to go, Housing Starts only at 2/3 of pre-crash averages. Sector will gain momentum as household formation and labor markets improve.
• Employment – The good times of monthly job gains averaging 200,000 or better are probably over; the rest of this year and next should be more moderate than the past couple of years.
• Foreign Trade – Strong dollar is hurting trade balances, a drag on the US economy through 2018. Recent yuan devaluation, coupled with already weak euro and yen, will impact OEM sourcing decisions.
• Investment – Strong profits, stock prices, suggest business fixed investment will accelerate; low oil prices are a “surprise” cost savings, but within the oil sector a major pullback is occurring.
MBS 2017 Conference / August 2017
© 2017 IHS Markit. All Rights Reserved.
Crude Slowly Recovers Amid New Supply• In a six-month accord that took effect in
January 2017, OPEC agreed to cut its production 1.2 million barrels per day. Russia’s energy minister announced a reduction of 300,000 barrels per day.
• The US onshore oil industry is proving effective at cutting costs and achieving efficiencies. US crude oil production bottomed in fourth-quarter 2016 near 8.6 MM b/d and will increase about 400,000 b/d during 2017.
• Under the Trump administration, reduced regulation, fewer hurdles for pipeline construction, and an opening of public lands to exploration and production could lead to higher-than-expected oil and gas supplies.
• The price of Dated Brent crude oil is projected to increase from USD44/barrel in 2016 to USD54 in 2017 and USD57 in 2018.
6
$0
$25
$50
$75
$100
$125
$150
2000 2003 2006 2009 2012 2015 2018 2021 2024 2027
Current US dollars 2016 US dollars
Price of Dated Brent crude oil (USD/Barrel)
Source: IHS Markit © 2017 IHS Markit
MBS 2017 Conference / August 2017
© 2017 IHS Markit. All Rights Reserved.
US: Light Vehicle Sales Forecast
4
6
8
10
12
14
16
18
20
Millions
Sales Vol Car Light Truck Linear (Sales Vol)
7
Market Dynamics Shifts – Conquest & Loyalty are Critical, Mix Shifts and More Players/Nameplates
Market peaks in 2018 – weaker buying conditions,
slower job creation, rising oil prices start next cycle.
Successful tax reform required ….
Source: IHS Markit Automotive, current light vehicles sales forecast
2017
17.1m
Car – sales flatten - rises as
affordability declines
LT – peaks in 2018, weaker
housing, higher fuel &
regulations force declinePre-Crash
40 year trend:
+140k annually
Model Count
2010 2016 2023
335 371 409
MBS 2017 Conference / August 2017
© 2017 IHS Markit. All Rights Reserved.
Global LV Production Outlook
Region 2016 2017 2018 2019 2020 2022 2024 CTG2016-24
Notes
China 27.4 27.6 27.9 29.4 30.5 31.9 33.1 37% • Tier 3 & 4 city growth
Europe 21.5 22.1 22.4 22.5 23.0 23.6 24.0 16%• Slow rebound of Russia
and shift from West EU
NA 17.8 17.4 17.5 17.7 18.4 18.1 18.0 1% • D3/A4/G3 Realignment
South Asia 8.4 8.7 9.2 9.7 10.7 11.9 13.3 31%• India domestic &
export, ASEAN rise
Japan/Korea 12.9 13.4 13.0 12.7 12.6 12.5 12.4 -3%• Slow domestic mkts,
production co-location
South America 2.7 3.1 3.4 3.5 3.8 4.3 4.7 13%• Well below 2013 record
of 4.5 mil
Middle East/Africa
2.3 2.5 2.7 2.9 3.1 3.3 3.2 6%• Focus of more attention
by OEMs
Total 93.1 94.9 96.1 98.4 102.0 105.6 108.7
8
Over 70% of Total Growth From Emerging Asia
CTG – Contribution to Growth
MBS 2017 Conference / August 2017
© 2017 IHS Markit. All Rights Reserved.
Top OEM Cooperative Groups by Production Volume 2024
0
2
4
6
8
10
12
14
16
18
20
Toyota+Mazda+Fuji+Suzuki
VW+ Tata R/N+Mits.
GM+ SAIC Hyundai Ford Honda FCA PSA Daimler BMW Geely+Proton
Changan BAIC Great Wall
Millions
Global Production Volume
9
Top-15 OEM Groups
Top-15 OEMs Total Volume
• A4: 44.6 M• D3: 21.8 M• G3: 20.2 M• Others: 12.0 M
MBS 2017 Conference / August 2017
© 2017 IHS Markit. All Rights Reserved.
Global Program Launches by RegionIncreased Launch Activity Raises Risk
10
17 1024 18 19
11 17 18 2436
2213 8 11 18
2221
2723 25
2226 24
3124
2329
2630 18
1719
16
1417
12
15 15
1219
1613
119
8
33
23
37
31
39
29
3627
41
51
39
31
23
39
31
21
27
33
22
25
25
30
25
32
45
45
39
23
32
41
0
25
50
75
100
125
150
175
200
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
# o
f Lau
nch
es
North America Europe Japan/Korea China Other
100
124
175
116
Increased industry pace places pressure on talent, resources and infrastructure.
MBS 2017 Conference / August 2017
© 2017 IHS Markit. All Rights Reserved.
-
2
4
6
8
10
12
14
16
18
20
2000 2003 2006 2009 2012 2015 2018 2021 2024
NA
LV
Pro
du
cti
on
Millio
ns
Detroit 3 Asian 4 German 3 Other
NAFTA ProductionCustomer Dynamics Changing …
• Rise in Mazda, Fuji Heavy, Volvo and Tesla underscores ‘Other’ OEM rise – Supply base shifts.
• Detroit 3 output declines due to new competition, comparative lack of exports and inflexibility to shift to
CUVs from sedans.
11
77%17%
3%3%
Det 345%
Asian 438%
Germ 310%
Other7%
NAFTA Production Share
2000
2024
17.418.118.4
MBS 2017 Conference / August 2017
© 2017 IHS Markit. All Rights Reserved.
NA Regional ShiftLogistics and Supply Structure Under Pressure
2.4 2.4 2.3 2.3 2.2 2.2 2.2 2.3 2.2 2.2
5.6 5.44.6 4.5 4.4 4.5 4.5 4.3 4.3 4.3
-
3
6
9
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Pro
d V
ol
Mil
Midwest/Ontario
13
2.7 2.8 2.7 2.6 2.6 2.8 2.8 2.8 2.7 2.7
0.9 0.9 1.0 1.0 1.1 1.0 1.0 0.9 1.0 1.0
0.8 0.8 0.8 0.8 0.9 0.9 0.9 0.9 0.9 0.9
-
3
6
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Pro
d V
ol
Mil
Southeast
1.1 1.3 1.4 1.5 1.6 1.7 1.7 1.6 1.6 1.6
1.6 1.6 1.8 1.7 1.8 1.7 1.7 1.7 1.6 1.70.5 0.4
0.6 0.8 0.8 0.9 0.9 0.9 1.0 1.0
-
3
6
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Pro
d V
ol
Mil
Mexico
A4 D3 G3 Oth
• Mix towards D/E-segment and Full Frame
• Detroit 3 still account for +60% of MW/ONT volume by 2024
8.06.9
4.6 4.7
3.5
4.5
• Remarkable stability – newer facilities w/export focus
• Higher concentration on C & D-segment CUVs
• Mid-Mexico now accounts for ~70% of Mex volume
• Rise of B & C-segment products with increasing luxury focus for export
7.2
4.8
4.6
MBS 2017 Conference / August 2017
© 2017 IHS Markit. All Rights Reserved.
Detroit Three Volumes Peak …
0.5
0.6
0.7
0.8
0.9
1.0
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Q42017
Q12018
Q22018
Q32018
Q42018
Q12019
Q22019
Q32019
Q42019
Millions
Quarterly NA Light Vehicle Production
General Motors General Motors Run Avg Ford
Ford Run Avg FCA FCA Run Avg
14
Peak
Peak
Peak
MBS 2017 Conference / August 2017
© 2017 IHS Markit. All Rights Reserved.
SUV/CUVs Dominate Production – Flexibility in Question
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Q42017
Q12018
Q22018
Q32018
Q42018
Q12019
Q22019
Q32019
Q42019
Millions
Quarterly NA Light Vehicle Production
SUV SUV Run Avg Sedan Sedan Run Avg
Pickup Pickup Run Avg All Other All Other Run Avg
15
SUV Peak
Pickups Peak
Sedan Trough
MBS 2017 Conference / August 2017
© 2017 IHS Markit. All Rights Reserved.
U.S. Production In Decline as Mexico Steadily Grows
0.4
0.9
1.4
1.9
2.4
2.9
3.4
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Q42017
Q12018
Q22018
Q32018
Q42018
Q12019
Q22019
Q32019
Q42019
Millions
Quarterly NA Light Vehicle Production
United States United States Run Avg. Canada
Canada Run Avg. Mexico Mexico Run Avg.
16
Peak
Shows no signs of slowing
Peak
MBS 2017 Conference / August 2017
© 2017 IHS Markit. All Rights Reserved.
0
10
20
30
40
50
60
CA
FÉ S
tan
dar
d (
MP
G)
Model Year
Cars
Trucks
Combined
EPA vs. NHTSA vs. CARB vs. the EU vs. China – Many Considerations …
Two key milestones for the future are the 2016 requirement and then the more difficult 2022-2025 requirement
New US Plan
??
Cars
Trucks
• US Administration is in the midst of a mid-term review with a recent note that standards may be reduced or frozen as of Model Year 2021.
• Complicating factors include the California Exemption, the ‘177’ states which follow California as well as emission reduction/electrification efforts of China, EU and Quebec.
17
MBS 2017 Conference / August 2017
© 2017 IHS Markit. All Rights Reserved.
95
98
104
107
110
13%
33%
34%
55%
45%
3%11%
29%
2.2% 3.8%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
75
80
85
90
95
100
105
110
115
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025%
Sh
are o
f P
ro
du
cti
on
Glo
bal Pro
duction V
ol. -
Millio
ns
Global Electrification Penetration
Volume Electrification Share Stop/Start Share Hybrid Share BEV Share
Global & NA Electrification Trends
18
Led by EU & China, Global has higher ‘electrification’ share, while North America will be slower
MBS 2017 Conference / August 2017
15.2
15.6
17.0
16.7 16.7
2%
11%
20%14%
56%
63%
7% 15%3.8% 4.8%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
14.0
14.5
15.0
15.5
16.0
16.5
17.0
17.5
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
% S
hare o
f P
ro
du
cti
on
N.A
. Pro
duction V
ol. –
Millio
ns
N.A. Electrification Penetration
Greater emphasis on Start/Stop tech. in N.A.
Electrification includes: Mild-/Full-Hybrid, BEV, Fuel Cell
© 2017 IHS Markit. All Rights Reserved.
ADAS – Several Strategies Toward a Common Goal
• Paving the way: Tesla Autopilot 2.0 Hardware suite
• Autopilot Expected 10% market share by 2022
• Autonomy hurdles: 50% Auto expertise, 50% tech expertise
• OEMs strategy: fund 3rd parties, opposed to in-house
• Essential tech investments
> Autonomous Software
> Cybersecurity
> Driver safety tools
> Connected vehicle, V2V, V2X, data management
> Fleet telematics
Blue = Full Autonomy
Features currently
Intuitive pedestrian detection with steering
Lane change/evasive steering
Remote control parking
MBS 2017 Conference / August 2017
19
ADAS: Advanced Driver Assistance Systems
© 2017 IHS Markit. All Rights Reserved.
North American Engine LaunchesCombination of Engine Family, Displacement and Engine Plant
20
0
2
4
6
8
10
12
14
16
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
# o
f Lau
nch
es
GM Ford FCA Toyota Honda Nissan Hyundai VW Daimler BMW Others
1
MBS 2017 Conference / August 2017
OEMs are spending a greater share of
resources on electrification,
batteries and power structures.
13
14
10
© 2017 IHS Markit. All Rights Reserved.
The Journey to Level 5 & Battery Electric
21
Substantial Change/New Modest Change
Thermal Propulsion (Engine/Trans)
Electrical/ Power Supply Fuel
Body In White Exhaust
Steering Suspension
Braking Interior
Aerodynamics/ NVH Seating
Driveline Exterior
Electronics Passive Safety
Battery
Vision/Lighting
ADAS/ Active Safety
Wheels/Tires
• Shift towards soft from hard parts
> Many suppliers focus resources on mechatronics, electric actuation, software and system integration
> Share of ‘value’ devoted to hard parts decline – the pie slices thinner
• System shifts will be rampant
> Major transitions in body, braking, chassis, steering and thermal as electrification and autonomy have a profound impact.
> Increase in 48 volt systems and the need for efficient distribution systems all underscore looming change.
MBS 2017 Conference / August 2017
© 2017 IHS Markit. All Rights Reserved.
~2020
Mass Reduction Shifts Beyond The ‘Edge Segments’
Mild Hybrid Rise Starts in Larger Segments, 48V
L3 Autonomy, More ADAS Content, Warranty Visibility
Today
BIW & Chassis System Lightweighting Begins
Down Displacement, Multi-speed Trans & S/S
ADAS & Connectivity Content Rises, Warranty Costs
A Looming Cost Cliff Alters The EcosphereOEMs, Suppliers, Regulators and Customers Are All Impacted
~2025
Integration of ‘Non-Standard Materials’ & Joining Methods
Full Hybrid, BEV and Alternative Drive Formats Rise
L3/4 Autonomy, Global influences, System Profit Pools Shift
~2030
+
Competitive Dynamics Shift – ‘Old’ Industry versus ‘New’ Industry
Optimization of BEV Packaging – Vehicle Longevity Extends
Level 5 Emerges, New Content Suppliers/Integrators
Success in a Rising Cost Environment
• Understand your costs, markets & risk profile
• Your systems in the new structure?
• Hedge technologies
• Smart vertical integration
• Proactive engagement
• Today’s differentiators are not tomorrow’s
MBS 2017 Conference / August 2017
© 2017 IHS Markit. All Rights Reserved.
Summary
• Plateauing volumes alter the landscape
> OEMs feeling the pressure of increased incentives, warranty exposure and competition –i.e. enhanced productivity/currency ‘adjustment’ requests
> Existing suppliers begin to cannibalize as new suppliers enter the market
– Indian & Chinese-owned concerns, Tier II Japanese/Korean and EU suppliers (following expanding Tier Is) and Silicon Valley entities
• Looming cost cliff drives urgency into system cost reductions
> Increased evidence of incremental cost transparency driven by OEMs
• Supplier strategies vary by system
> Vertical integration to offer enhanced capability to blunt margin erosion
> Smart capital deployment, priority opportunity targeting, less may be more
MBS 2017 Conference / August 2017
© 2017 IHS Markit. All Rights Reserved.
Thank You
Michael Robinet
Managing Director, IHS Markit AutomotiveAdvisory [email protected]
COPYRIGHT NOTICE AND DISCLAIMER
© 2017 IHS. All rights reserved. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form withoutprior written consent of IHS. Content reproduced or redistributed with IHS permission must display IHS legal notices and attributions ofauthorship. The information contained herein is from sources considered reliable, but its accuracy and completeness are not warranted, norare the opinions and analyses which that are based upon it, and to the extent permitted by law, IHS shall not be liable for any errors oromissions or any loss, damage, or expense incurred by reliance on information or any statement contained herein. In particular, please notethat no representation or warranty is given as to the achievement or reasonableness of, and no reliance should be placed on, any projections,forecasts, estimates, or assumptions, and, due to various risks and uncertainties, actual events and results may differ materially fromforecasts and statements of belief noted herein. This presentation is not to be construed as legal or financial advice, and use of or reliance onany information in this publication is entirely at your own risk. IHS and the IHS logo are trademarks of IHS.
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