A Division of MEMA
9:15 a.m. | Panel Discussion
Industry Outlook and Insight
Remanufacturing and Sustainability Conference
Gary MeteerDirector, Commercial Vehicle Solutions
IHS Markit
Paul McCarthySr. Vice President, Strategy and Planning
MEMA
Paul TraubSenior Business Economist
Federal Reserve Bank of Chicago
Mark SengGlobal Aftermarket Practice Leader
IHS Markit
A Division of MEMA Paul McCarthySr. VP, Strategy and PlanningMEMA
MODERATORTOPIC
Industry Outlook and Insight
PANELISTS
Paul TraubSenior Business EconomistFederal Reserve Bankof Chicago
Mark SengGlobal Automotive
Practice LeaderIHS Markit
Gary MeteerDirector, CommercialVehicle SolutionsIHS Markit
Paul TraubSenior Business Economist
Federal Reserve Bank of ChicagoSeptember 28, 2016
Economic UpdateMotor Equipment Remanufacturing Association
September 28, 2016 25Federal Reserve Bank of Chicago
Main Economic IndicatorsYear-over-year Comparison
Source: U.S. Bureau of Economic Analysis, Census Bureau and Bureau of Labor Statistics
Actual 2015 2015 2016
GDP – Annual Growth Rate 1 2.6% 3.0% 1.2%
Unemployment Rate 2 5.3% 5.1% 4.9%
Nonfarm Job Growth (Monthly Avg.) 3 228,700 218,600 181,500
PCE Core Inflation Yr. / Yr. 3 1.4% 1.4% 1.6%
Initial Unemployment Claims 4 278,039280,914 266,486
1. Year‐over‐year 2015, Q2 ‘15 and Q2 ‘162. 2015 Annual Average, Aug ‘15 and Aug ’163. 2015 Annual Average, 2015 and Jul ’15 and Jul 16 YTD4. Year‐to‐date Average – Dec ‘15, Aug ’15 and Aug ‘16
September
Billions Chained $2009, % Change Q/Q at SAAR
‐10.0
‐7.5
‐5.0
‐2.5
0.0
2.5
5.0
7.5
10.0
12.5
15.0
12,000
12,500
13,000
13,500
14,000
14,500
15,000
15,500
16,000
16,500
17,000
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
$ Billions
Q4 ‘07$14,992
Q2 ‘16$16,570.2
1.1%
September 28, 2016 26Federal Reserve Bank of Chicago
U.S. Real GDP
Q4 ‘08‐8.3%
Percent
Source: U.S. Bureau of Economic Analysis
September 28, 2016 27Federal Reserve Bank of Chicago
Contribution to Percent Change, Q2, 2016 - Q/Q at SAAR
U.S. Real GDP
1.1
2.9
‐1.7
0.1
‐0.3
‐3.0
‐2.0
‐1.0
0.0
1.0
2.0
3.0
4.0
GDP Consumption PrivateInvestment
Net Exports Government
Percent
Source: U.S. Bureau of Economic Analysis
Note: Private domestic investment includes: nonresidential ‐0.11. residential ‐0.30 and ‐1.26 inventory change .
Net Exports includes: Exports 0.14 and Imports ‐0.04.Government Consumption and Investment includes: Federal ‐0.02 and State and Local ‐0.25.
Consumer Sentiment
28Federal Reserve Bank of ChicagoSeptember 28, 2016
University of Michigan
Index
20
40
60
80
100
120
140
'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16
January ‘00112.0
Source: Thomson Reuters / University of Michigan
Aug ’16 89.8
September 28, 2016 29Federal Reserve Bank of Chicago
Percent Change – Q1 ‘14 to Q4 ‘15 and Jul ‘16 at SAAR
1.9
3.8 3.7
4.6
2.42.9
2.72.3
1.6
4.44.0
0.0
1.0
2.0
3.0
4.0
5.0
Q1 '14 Q2 Q3 Q4 Q1 '15 Q2 Q3 Q4 Q1 '16 Q2 Jul
Percent
Source: U.S. Bureau of Economic Analysis
Real Personal Consumption Expenditures
Expenditures on goods was up 7.5% (durables 25.4%, nondurables -0.8%). July, 2016 Detail:
Expenditures on services was up 2.4%.
September 28, 2016 30Federal Reserve Bank of Chicago
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
SAAR Annual Average
Aug ’0914.6
Aug ‘1617.2 YTD
16.9
Feb ’099.0
S.A.A.R – Millions of Units
Millions
U.S. Light Vehicle Sales
Cash for Clunkers
Source: Ward’s Automotive and BEA
Billions Chained $2009, % Change Q/Q at SAAR
‐40.0
‐30.0
‐20.0
‐10.0
0.0
10.0
20.0
30.0
40.0
50.0
1,000
1,250
1,500
1,750
2,000
2,250
2,500
2,750
3,000
3,250
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
$ Billions
Q2 ’16
$2,769.9
‐9.7%
September 28, 2016 31Federal Reserve Bank of Chicago
Real Gross Private Domestic Investment
Percent
Source: U.S. Bureau of Economic Analysis
September 28, 2016 32Federal Reserve Bank of Chicago
Private Fixed Investment
1.0 2.0
‐2.3 ‐3.3
‐9.7
4.35.7
‐0.2 ‐0.9‐2.5
1.63.9
‐3.3 ‐3.4‐0.9
14.812.6 11.5
7.8
‐7.7
‐15.0
‐10.0
‐5.0
0.0
5.0
10.0
15.0
20.0
Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16
Total Fixed Investment Nonresidential Residential
Percent
Source: U.S. Bureau of Economic Analysis
Billions of Chained $2009, Percent Change - Q/Q at SAAR
September 28, 2016 33Federal Reserve Bank of Chicago
New Orders and Industrial ProductionIndex – 2014 = 100
88.0
92.0
96.0
100.0
104.0
108.0
2014 2015 2016
New Orders Industrial Production
Note: New Orders Nondefense Capital Goods Excluding Aircraft.
Aug ‘1699.5
Jul ‘1693.8
Percent
September 28, 2016 34Federal Reserve Bank of Chicago
Private Fixed Investment - Change in InventoriesBillions of Chained $2009 - SAAR
$31.7
$55.2 $66.8
$76.9
$114.4
$93.8
$70.9 $56.9
$40.7
($12.4)
($40.0)
($20.0)
$0.0
$20.0
$40.0
$60.0
$80.0
$100.0
$120.0
$140.0
2014 Q2 Q3 Q4 2015 Q2 Q3 Q4 2016 Q2
Source: U.S. Bureau of Economic Analysis
$Billions
September 28, 2016 35Federal Reserve Bank of Chicago
In Thousands of Units (SAAR) and Annual Average
(000)’s
Source: U.S. Census Bureau
U.S. Housing Starts
Note: The United States averaged 1.5 million housing starts per year 1990 to 2004.
0.0
500.0
1,000.0
1,500.0
2,000.0
2,500.0
'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Annual Average SAAR
Aug ‘161,142
1,108
Billions Chained $2009, % Change Q/Q at SAAR
‐10.0
‐8.0
‐6.0
‐4.0
‐2.0
0.0
2.0
4.0
6.0
8.0
10.0
2,000
2,125
2,250
2,375
2,500
2,625
2,750
2,875
3,000
3,125
3,250
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
$ Billions
Q2 ’16$2.902.1
‐1.5%
September 28, 2016 36Federal Reserve Bank of Chicago
Real Government Consumption & Investment
Percent
Source: U.S. Bureau of Economic Analysis
September 28, 2016 37Federal Reserve Bank of Chicago
60.0
70.0
80.0
90.0
100.0
110.0
120.0
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Trade Weighted DollarExchange Value of US Dollar Versus Major Currencies – Index Jan ‘00 = 100
Source: Federal Reserve Board and Haver Analytics
Sep 14, 201693.73
Index
Billions Chained $2009, Index – 2005 = 100
‐$1,000
‐$800
‐$600
‐$400
‐$200
$0
$200
$400
$600
$800
$1,000
0
20
40
60
80
100
120
140
160
180
200
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Net Exports Exports Imports
Index
Q2 ‘16152.6
123.4
‐$562.0
September 28, 2016 38Federal Reserve Bank of Chicago
Real Imports and Exports
Source: U.S. Bureau of Economic Analysis
September 28, 2016 39Federal Reserve Bank of Chicago
Global Outlook for 2016 & 2017IMF Forecast for Growth, % Chg. Yr./Yr.
3.4
2.1
4.3
3.2
1.8
4.4
3.1
1.8
4.1
0.0
1.0
2.0
3.0
4.0
5.0
6.0
World Advanced Emerging
January April July
3.6
2.1
4.7
3.5
1.9
4.9
3.4
1.8
4.6
0.0
1.0
2.0
3.0
4.0
5.0
6.0
World Advanced Emerging
January April July
Percent Change 2016 / 2015 Percent Change 2017 / 2016
Forecast Month Forecast Month
Source: IMF World Economic Outlook
September 28, 2016 40Federal Reserve Bank of Chicago
U.S. Real GDP Blue Chip ForecastAnnual Percent Change – Chained $2009
2.5
2.1 2.12.0
1.81.9 1.9
1.5 1.5
2.52.4 2.4
2.3 2.3 2.32.2 2.2 2.2
1.0
1.3
1.5
1.8
2.0
2.3
2.5
2.8
3.0
Jan '16 Feb '16 Mar '16 Apr '16 May '16 Jun '16 Jul '16 Aug '16 Sep '16
2015 2016
Source: Blue Chip Economic Indicators
Percent
September 28, 2016 Federal Reserve Bank of Chicago 41
Monetary PolicyEmployment & Inflation
September 28, 2016 42Federal Reserve Bank of Chicago
F.O.M.C Statement
1. Information since the F.O.M.C. met in July indicates that the labor market strengthened and growth of economic activity has picked up from the modest pace seen in the first half of this year.
2. Although the unemployment rate is little changed in recent months, job gains have been solid, on average.
3. Household spending has been growing strongly but business fixed investment has remained soft.
4. Inflation has continued to run below the Committee’s 2 percent longer‐run objective, partly reflecting earlier declines in energy prices and in prices of non‐energy imports.
5. Market‐based measures of inflation compensation remain low; most surveyed based measures of longer‐term expectations are little changed, on balance, in recent months.
September 21, 2016
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
'09 '10 '11 '12 '13 '14 '15 '16
Actual Target
September 28, 2016 43Federal Reserve Bank of Chicago
Unemployment Rate & PCE InflationPercent Unemployed, PCE % Change Yr./Yr.
Source: U.S. Department of Labor: Bureau of Labor Statistics , Bureau of Economic Analysis and the Federal Reserve
1.2 1.31.5
1.9
1.5 1.51.3
0.0
0.5
1.0
1.5
2.0
2.5
3.0
'09 '10 '11 '12 '13 '14 '15 '16
Annual Actual Target
Unemployment Inflation – Core PCE
2.0%
Jul ‘161.6%
Aug ‘164.9%
Percent Percent
60.0
61.0
62.0
63.0
64.0
65.0
66.0
67.0
68.0
'00 '02 '04 '06 '08 '10 '12 '14 '16
September 28, 2016 44Federal Reserve Bank of Chicago
Labor Force Participation RateIn Percent
Source: U.S. Department of Labor: Bureau of Labor Statistics , Bureau of Economic Analysis and the Federal Reserve
Aug ‘1662.8%
Percent
September 28, 2016 45Federal Reserve Bank of Chicago
0
50
100
150
200
250
300
350
400
2012 2013 2014 2015 2016
Monthly Actual Annual Average
U.S. Nonfarm PayrollsMonthly and Annual Average Job Change – In Thousands
Thousands
Source: U.S. Department of Labor: Bureau of Labor Statistics
2012179.1
2013192.6
2014251.3 2015
228.7
2016 YTD181.5Aug ‘16151
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
'00 '02 '04 '06 '08 '10 '12 '14 '16
September 28, 2016 46Federal Reserve Bank of Chicago
Underutilization of LaborU6 Unemployment Rate ‐ SA
Source: U.S. Department of Labor: Bureau of Labor Statistics , Bureau of Economic Analysis and the Federal Reserve
Aug ‘169.7%
Percent
Includes total unemployed plus marginally attached workers plus employed part‐time for economic reasons.
September 28, 2016 47Federal Reserve Bank of Chicago
Nonfarm BusinessLabor Productivity – Output Per Hour, Index 2009 = 100
‐1.00
‐0.50
0.00
0.50
1.00
1.50
100.0
102.0
104.0
106.0
108.0
110.0
'10 '11 '12 '13 '14 '15 '16
M/M % Chg. Index
Source: U.S. Department of Labor: Bureau of Labor Statistics
Index Percent
Q2 ‘16106.0
‐0.14
September 28, 2016 48Federal Reserve Bank of Chicago
Average Hourly Earnings & Hours WorkedTotal Private, All Employees – % Change Y/Y and Hours, SA
33.4
33.6
33.8
34.0
34.2
34.4
34.6
34.8
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Earnings (Left) Hours (Right)
Aug 16
34.3
2.4%
Percent
Source: U.S. Department of Labor: Bureau of Labor Statistics data.
Jun ’0734.53.6%
Hours
September 28, 2016 49Federal Reserve Bank of Chicago
Inflation ExpectationsPCE Core Inflation – Yr./Yr. & Q4/Q4
Source: Bureau of Economic Analysis and FRB Philadelphia Q1 ‘16 Survey
Survey of Professional Forecasters – Q3 ‘16 ForecastPercent
1.5
1.3
1.6 1.6
1.81.9
2.0
1.6 1.6 1.6
1.8 1.81.9
0.0
0.4
0.8
1.2
1.6
2.0
2014 2015 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 2016 2017 2018
Actual Expectations
September 28, 2016 50Federal Reserve Bank of Chicago
Economic Projections ComparisonsSeptember 2015 versus September 2016
2.32.2
2.0 2.01.8
2.0 2.01.8 1.8
1.0
1.5
2.0
2.5
2016 2017 2018 2019 Longer runSep '15 Sep '16
Percent GDP ‐ % Chg. Q4/Q4
4.8 4.8 4.8 4.94.84.6 4.5 4.6
4.8
3.5
4
4.5
5
5.5
2016 2017 2018 2019 Longer runSep '15 Sep '16
Percent Unemployment Rate – Q4 Est.
1.71.9
2.0 2.0
1.3
1.92.0 2.0 2.0
1.0
1.5
2.0
2.5
2016 2017 2018 2019 Longer runSep '15 Sep '16
Percent PCE Inflation ‐ Annual
1.71.9
2.0
1.71.8
2.0 2.0
1.0
1.5
2.0
2.5
2016 2017 2018 2019Sep '15 Sep '16
Percent PCE Core Inflation ‐ Annual
Source: Board of Governors – Federal Reserve System, September 2015 & September 2016
September 28, 2016 51Federal Reserve Bank of Chicago
Appropriate pace of policy firmingMidpoint of target range or target level of the Fed Funds Rate
Percent
Source: Board of Governors – Federal Reserve System, September 2015 & September 2016
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2015 2016 2017 2018 2019
Sep '15 Sep '16 Market Expectations
Longer‐run
September 28, 2016 52Federal Reserve Bank of Chicago
Yield Curve10 Year – 1 Year Treasuries in Basis Points
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
'12 '13 '14 '15 '16
10 Yr ‐ 1 Yr T‐Bill Spread 1 Year Treasury 10 Year Treasury
23‐Sep‐2016167 bps
106 bps
61 bps
Percent
Source: Board of Governors – Federal Reserve System
Thank You!
A Division of MEMA Paul McCarthySr. VP, Strategy and PlanningMEMA
MODERATORTOPIC
Industry Outlook and Insight
PANELISTS
Paul TraubSenior Business EconomistFederal Reserve Bankof Chicago
Mark SengGlobal Automotive
Practice LeaderIHS Markit
Gary MeteerDirector, CommercialVehicle SolutionsIHS Markit
© 2016 IHS Markit. All Rights Reserved.© 2016 IHS Markit. All Rights Reserved.
MERA-Golisano Annual Conference
Mark SengGlobal Aftermarket Practice Leader
September 28, 2016
Key Trends Impacting the North American Automotive Aftermarket
© 2016 IHS Markit. All Rights Reserved.
Agenda
• Vehicle Miles Traveled
• Light Vehicle Sales & VIO Trends
• Average Age
• New Technology & the Autonomous Vehicle
© 2016 IHS Markit. All Rights Reserved.
Change in U.S. Driving Volume
0
250
500
750
1,000
1,250
1,500
1,750
2,000
2,250
2,500
2,750
3,000
3,250
3,500
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Historical Vehicle Miles Traveled (billions of miles)
4 year positive trend after 7 years of sustained flat or declining miles driven.
2 consecutive years > 3 trillion miles
Source: IHS Automotive, DOT and FHWA
• 2012 Up 0.3%• 2013 Up 0.6%• 2014 Up 1.7%• 2015 Up 3.5%• 2016YTD June Up 3.3%
© 2016 IHS Markit. All Rights Reserved.
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
MIL
LIO
NS
11.3%10.2%
13.2%
-22%
7.5%5.4%
-17.5%
Source: IHS Automotive
2015 = 17.5 million units
Forecast Peak = 17.7MM in 2017
5.8%
U.S. Light Vehicle Sales
History Forecast
© 2016 IHS Markit. All Rights Reserved.
0
50
100
150
200
250
300
Mill
ion
s o
f U
nit
s
VIO will Increase 6.6% by 2020VIO will Increase 6.6% by 2020
History Forecast
U.S. Light Vehicles in Operation
Data as of January1 each year.
Source: IHS Automotive
© 2016 IHS Markit. All Rights Reserved.
COMPACT CUV
TRADITIONAL COMPACT
TRADITIONAL MID SIZE
FULL SIZE PICKUPS
Represent 58% of all new U.S. registrations in 2015
Mid-Size CUV
17.3%
14.1%
14.0%
12.3%7.2%
4 non-Luxury Segments Dominate
Source: IHS Automotive
© 2016 IHS Markit. All Rights Reserved.
Smaller Size - More Power
4 Cylinder Engines
Source: IHS Automotive
© 2016 IHS Markit. All Rights Reserved.
4 Cylinder Engines Gaining in Popularity
2012: 50% Market Share
2013: 53% Market Share
2008: 41% Market Share
2014: 55% Market Share
Source: IHS Automotive
2015: 56% Market Share
4 Cylinder Engines
© 2016 IHS Markit. All Rights Reserved.
Yea
rs
Average Age History
Source: IHS Automotive
9.6 9.7 9.7 9.8 9.8 9.910.0
10.3
10.6
10.911.1
11.311.4
11.511.6
8.5
9.0
9.5
10.0
10.5
11.0
11.5
12.0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Cars & Light Trucks Combined
© 2016 IHS Markit. All Rights Reserved.
%drop in new vehicle
registrations
The market feltthe impact of the
Impact of New Vehicle Drop Off
Source: IHS Automotive
© 2016 IHS Markit. All Rights Reserved.
Impact on VIO Age Groups - 2015-2020
Vehicles12 + years old grow
15%
Is the aftermarket “sweet spot” really shrinking – or just changing?Source: IHS Automotive
Vehiclesnew to 5 years
old grow
24%
Vehicles6-11 years old
decline
-11%
© 2016 IHS Markit. All Rights Reserved.
Average Age Impact on VIO
Source: IHS Automotive
2002 New – 5 Year Old 84m units
2015 New – 5 Year Old 70m units
2020 New – 5 Year Old 86m units
Segment remains flat after decline due to recession’s impact on new vehicle sales.
© 2016 IHS Markit. All Rights Reserved.Source: IHS Automotive
2002 16+ Year Old 35m units
2015 16+ Year Old 57m units
2020 16+ Year Old 76m units
19 million units will be 25 years or older by 2020!
Average Age Impact on VIO
© 2016 IHS Markit. All Rights Reserved.
Global CO2 & Fuel Efficiency Regulations
2016
2025
CAFÉ & Global Standards are Merging
54.5 MPG
35 MPG
To reach this goal, every OEM must
improve fuel efficiency by 5% per year!
To reach this goal, every OEM must
improve fuel efficiency by 5% per year!
86 MPG2030
© 2016 IHS Markit. All Rights Reserved.
Share of Global Sales
Mild 2.0% 4.8%
Full 4.6% 6.3%
EV 1.0% 1.5%
2021 2025
Source: IHS Automotive
© 2016 IHS Markit. All Rights Reserved.
The Traditional Internal Combustion Engine (ICE)
• Gasoline direct-injection
• Turbo chargers
• Stop/start capability
• Cylinder de-activation
• AWD disconnect
• More efficient transmissions> more speeds and CVTs
© 2016 IHS Markit. All Rights Reserved.
ADAS Sensor Technology Drives Increase ECU’s as WellADAS ECU Supply Chain – Audi RS6 (2015)
© 2015 IHS
Supplier: Hella Applications: BSD
Radar Module (Secondary)
Supplier: Hella Applications: BSD
Radar Module (Primary)
Supplier: KufatecApplications: Surround-view Park Assist
Camera Module
Supplier: ValeoApplications: Park Assist
Park Assistance ECU
Supplier: BoschApplications: ACC
Supplier: Bosch/ ContinentalApplications: LDW, ACC, TSR & HBC
Front-view Camera Module
Radar Module
Supplier: BoschApplications: LDW, ACC & TSR
Additional Data Processing Module
Supplier: AutolivApplications: Night Vision
Night Vision Camera Module
Supplier: AutolivApplications: Night Vision
Night Vision Control Unit
TSR – Traffic Sign RecognitionHBC – High Beam ControlACC – Adaptive Cruise Control
Full Driver Control Driver Assisted Fully Autonomous Car
© 2016 IHS Markit. All Rights Reserved.
0.00
2.00
4.00
6.00
8.00
10.00
12.00
'25 '26 '27 '28 '29 '30 '31 '32 '33 '34 '35
Mill
ions
L4 SDC+HDC
L5 SDC Only
L4+L5
HDC = Human Driven Car
SDC = Self-Driving Car
SOURCE: IHS Automotive Autonomous Driving Portal
Self-Driving Light Vehicle Forecast: Global Annual Sales
© 2016 IHS Markit. All Rights Reserved.
But What Timing is Actually Relevant for the Aftermarket? Ever Heard of George Hotz?
Hacked the iPhone in 2007
Allowing it to be used with any wireless carrier – despite AT&T and Apple’s intentions
George was 17 years old
Next trick was hacking into Sony’s PlayStation 3 - gaining read and write access to its system memory
George was 20 years old
© 2016 IHS Markit. All Rights Reserved.
George is now 26…..
He has built an autonomous car from a stock version of the 2016 Acura ILX
In his garage….
His company – Comma.ai –will offer an aftermarket ADAS kit with lane-keeping assistance and emergency breaking…
…with his history, I don’t doubt him….
But What Timing is Actually Relevant for the Aftermarket?
© 2016 IHS Markit. All Rights Reserved.© 2016 IHS Markit. All Rights Reserved.
MERA-Golisano Annual Conference
Mark SengGlobal Aftermarket Practice Leader
October 3, 2016
Thank You
A Division of MEMA Paul McCarthySr. VP, Strategy and PlanningMEMA
MODERATORTOPIC
Industry Outlook and Insight
PANELISTS
Paul TraubSenior Business EconomistFederal Reserve Bankof Chicago
Mark SengGlobal Automotive
Practice LeaderIHS Markit
Gary MeteerDirector, CommercialVehicle SolutionsIHS Markit
© 2016 IHS Markit. All Rights Reserved.© 2016 IHS Markit. All Rights Reserved.
Current Market Performance COMMERCIAL
28 September 2016 | Conference
Gary Meteer, Director Commercial Vehicle Solutions, +1 248 728 7405, [email protected]
© 2016 IHS MARKIT
Commercial Vehicle IntelligenceNew Registrations – Business Ownership by GVW
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2010 2011 2012 2013 2014 2015 2016
GVW 1C GVW 2 GVW 3 GVWs 4-6 GVW 7 GVW 8
© 2016 IHS MARKIT
Commercial Vehicle IntelligenceGVW New Registrations
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016Index
GVWs 4-7 Share GVW 8 Share Total 4-8 Units
© 2016 IHS MARKIT
Commercial Vehicle IntelligenceNew Registrations of GVW 8 Vehicles by Large Fleets
80
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
0
50000
100000
150000
200000
250000
300000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016Index
IND GVW 8 Units Fleets 500+ Share
© 2016 IHS MARKIT
Commercial Vehicle IntelligenceNew Registrations GVWs 4-8 by Manufacturer
FORD17%
F'LINER20%
INT'NATIONAL20%
KENWORTH5%
PETERBILT5%
OTHER33%
2000FORD23%
F'LINER17%
INT'NATIONAL12%
KENWORTH6%
PETERBILT6%
OTHER36%
2007
FORD17%
F'LINER29%
INT'NATIONAL9%
KENWORTH9%
PETERBILT8%
OTHER28%
2015
FORD22%
F'LINER28%
INT'NATIONAL9%
KENWORTH8%
PETERBILT7%
OTHER26%
2016 6 mo’s
© 2016 IHS MARKIT
Commercial Vehicle IntelligenceNew Registrations by Vehicle Type for GVWs 4-8
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
CABCHASSIS
CUTAWAY STRAIGHTTRUCK
TRACTORTRUCK
OTHER
2016 6 mo’s
CABCHASSIS
CUTAWAY STRAIGHTTRUCK
TRACTORTRUCK
OTHER
2006-2015
© 2016 IHS MARKIT
Commercial Vehicle IntelligenceNew Registrations by Fuel Type for GVWs 4-8
COMPRESSEDNATURAL GAS
DIESEL GAS OTHER
2006-2015
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
COMPRESSEDNATURAL GAS
DIESEL GAS OTHER
2016 6 mo's
© 2016 IHS MARKIT
Commercial Vehicle IntelligenceDiesel share of GVW New Registrations
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 20166 mo.
Die
sel s
har
e of
GV
Ws
4-8
Die
sel S
har
e o
f G
VW
GVW 4 Share GVW 5 Share GVW 6 Share GVW 7 Share GVW 8 Share DIESEL SHARE OF GVWs 4-8
© 2016 IHS MARKIT
Commercial Vehicle IntelligenceDiesel Engine Manufacturers Share of GVWs 4-8
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Top
Man
ufa
ctu
rers
sh
are
of t
otal
die
sel i
nst
alla
tion
s
Man
ufa
ctu
rer
shar
e of
tot
al d
iese
l in
stal
lati
ons
CATERPILLAR SHARE CUMMINS SHARE DETROIT DIESEL SHARE
FORD SHARE PACCAR SHARE TOP 4 MAKES SHARE
© 2016 IHS MARKIT
Commercial Vehicle Intelligence GVW Performance within each Region
GVW 3 GVW 4 GVW 5 GVW 6 GVW 7 GVW 8 Total
Northeast 15.0 20.1 14.1 39.5 20.6 1.8 14.6
Central -11.0 6.1 15.8 -16.3 -6.6 -22.8 -14.7
South -.3 17.2 17.6 10.5 11.8 -14.8 -.9
West 2.4 29.9 17.5 49.3 .1 -6.2 8.1
Total .5 20.3 16.3 15.7 6.2 -14.7 .8
Shaded areas denote a better percent change versus industry within a GVW.
© 2016 IHS MARKIT
Commercial Vehicle IntelligenceGVW 4-8 Fleet Size Comparison
The initial registration of new vehicles is heavily influenced by large fleets; however, when these vehicles transition to the second or third owner they are registered by small-mid size fleets.
New Registrations Vehicles in Operation
Fleets 500+ Fleets 500+
GVW 4 36% 17%
GVW 5 30% 18%
GVW 6 54% 19%
GVW 7 48% 24%
GVW 8 45% 24%
Total 43% 22%
© 2016 IHS MARKIT
14
12
21
16
13
14.0 Ave Age
Commercial Vehicle IntelligenceAverage Age of the Vehicle Population
10
13
18
13
11
12.0 Ave Age
GVW 4
GVW 5
GVW 6
GVW 7
GVW 8
2007 CYE
VIO 7.7M units
2016 6 mo’s
VIO 9.1M units
© 2016 IHS MARKIT
Commercial Vehicle Intelligence Vehicles in Operation Summaries
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
GVW4
GVW5
GVW6
GVW7
GVW8
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
Region
Vehicle Type GVW
© 2016 IHS MARKIT
Commercial Vehicle IntelligenceAftermarket Commercial Parts DemandReManufactured Parts/$$’s
Commercial Vehicle Replacement Demand Units (Thousands)
NUMBER NEW TOTAL TOTAL REMAN %PART CATEGORY OF PARTS PARTS REMAN OTHER DEMAND TOTAL
Brakes 19 13,500 10,300 200 24,000 43%Cooling 2 600 200 100 900 22%
Electrical 2 700 1,400 100 2,200 64%Engine 9 500 4,700 200 9,700 48%
Steering 2 600 500 100 1,200 42%TOTAL 34 15,900 17,100 700 38,000 45%
Commercial Vehicle Replacement Demand $$'s (Millions)
NUMBER NEW TOTAL TOTAL REMAN %PART CATEGORY OF PARTS PARTS REMAN OTHER DEMAND TOTAL
Brakes 19 1,700 1,065 11 2,776 38%Cooling 2 540 50 10 600 8%
Electrical 2 175 315 12 502 63%Engine 9 1,620 1,586 29 3,235 49%
Steering 2 186 105 9 300 35%TOTAL 34 4,221 3,121 71 7,413 42%
© 2016 IHS MARKIT
60%
20%
9%
3%2%
6% Light-DutyVehicles
Heavy-DutyTrucks andBuses
Aircraft
Ships and Boats
Heavy-Duty
Commercial Vehicle IntelligenceU.S. Transportation Sector Energy Use
Source: U.S. Energy Information AdministrationAnnual Energy Outlook 2014
Heavy-duty vehicles responsible for about one fifth of the energy use and GHG emissions from transportation sources In terms of energy
use, heavy-duty vehicles are also the fastest growing transportation sector in the U.S. and globally
© 2016 IHS MARKIT
Commercial Vehicle IntelligenceGovernment Fuel Economy RegulationsHeavy-duty fuel efficiency and GHG standardsPhase 1
Begin in Model Year 2018 for EPA trailer standards, which were not regulated Begin in Model Year 2021 for all other EPA categories All Phase 2 standards will be fully phased in by Model Year 2027
Final program is technology-advancing and performance-based, and can be met through a combination of existing technologies and advanced technologies
Requires full use of most Phase 1 technologies with improvements in effectiveness
Significant use of emerging and advanced technologies by 2027
Phase 2
First-ever standards for heavy-duty vehicles, started in 2014 and will be fully phased in by 2018…Manufacturers are complying with Phase 1 with “off-the-shelf” technologies
© 2016 IHS MARKIT
Commercial Vehicle IntelligenceHeavy-Duty Truck Regulatory Categories
Large Pickups &
Vans
Combination Tractors
60% of HD Fuel Consumption & GHG Inventory
(together)
Trailers Pulled by Combinati
on Tractors
(currently unregulated Federally)
17% of HD Fuel Consumption & GHG
Inventory
VocationalVehicles
23% of HD Fuel Consumption
& GHG Inventory
NEW!
© 2016 IHS MARKIT
Phase 2 Reductions
2027 CO2/Fuel ConsumptionReductions
(per new vehicle)Tractors (includes engine reductions) 25%
Trailers 9%Vocational Vehicles (includes engine reductions) 24%
Pick-ups & Vans 16%
Separate Engine Standards (for Tractor and Vehicle applications, diesel value shown)
5% tractor 4% vocational
Maximum vehicle fuel savings and tailpipe GHG reduction (%) based on per vehicle emissions standards versus baseline standards
Other subcategory reductions may vary
Commercial Vehicle IntelligenceGovernment Fuel Economy RegulationsPhase 2 Final Program Summary
© 2016 IHS MARKIT
Commercial Vehicle IntelligenceVehicle Outlook
0
50
100
150
200
250
US retail sales class 4-7 (Thousands)
0
50
100
150
200
250
300
US retail sales class 8 (Thousands)
© 2016 IHS MARKIT