Jonathan Smoke | Chief Economist, Cox Automotive

KEY TRENDS OF 2019Q1 Update

THE ECONOMY

ECONOMIC GROWTH SLOWS AS HEADWINDS MOUNT

Source: United States Bureau of Economic Analysis

Real GDP growth will slow to no more than 2.4% in 2019 while risk of recession grows

US ECONOMIC GROWTH SINCE WORLD WAR II

2.9

2.4

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

1948

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2019

F

Annu

al %

Cha

nge

Recession Real GDP Growth (Annual)

TAX REFUNDS

SURPRISES AND FALLOUT FROM LOWER & SLOWER 2019 TAX REFUNDS

Millions of households likely to be in a different position relative to tax refunds than they are accustomed

• 78% of filers surveyed in February said they were surprised by their refund amount

• Through March 29:- Total number of refunds down 2.2%- Total $ amount of refunds down 2.9%- Average refund down 0.7%

• An estimated 8 million filers now likely to owe when they received a refund last year

Impact to economy yet to fully unfold

• Consumer spending likely to be negatively impacted

• Consumer credit conditions likely to deteriorate

• Updated W4 will lead to higher withholdings and lower disposable income

INTEREST RATES

0

1

2

3

4

5

6

7

8

9

%

Interest RatesNew Auto 60 Mo New Auto 48 Mo Used Auto 36 Mo US 10 Year Treasury Fed Discount Rate

Source: Bankrate.com, US Federal Reserve, Bloomberg

“BEST AVAILABLE” AUTO RATES CONTINUE TO PUSH HIGHER

Despite declines in Treasury rates in Q1, best available auto rates remain higher >1%, now up 2.37% from low

AUTO LENDING

Source: Equifax

SUBPRIME AUTO LOANS CONTINUE TO SEE RISING DELINQUENCY RATE

Subprime severe delinquency rate at highest level in a decade, but overall delinquency rate has not risen as much

AUTO LOAN SEVERE DELINQUENCIES UNIT RATE

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

Total 60+ Unit Rate Subprime 60+ Unit Rate 12 per. Mov. Avg. (Total 60+ Unit Rate) 12 per. Mov. Avg. (Subprime 60+ Unit Rate)

CONSUMER PREFERENCE

Source: Autodata, Kelley Blue Book

DECLINE OF CARS BOTTOMS OUT, BUT AFFORDABILITY WORSENS

The SUV has lost share so far in 2019 as car share decline reversed

32%

16%

47%

5%0%

10%

20%

30%

40%

50%

60%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

New Vehicle Sales by CategoryCAR PICKUP SUV VAN

7%

47%

24%

16%

6%

2%

33%

23%

18%

24%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

< $20,000 $20,000-29,999

$30,000-39,999

$40,000-49,999

$50,000+

Distribution of MSRP by Year2012 2013 2014 2015 2016 2017 2018 2019

NEW VEHICLE SALES

Source: Cox Automotive, January 2019

NEW VEHICLE SALES RESUME MODERATE DECLINE TREND

17.2

8

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COX AUTOMOTIVEFULL-YEAR FORECASTS

2018

17.22019

16.82020*

16.5

LIGHT VEHICLE SALES OUTLOOK (MILLIONS)

2019 YTD

16.9

USED VEHICLE SALES

Source: Cox Automotive, January 2019

USED VEHICLE SALES PLATEAU

39.4

25

28

31

34

37

40

43

46

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2020

COX AUTOMOTIVEFULL-YEAR FORECASTS

2018

39.42019

39.42020*

39.2

USED VEHICLE SALES OUTLOOK (MILLIONS)

YTD 2019

38.9

USED VEHICLE PRICES

Source: Manheim

USED VEHICLE PRICES SEEING ANOTHER UP & DOWN (REVERSED) YEAR

A challenging start of year but strong spring already delivering another year of abnormal patterns

80.0%

85.0%

90.0%

95.0%

100.0%

105.0%

110.0%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52

3-Year-Old Model MMR Index by Week2014 2015 2016 2017 2018 2019

AFFORDABLE USED CARS

(MOST) AFFORDABLE CARS CONTINUE OUTPERFORMING OTHER SEGMENTS

PERCENT CHANGE IN MANHEIM INDEX YEAR-OVER-YEAR MARCH 2019

4.0%

1.8%

7.2%

2.0%

3.4%

2.2%

-1.5%-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

Industry Compact cars Midsize cars Luxury cars Pickups SUV/CUV Vans

Source: Manheim

TARIFFS

TARIFF ACTIONS & KEY DATES

Ratification of USMCA (Report on April 18)

Section 232 Tariff on Imported Autos and Parts(Details by May 18; 15 days to implement)

China Trade Deal (March 1; TBD)

EU Trade Deal

Japan Trade Deal

UK Trade Deal?