Automotive Outlook: Long Term Impacts on U.S. Auto Sales Kim Hill Research Director September 29, 2014
Agenda
• Current sales • Factors that affect sales • The current industry • A look forward
U.S. Light Vehicle Sales Percent Change YTD Through August:
2014 vs. 2013
0.9%
9.4%
5.1%
Passenger Cars
Light Trucks
Total
Source: Automo,ve News; CAR Research
Detroit Three at 43.6% in August 2014 U.S. Market Share:
August 2014 & YTD Total
7.9%
8.5%
10.5%
12.5%
15.5%
14.0%
17.2%
8.1%
8.6%
9.3%
12.4%
14.5%
15.2%
17.7%
0% 5% 10% 15% 20%
Hyundai-Kia
Nissan
Honda
Fiat-Chrysler
Toyota
Ford
GM
YTD 2014
Source: Automotive News; CAR Research
Segment Breakdown U.S. Light Vehicles Sales Percent Change
August YTD: 2014 vs. 2013
-‐9.2% -‐3.0%
1.2% 2.2% 2.4% 2.6%
10.7% 11.0%
12.9% 4.9%
-15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0%
Large Car Electrified Middle Car Small Car
Luxury Car Pickup
Van CUV SUV Total
Note: Electrified Segment consists of BEVs, HEVs and PHEVs; all other segments are sales exclusive of Hybrid models Source: Ward’s Automotive Reports, HybridCars.com and CAR Research
Market Share: Segment Breakdown U.S. Light Vehicles Sales
August YTD 2014
2.0% 3.6%
5.5% 6.3% 6.9%
13.0% 17.2%
18.8% 26.5%
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%
Large Car Electrified
Van Luxury Car
SUV Pickup
Middle Car Small Car
CUV
Note: Electrified Segment consists of BEVs, HEVs and PHEVs; all other segments are sales exclusive of Hybrid models Source: Ward’s Automotive Reports, HybridCars.com and CAR Research
Long Term Economic Indicators That Affect Sales
• Diminishing labor force par,cipa,on • Increasing household financial burdens • Household budget outlays are shiCing • Motor vehicle price is rising • Full-‐,me employment drives up auto sales • Household wealth effect
Labor Force Participation Rate Is Falling Even After the Last Two Recessions
Labor Force Participation Rate 1978 – 2014
60%
61%
62%
63%
64%
65%
66%
67%
68%
Labo
r Force ParVcipaV
on Rate
Women’s par,cipa,on In labor force
Economy Boomed. GDP grew 3.8% per year
Lowest since 1978
Source: Current Popula,on Survey, Bureau of Labor Sta,s,cs
Younger Generations Are Facing Tougher Challenges Unemployment Rate by Age January 2000 – June 2014
0
5
10
15
20
2000 2002 2004 2006 2008 2010 2012 2014
Une
mploymen
t Rate (%
)
16-‐24 25-‐34 35-‐44 45-‐54 55-‐64 65+
Source: Current Popula,on Survey, Bureau of Labor Sta,s,cs
And Households Are Carrying More Debt Household Non-Mortgage Aggregate Debt 1Q 2003 – 1Q 2014
-‐
500
1,000
1,500
2,000
2,500
3,000
3,500
-‐
200
400
600
800
1,000
1,200
1Q 2003
1Q 2004
1Q 2005
1Q 2006
1Q 2007
1Q 2008
1Q 2009
1Q 2010
1Q 2011
1Q 2012
1Q 2013
1Q 2014
Total in Billion
$
Debt in Billion $
Student Loans Auto Loans Home Equity Loans Credit Card Other Total
Source: FRBNY Consumer Credit Panel/Equifax
Household Budget Outlays Are Shifting To Non Auto Categories
Monthly Expenditure Per Household By Selected Products and Services, 1999-2013
945
1,211
-‐
500
1,000
1,500
2,000
2,500
1999 2001 2003 2005 2007 2009 2011 2013
Real U.S. D
ollars (C
hained
2009 $)
MV & Parts Gasoline and Fuel MV Service Consumer Electronics Telephone and Internet Health Care
705 596
130 398
Source: CAR research based on Personal Consump,on Expenditures by Type of Product, Bureau of Economic Analysis
Increase in Full-Time Employment Drives Up Sales October 1996 – June 2014
100
105
110
115
120
125
5
10
15
20
25
2000 2002 2004 2006 2008 2010 2012 2014
Full-‐Time Em
ploymen
t (m
illion)
Light V
ehicle Sales
(millions SAA
R)
New Auto Sales Full-‐Time Employment
Source: BEA; BLS
Growth in Household Wealth Drives Up Auto Sales January 2000 – April 2014
0 100 200 300 400 500 600
5
10
15
20
25
2000 2002 2004 2006 2008 2010 2012 2014
Geom
etric
Mean Va
lue
S&P an
d Ho
me Eq
uity
Light V
ehicle Sales
(millions SAA
R)
Auto Sales Geo. Mean of S&P and Home Equity
Source: BEA; Yahoo Finance; Na,onal Composite Home Price Index for the United States
Beware of the Next Downturn! U.S. Monthly LV Sales and Automotive Business Cycle
8
10
12
14
16
18
20
22
1976 1981 1986 1991 1996 2001 2006 2011 2016
U.S. M
onthly LV Sales
(million SA
AR)
Monthly Sales 12-‐Month Moving Average
Housing Bubble
Dot Com Bubble Fed Rescue
S&L Crisis And Fed Pullback
Oil Embargo
( Collapse of Stock Market and Student Loan Bubble?)
78 months 124 months 102 months
Oil Shock and a Fed Pullback
Source: BEA
U.S. Light Vehicle Monthly Sales and SAAR August 2012 – August 2014
1.3 1.2
1.1 1.1
1.4
1.0 1.2
1.5 1.3
1.4 1.4 1.3
1.5
1.1 1.2 1.2
1.4
1.0
1.2
1.5 1.4
1.6
1.4 1.4 1.6 14.5
14.9 14.3
15.6 15.4 15.2
15.3
15.3 15.2 15.5
15.9 15.8 16.1 15.3 15.2
16.4
15.4 15.2 15.4 16.4 16.1
16.8 17.0 16.5 17.5
0 2 4 6 8 10 12 14 16 18
0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0
Aug
-12
Sep-
12
Oct
-12
Nov
-12
Dec
-12
Jan-
13
Feb-
13
Mar
-13
Apr
-13
May
-13
Jun-
13
Jul-1
3
Aug
-13
Sep-
13
Oct
-13
Nov
-13
Dec
-13
Jan-
14
Feb-
14
Mar
-14
Apr
-14
May
-14
Jun-
14
Jul-1
4
Aug
-14
Mon
thly SAA
R
Mon
thly Sales (M
illions)
SALES SAAR
Source: Automotive News; CAR Research
Are Sales Back? 1995-2014
8
10
12
14
16
18
250 300 350 400 450 500 550
Million Units
Billion
$ (2
005 do
llar)
In Spending (Billion of 2009 $) In Units
Source: BEA, Table 7.2.6B. Real Motor Vehicle Output, Chained Dollars
Motor Vehicle & Parts Manufacturing Employment 1999 –2014
316,300
163,300
105,100 74,600
153,500
90,100
1,130,900
727,300
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 May-‐14 Jun-‐14
U.S.
State Level
Michigan Indiana
50% change
64% change
53% change
47% change
Source: BLS, U.S. DOL, Statistics Canada
Big 7 Monthly U.S. Market Share 1999 – 2014 YTD (August)
24.7%
15.2%
29.4%
17.7%
15.6% 12.4%
6.4%
9.3%
1.8%
8.1% 4%
8.6% 8.7%
14.5%
0%
5%
10%
15%
20%
25%
30%
35%
Percen
t of U
.S. M
arket S
ales
Ford GM Chrysler Honda Hyundai-‐Kia Nissan Toyota
Source: Automotive News; CAR Research
U.S. Sales Forecast: 2014-2018
16.1
13.2
10.4 11.6
12.8 14.5
15.6 16.3 16.5 16.6 16.8 16.9
0
5
10
15
20
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Million
Source: CAR Research, Aug 2014 19
10.4%
11.6%
13.3% 7.6%
5.1%
U.S. Vehicle Production Forecast: 2007-2018
10.8
8.7
5.8
7.8 8.7
10.4 11.1 11.7 12.0 12.2 12.3 12.5
0
2
4
6
8
10
12
14
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Million
20
34.5% 11.5%
19.5% 6.7%
5.4%
Source: CAR Research, Aug 2014
North American Production Forecast: 2007-2018
15.2 12.7
8.6
12.0 13.3
15.6 16.5 17.5 17.7 18.0 18.5 18.7
0
5
10
15
20
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Million
21
39.5% 10.8%
17.3%
5.8% 6.0%
Source: CAR Research, Aug 2014
Footprint of the North American Automotive Industry
Almost 500 automaker faciliVes, and over 7500 supplier faciliVes in the United States
Source: CAR / BLS 2012
U.S. Motor Vehicle Related Value Chain Exceeds $1 Trillion
Suppliers $307 Bil.
Auto Makers $119 Bil.
Dealers $37 Bil.
Finance & Insurance $80 Bil.
Fuels and Lubricants $343 Bil.
Leasing, Rental, and Parking $62 Bil.
Resale $117 Bil.
Salvage $4 Bil.
Source: NADA, BEA, U.S. Census, R.L. Polk, CAR Research, 2007 esLmates
Repair Service & Ahermarket $213 Bil.
AutomoVve-‐related Taxes and Fees
Sales Tax Revenues
• New Vehicles (New) • Used Vehicles (Fleet) • Parts/Services (Fleet)
Use Tax Revenues
• Fuel (Fleet) • Title/Registra,on (Fleet) • Driver’s License (Fleet)
Business Taxes
• Manufacturers (New) • Dealerships (New/Fleet)
Personal Income Taxes
• Automakers (New) • Suppliers (New) • Dealerships (New/Fleet)
What is Auto Manufacturing? Automotive Employment and Establishments
Forging & Stamping
Machine Shops & Threaded Product
CoaVng, Engraving & Heat TreaVng
Ferrous Nonferrous
Tool/Die/Mold/ Jig/Fixture
Gasoline Engine/Parts
Powertrain
Electric Equipment Steering/Suspension
Brake Systems
SeaVng/Interior Trim
Metal Stamping
Other Parts
Assembly
0
20,000
40,000
60,000
80,000
100,000
120,000
332 331 3335 3363 3361
Fabricated Metal Foundaries Metalworking Machinery Motor Vehicle Parts & Components
Motor Vehicle Manufacturing
Employmen
t
TOTAL Michigan AutomoVve Industry: 250,000 Employees 4,500 Establishments
Source: U.S. Department of Labor, Bureau of Labor Statistics, QCEW
Engineering Services
25
2013 Per Vehicle Profits North America
$2,307
$2,844
$1,323 $1,254 $1,225
0
500
1,000
1,500
2,000
2,500
3,000
GM Ford Chrysler Honda Toyota
EBIT or automoLve operaLng income per vehicle sold. Global average for Chrysler figure. Honda also excludes motorcycle, finance, and power products.
Canada 2014: $0 billion 2013: $0.9 billion
Total North America 2014: $7.9 billion 2013: $8.8 billion
United States 2014: $4.5 billion 2013: $6.4 billion
Mexico 2014: $3.4 billion 2013: $1.5 billion
Announced North American Automaker Investments 2013 and Current 2014
Source: CAR Research, Book of Deals
The New Big Three - Technology Shock !
Materials Powertrain
Connectivity
New Jobs? New Rules?
New Players?
Source: BLM 2013
28
Market Share of U.S. Electrified Light Vehicle Sales and Selected OEM Share of U.S. Electrified Sales
August YTD 2014 vs. 2013
0.76%
4.8%
5.3%
6.0%
6.2%
15.9%
55.9%
3.6%
1.1%
3.1%
8.4%
3.5%
5.6%
14.7%
59.6%
3.9%
0% 10% 20% 30% 40% 50% 60% 70%
Volkswagen Honda
GM Nissan
Hyundai-‐Kia Ford
Toyota Electrified Total
2013 YTD 2014 YTD
Note: Electrified Light Vehicles consist of BEV, HEV and PHEV Source: Ward’s Automotive Reports; HybridCars.com; CAR Research
Key Material Trends in Next 10 Years - All technology pathways anticipate light-weighting
• Increased use of ultra high strength steel for structural components around the “safety cage” to prevent intrusion
• Aluminum use for chassis and exterior panels is increasing—Ford F-‐150
• Fiber reinforced plas,cs (glass and carbon) for structural components are s,ll several years away from high volume produc,on
• Joining complexity: more laser welding, fasteners and adhesives
Structural Adhesive
30
An average vehicle contains around 60 microprocessors to run electric content – four ,mes as many as a decade ago. More than 300 million lines of soCware code run a typical vehicle’s sophis,cated computer network.
Growth in Electronics (>40%)
Intelligent Mobility
32
U.S. Auto Parts Manufacturing % of Capacity Utilization
40
50
60
70
80
90
100
Jan-‐07
Ap
r-‐07
Jul-‐0
7 Oct-‐07
Jan-‐08
Ap
r-‐08
Jul-‐0
8 Oct-‐08
Jan-‐09
Ap
r-‐09
Jul-‐0
9 Oct-‐09
Jan-‐10
Ap
r-‐10
Jul-‐1
0 Oct-‐10
Jan-‐11
Ap
r-‐11
Jul-‐1
1 Oct-‐11
Jan-‐12
Ap
r-‐12
Jul-‐1
2 Oct-‐12
Jan-‐13
Ap
r-‐13
Jul-‐1
3
Source: U.S. Federal Reserve Board of Governors, 2013
Generally, All Is Good, But Keep An Eye On These
• Labor force par,cipa,on rates
• Household financial burdens • ShiCing household budget
outlays • Full-‐,me employment • Household wealth effect • External shocks
• Student debt • GDP growth • Gas prices • Interest rates