Global Automotive Trends, Outlook & Observations

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4 Global LV Sales Recent Boots Driven by China World 2016 forecast: 93.1 mn, up 3.9 mn units (+4.4%) North America 6% 6% 1% F Western Europe 5% 9% 6% F C&E Europe -2% -8% -13% F Asia Pacific 7% 5% 3% F South America F World China Top Countries LV Sales (Millions) % -11% 4% 2% 4% US Japan % F Germany India LMC Automotive Limited, All Rights Reserved. 4

5 Global Production Growth is in Near-term Volume expected to be up 4.3% in 2016, on strong growth in China due to boost in demand from tax cut growth slows to 1.1% on China s pull forward impact spills over to production (-500K decline). Growth slows in WE with volume up a marginal 6K on Brexit uncertainty, while Central and Easter Europe see growth across much of the region, including recovery starting in Russia (+11%). Brazil also expected to start recover in 2017, up 8% but remaining risky. NA continues localization trend and expansion into Mexico, but growth only at 1.5% for year LMC Automotive Limited, All Rights Reserved. 5

6 Short-Term Capacity Utilization Capacity Utilization takes a hit in 2016 on struggling South America and East Europe. China s low utilization a function of heavy investment without consolidation of old capacity. 73.1% Global 68.2% % 75% 50% 25% 0% 92.3% 92.7% 74.6% 81.5% 79.6% 65.8% 66.2% 68.8% 79.4% 57.1% 59.5% 36.4% NA SA WE EE China Japan 2016 LMC Automotive Limited, All Rights Reserved. 6

7 8% 6% 4% 2% Global OEMs - Short-term Outlook Global Production Growth from 2015 Global OEM leads with mixed 2 groups dip into negative growth. VW diesel scandal risk - China growth and US prod. stability driving pace. Toyota is exposed in Japan but RAV4 and C-HR in EE doing well. R-N growth with new product barrage - Lannia in China, Kwid in India. 0% -2% -4% -6% VW Toyota Ren-Nis Hyundai/Kia GM Ford Honda FCA PSA Suzuki/Maruti Daimler BMW SAIC GM up with expansion in China (Cadillac). Ford flat with weakness across Europe and exposure in BR/AR. Honda tops growth Fit/Freed MPV in Japan and CR- V/Ridgeline in NA. FCA gains with Alfa expansion and Fiat Egea in EE, but falls in NA/SA. Suzuki transition in Asia ceases in Malaysia, down in Japan, growth in India LMC Automotive Limited, All Rights Reserved. 7

15% 10% Will Global Growth be Sustained?

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

8 15% 10% Will Global Growth be Sustained? Year-on-year growth, World LV Sales GDP Average historical growth rates LV Sales: 3.1% GDP: 2.9% 5% 2016: 93 mn 2023: 111 mn 0% -5% -10% Average growth rates LV Sales: 2.7% GDP: 2.7%, Oxford Economics 2016 LMC Automotive Limited, All Rights Reserved. 8

9 13.6% 0.8% Other 13.9% 1.9% 4.2% Iran 6.2% 5.3% India 4.1% 10.9% S Korea 7.6% 24.7% Japan 30.2% China 2.5% Russia 1.8% 15.0% WE 13.8% 4.1% Brazil 2.9% 19.0% NA 17.6% Mature production hubs (NA, WE, Japan, S Korea) continue to lose ground as Emerging hubs expand further. Exception - Russia and Brazil not expected to return to 2013 levels. 44 new factories in China, averaging 150k of volume by 2023 drives growth lead; India adds 5 since 2013, but nothing new planned from Iran gain due to restart of production after sanctions lifted then expansion. Global LV Production Spreading Resources Share of Global Production 2016 LMC Automotive Limited, All Rights Reserved. 9

10 Global Platforms Push to Globalization Total # of Platforms (LHA) Top 10 % of Ttl Prdxn (RHA) 27% 25% % Push to global consolidation: Top-10 platform share increases even though total platform count increases 21% 19% % % 2016 LMC Automotive Limited, All Rights Reserved. 10

11 Trend in Primary Design Lead Location Other USA China 30% 25% 20% 15% 10% 5% 0% France Germany Shift in primary design lead location is consistent with push toward global modular platforms. Germany and Japan dominate volume scale, with most design coordinated from headquarters. China gains on maturing Chinese industry and volume, while US and Korea contract slightly. Korea Japan Italy Secondary design remains important and will drive some sourcing decisions LMC Automotive Limited, All Rights Reserved. 11

12 Global Body Type Movement from Cars to SUVs 6.9% 2013 Traditional Car MAV/MPV % 19.7% 10.5% 52.6% Pickup Sporty Car 32.7% 42.7% SUV 9.5% 1.4% 8.8% 1.6% 8.3% SUVs grow to 1/3 of all light vehicles by 2023, coming mainly from traditional cars (sedans, wagons), but most body types lose share over forecast horizon. Only other body type to grow on a global scale is Sporty Car, with volume growth spread across all regions. Volume and growth dominated by German Premium Sporty and American Muscle. In addition, Honda, Hyundai and Mazda expand in segment. Pickup volume expands by 1.5mn units over period, with growth concentrated in Asia and North America LMC Automotive Limited, All Rights Reserved. 12

14 North America GDP Snapshot Trending Lower! 5% 4% 3% 2% 1% 0% US Canada Mexico US Q3 real GDP growth stands at 2.9% (in line with the BEA). Moderating growth expected in 4Q (closer to 2%). Oct Jobs was upbeat, adding 161,000 but labor market is maturing which will likely lower consumer spending to 2%. GDP growth expected to average a soft 1.5% for 2016 and around 2% in 2017 and Canada We expect downbeat GDP growth of 1.2% in 2016 and 1.8% in 2017, supported by slowly strengthening non-energy activity and a fading drag from the energy sector. Debt levels and low oil prices could be further drag. Mexico GDP growth of 2.0% in 2016, but lower uptick in 2017 and 2018 (2.5%) amid lower growth in the US. The job market remains strong but inflation is starting to rise from low levels. Source: Oxford Economics 2016 LMC Automotive Limited, All Rights Reserved. 14

16 October sales came in slightly ahead of expectations with an 18 million unit SAAR. However, YTD sales are off 0.1% from 2015 and retail demand is off 1.7% US LV sales Monthly Selling Rate (SAAR) Trend LMC Automotive Limited, All Rights Reserved SAAR Moving Average Annual

US LV Sales Driven by Multitude of Factors Volume Total Sales 16.5mn 13.6mn Total Sales 17.4mn Growth in Fleet/Contraction in Retail Fleet at 19.5%, up from 18% in 2015 14.2mn Total Sales 17.4mn 14.

17 US LV Sales Driven by Multitude of Factors Volume Total Sales 16.5mn 13.6mn Total Sales 17.4mn Growth in Fleet/Contraction in Retail Fleet at 19.5%, up from 18% in mn Total Sales 17.4mn 14.0mn Risk 13.8mn -1.3% YoY Disposable Income Source: JDP PIN, LMC Automotive 2. Unemp. 3. Housing Market Macro Factors 4. Stock Market 5. Fuel Prices 2016 LMC Automotive Limited, All Rights Reserved Credit/ Terms 7. Vehicle Equity Vehicle Price Incentive Actions 10. Product Activity Consumer Internals & OEM Drivers 2016F

18 2016 US Sales Segment Share Movement 1.8% 38.8% share SUV growth slows from very strong 2015, but gains on small/compact demand, expanded lineups, favorable fuel prices. Pickups continue to gain ground 0.5% given low gas prices and new products. 15.0% share 1.4% 13.8% share 0.0% 12.3% share After falling 1 ppt. in 2015, D-Segment Cars continue to lose share to SUV demand. SUVs gain, but lower compact car demand hurts Premium. 0.5% 7.1% share Vans gain from new Pacifica, Metris, plus Transit. SUVs cut into personal MPV market LMC Automotive Limited, All Rights Reserved. 18

19 US Demand Still Expected to Grow? Baseline US LV topline is expected to grow at a CAGR of just 0.3% from with 2017 now expected to be lower than Slow (>2%) economic growth supporting long run in autos! Risks to baseline include lease maturities (used car substitute), tighter credit and trade/fiscal policies. Negative bias with recession scenario - mild with short duration as volume falls to 15.4mn in 2019, a 12% drop from baseline. Recovery may be hampered by lower density growth, car sharing and regulations impact. Outperform scenario Near-term up from VW buyback and lease maturities followed by technology driven increase as market transitions. CAGR still only 0.8% LMC Automotive Limited, All Rights Reserved. 19

Collision Course Not So Fast? 30% Consumers want SUVs! US Sales SUV share 36% 39% 40%+ Thousands 500 400 300 200 YTD Sep Hybrid/EV Sales Down!

21 Collision Course Not So Fast? 30% Consumers want SUVs! US Sales SUV share 36% 39% 40%+ Thousands YTD Sep Hybrid/EV Sales Down! YTD Sep16-5% YTD Sep10 YTD Sep15 YTD Sep F Regulation coming tougher on cars to hit milestones Q00 1Q02 1Q04 1Q06 Price of Oil to Q08 1Q10 1Q12 1Q14 1Q16 1Q18 1Q20 1Q22 1Q24 Expected price of oil will not drive push toward compact car EVs SUVs continue to grow but will likely need stronger EV penetration Pickups have place in future, share expected to hold at 15% 2016 LMC Automotive Limited, All Rights Reserved. 21

22 US Large Pickup Market Will Remain Steady Volume (mn) Large Pickup Volume Segment Share Volume and share level off as overall market growth flattens and Midsize Pickup gains entrants 16% 14% 12% 10% # of Entries Avalanche Exits Dodge to Ram transition LMC Automotive Limited, All Rights Reserved. 22 8%

24 Short-term Production Outlook North America NA growth up 2.4% on the year with 16 new entries or in first full year. Some pressure on Q4 given plant shutdowns, 2H growth now expected less than 2%, down from 2.9% in 1H outlook remains solid but lower growth rates (1.8%), given flattening of demand, but launch activity remains strong - New entries and Redesigns increase to 33 from 23 in Millions Drops New Entries Additional Growth LMC Automotive Limited, All Rights Reserved. 24

25 Inventory is in Check Inventory (millions) Days Supply Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-15 Inventory very stable and in good shape through September at a 64-day supply suggesting industry has not started an overbuild as demand flattens out though there are some trouble spots in certain vehicle types. Interplay between inventory levels and incentives will be key indicator LMC Automotive Limited, All Rights Reserved. 25

NA Short-Term Production by OEM Group 40% 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% Tesla Hyundai Fuji Heavy Daimler 2016 2017 GM R/N Toyota

GM 16 gains on strong SUV and Pickup volume and new CT6/Bolt; 17 falls on lower Car and Large PU/SUV output.

VW for 16 under pressure, helped by new Audi capacity; 17 adds needed SUVs.

26 NA Short-Term Production by OEM Group 40% 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% Tesla Hyundai Fuji Heavy Daimler GM R/N Toyota Industry VW Ford BMW FCA Hyundai/Kia localizing at Monterrey plant drives growth, Montgomery adds Santa Fe. GM 16 gains on strong SUV and Pickup volume and new CT6/Bolt; 17 falls on lower Car and Large PU/SUV output. Ford declines in 16 on slowing Car demand and Compact SUV competition; 17 under pressure but slight growth with new Continental. VW for 16 under pressure, helped by new Audi capacity; 17 adds needed SUVs. FCA 16 off with Toluca and Sterling Heights downtime; 17 falls on drops/sourcing shifts/changeovers. Toyota 16 up with localized ES-Series and expanded Highlander output; 17 declines on Camry changeover, Venza and GCC Sequoia end LMC Automotive Limited, All Rights Reserved. 26

NA Production and Capacity Long-term Trend Demand level adds stability layer through horizon. Localization and exports drive production expansion.

27 NA Production and Capacity Long-term Trend Demand level adds stability layer through horizon. Localization and exports drive production expansion. Some relief in the mid- to long-term, but utilization holds just below 90%. Millions Production Excess Capacity Utilization % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2016 LMC Automotive Limited, All Rights Reserved. 27

NA Production Volume Growth by Segment Thousands 400 300 200 100 0-100 -200-300 Compact SUV Midsize SUV Compact Premium Car Top 5 Volume Gainers/Losers

entries. Compact and Small gain while Large Cars and Large SUVs are under pressure from market preferences and regulations.

28 NA Production Volume Growth by Segment Thousands Compact SUV Midsize SUV Compact Premium Car Top 5 Volume Gainers/Losers Small Car Compact Car Midsize Sporty SUVs will account for the majority of gain in total NA output, given increased demand and numerous new entries. Compact and Small gain while Large Cars and Large SUVs are under pressure from market preferences and regulations. Compact MPV Van/MPV Large SUV Midsize Car Large Car Volume Delta by Bodystyle ,000 1, LMC Automotive Limited, All Rights Reserved. 28 SUV Car Pickup Sporty Thousands

North America Capacity and Sourcing Movement Millions 18.7 2.4 3.7 USA Mexico Canada 22.4 2.4 5.7 12.6 14.

29 North America Capacity and Sourcing Movement Millions USA Mexico Canada % 80% 60% 40% 20% 0% new plants and investments in 3 others in Mexico to account for 55% of new capacity US production in transition to trucks and SUVs adds 5 new plants (3 low volume) and 10+ with capacity investment LMC Automotive Limited, All Rights Reserved % 13% 3% NAFTA Costs and lack of incentives hurt Canada However, Unifor contract keeps Oshawa 2 alive and get investment from Ford in Essex and FCA for Brampton. 67% 19% 14% 63% 27% 10%

30 NA Production Shifts in Body Types Car Share SUV Share Premium Share 60% 40% 20% 0% US Canada Mexico Industry 80% 70% 60% 50% 40% 30% 20% 10% 0% US Canada Mexico Industry 100% 80% 60% 40% 20% 0% US Canada Mexico Industry Car share falls slightly as another shift to trucks continues. Shift of small car to Mexico drives volume to increase to 4 million units by Consumer demand for SUVs drives significant expansion with volume reaching 40% of total NA production. US continues to dominate but expansion in Mexico leads to significant growth (140%). Strong capacity investment in Mexico, will drive production growth - Audi/BMW/MB-Infiniti investment LMC Automotive Limited, All Rights Reserved. 30

31 Global Platform Consolidation Continues Millions (North America) 2015 (Global) 2023 (North America) 2023 (Global) 2015 Top 10 platforms accounted for 42% of NA production volume, by 2023 this is expected to increase to 50%. Scale, scope and complexity increases as platforms underpin variety of bodystyles, driveline configurations and powertrains LMC Automotive Limited, All Rights Reserved. 31

33 2016 LMC Automotive Limited, All Rights Reserved. 33 Summary China driving near-term global growth but expected to contract in Brexit is not over and poses a risk over mid-term. Russia and Brazil appear to be at bottom. US demand growth appears to be coming to a halt, with some risk for the remainder of the year. No evidence of major contraction coming, but long-term growth expected to average less than 0.5%. Number of entries increases as more SUVs and alternative fuel vehicles are added to the US market - with slowing demand, competition increases. North American production is on watch in Q as OEMs align supply with slowing demand. North American production outpaces demand, investment still pouring in with volume into the 19 mn unit range. Launch activity is strong, though some risk with new plants being underutilized if demand slows further.

Automotive Outlook: From Plateau to Uncertainty Where is the Industry Headed?

Automotive Outlook: From Plateau to Uncertainty Where is the Industry Headed? Jeff Schuster Senior Vice President, Global Forecasting September 15 th, 2016 Outline Global Automotive Backdrop North America