Greater Cleveland Auto Outlook

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1 Covering First Quarter 2018 Volume 26, Number 2 Sponsored by: Greater Cleveland Automobile Dealers Association FORECAST Area New Vehicle Registrations Predicted to Exceed 260K Units in 18 Key factors providing a boost to new vehicle sales Key factors holding back new vehicle sales Economic growth is solid. The economy has been growing at a respectable, albeit less than robust, pace for several years. Most economists expect this trend to continue in Positives are lower taxes and rising employment. Negatives are increasing interest rates and potential harmful fallout resulting from restrictive trade policies. These negatives should not be enough to derail the economy, however. Consumer confidence is high. The improving economy, rising incomes, and ascending net worth have led many consumers to feel upbeat about current and future economic conditions. The volatile stock market and higher borrowing costs are potential concerns for 2018, but baseline consumer sentiment should remain positive. New vehicles have a lot to offer. From zero emission electric vehicles to every conceivable iteration of SUVs and trucks, manufacturers are serving up an impressive array of new vehicles. And these new models are packed with driver assistance and infotainment technologies that make the average 10 year old vehicle on the road seem obsolete. Consumer affordability is weakening. Low interest rates, steady (if not spectacular) household income growth and high incentives combined to keep new vehicle affordability strong for many years. But this scenario is changing. Higher loan rates are boosting monthly finance and lease payments, which will keep some new vehicle shoppers on the sidelines. Used vehicle values are softening. Improving supplies of used cars and trucks and increasing off-lease volumes are likely to put a mild damper on new vehicle sales in two ways. First, trade in values will soften, increasing net transaction prices. And second, lower used vehicle prices will entice some consumers to purchase used vehicles instead of new. Pent up demand is waning. The area new vehicle market posted steady and significant gains between 2009 and 2015, but there is a ceiling on high how sales can go. As shown on the graph to the left, the market has plateaued during the past two years and is likely to drift lower in Annual Trend in Area Market Market Summary New light vehicle registrations 300, , , , ,000 50, Historical Data Source: IHS Markit Forecast YTD '17 YTD '18 % Chg. Mkt. Share thru Mar. thru Mar. '17 to '18 YTD '18 TOTAL 64,955 65, % Car 22,205 18, % 28.5% Light Truck 42,750 46, % 71.5% Domestic 36,102 36, % 55.3% European 3,608 3, % 5.9% Japanese 19,382 19, % 30.0% Korean 5,863 5, % 8.8% Source: IHS Markit. The graph above shows annual new retail light vehicle registrations in the area from 2012 thru 2017 and Auto Outlook s projection for Domestics consist of vehicles sold by GM, Ford, FCA (excluding Alfa and FIAT), and Tesla. Historical figures were revised by IHS Markit and will differ slightly from those shown in previous releases. *Figures for March 18 were estimated by Auto Outlook.

Page 2 MARKET TRACKER: QUARTERLY RESULTS Area Registrations Remained Strong in 1Q 18 QUARTERLY TREND Percent Change in Area and U.S. New Vehicle Market QUARTERLY PERSPECTIVE 1Q 2018 Registrations Versus Average for Previous Five Years 10.

2 Page 2 MARKET TRACKER: QUARTERLY RESULTS Area Registrations Remained Strong in 1Q 18 QUARTERLY TREND Percent Change in Area and U.S. New Vehicle Market QUARTERLY PERSPECTIVE 1Q 2018 Registrations Versus Average for Previous Five Years 10.0% 7.5% The area and U.S. markets increased slightly in 1Q 18. Area registrations exceeded the average for the previous five years in the First Quarter of this year. % change versus year earlier 5.0% 2.5% 0.0% -2.5% -5.0% -7.5% -10.0% Q2 '17 Q3 '17 Q4 '17 Q1 '18* Area 0.8% -0.6% -0.8% 0.3% U.S. -1.0% -2.8% 0.6% 0.7% 1Q '18 1Q avg. ('13 to '17) 65,137 61, ,000 20,000 30,000 40,000 50,000 60,000 70,000 Quarterly new retail light vehicle registrations * Figures for the First Quarter of 2018 were estimated by Auto Outlook based on data for January and February. Source: IHS Markit. * Figures for 1Q 2018 were estimated by Auto Outlook based on data for January and February. Source: IHS Markit. MARKET TRACKER: AREA MARKET VERSUS U.S. Area Car Market Share Falls to 28.5% Percent change in registrations YTD '18 thru Mar.* vs. YTD '17 Passenger car market share YTD '18 thru Mar.* Domestic brand market share YTD '18 thru Mar.* Area Market U.S. Market 0.3% 0.7% 28.5% 31.5% 55.3% 42.5% Top 10 brands and market share YTD '18 thru Mar.* First Chevrolet 15.3% Toyota 13.0% Second Ford 14.4% Ford 11.8% Third Jeep 8.7% Chevrolet 11.6% Fourth Honda 8.1% Honda 9.7% Fifth Toyota 7.6% Nissan 6.8% Sixth Nissan 4.9% Jeep 6.3% Seventh Kia 4.9% Subaru 4.4% Eighth Subaru 4.5% Kia 3.5% Ninth GMC 4.4% GMC 3.5% Tenth Hyundai 3.9% Hyundai 3.3% *March 2018 figures estimated by Auto Outlook Source: IHS Markit Greater Cleveland Auto Outlook First Quarter 2018 Published by: Auto Outlook, Inc. PO Box 390 Exton, PA Phone: jfoltz@autooutlook.com Editor: Jeffrey A. Foltz Reproduction, including photocopying of this publication in whole or in part, is prohibited without the express permission of Auto Outlook, Inc. Any material quoted must be attributed to, published by Auto Outlook, Inc. on behalf of the Greater Cleveland Automobile Dealers Association, and must also include the statement: Data Source: IHS Markit. Unforeseen events may affect the forecast projections. Consequently, Auto Outlook is not responsible for management decisions based on the content of.

Covering First Quarter 2018 Page 3 MARKET TRACKER: HYBRID AND ELECTRIC VEHICLES Prius and RAV4 are Top Sellers in Hybrid/Electric Market Market Share 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.

3 Covering First Quarter 2018 Page 3 MARKET TRACKER: HYBRID AND ELECTRIC VEHICLES Prius and RAV4 are Top Sellers in Hybrid/Electric Market Market Share 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% Q2 15 Quarterly Alternative Powertrain Market Share (includes hybrid and electric vehicles) Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Hybrid Plug In Hybrid Electric Q3 17 Q4 17 Q1 18* The graph above shows hybrid powertrain and electric vehicle quarterly market share in the area. *First Quarter 2018 includes January and February. Source: IHS Markit. Hybrid/electric vehicle market share in Q1 18: 1.6% New Retail Hybrid and Electric Vehicle Registrations Top 10 Selling Models in Area - YTD '18 thru February Rank Model Regs. 1 Toyota Prius 98 2 Toyota RAV Kia Niro 61 4 Ford Fusion 49 5 Toyota Camry 38 6 Ford C-Max 26 7 Hyundai Ioniq 24 8 Toyota Highlander 21 9 Tesla Model S Honda Accord 20 MARKET TRACKER - SEGMENTS Compact and Mid Size SUV Segments Rank First and Second Segment Greater Cleveland Area Segment Market Share Review Market Share YTD 17 thru February Market Share YTD 18 thru February Change in share YTD 17 to 18 Best selling model in segment Compact SUV Chevrolet Equinox Mid Size SUV Jeep Grand Cherokee Full Size Pickup Ford F Series Compact Car Honda Civic Mid Size Car Ford Fusion Subcompact SUV Chevrolet Trax Mini Van Chrysler Pacifica Subcompact Car Kia Soul Luxury Mid Size SUV Cadillac XT5/SRX Near Luxury Car BMW 3-Series Compact/Mid-Size Pickup Toyota Tacoma Large Car Dodge Charger Luxury Compact SUV Lincoln MKC Large Van Ford Transit Connect Van Luxury and High-end Sports Cars BMW 5-Series Large SUV Chevrolet Tahoe Sports/Pony cars Dodge Challenger Luxury Large SUV Land Rover Range Rover Entry Luxury Car Mercedes CLA-Class Luxury Subcompact SUV BMW X1 The table above shows Cleveland area market share for 20 vehicle segments during the first two months of 2017 and 2018, and the change in market share over the period. The best selling model in each segment is also shown. Segments are ranked from top to bottom based on 2018 share. Data Source: IHS Markit.

4 Page 4 Brand Registrations Report Greater Cleveland Area New Retail Car and Light Truck Registrations First Quarter* Anuual Totals Registrations Market Share (%) Registrations Market Share (%) 1Q '17 1Q '18 % change 1Q '17 1Q '18 Change % change Change TOTAL 64,955 65, , , Cars 22,205 18, ,769 90, Light Trucks 42,750 46, , , Domestic Brands 36,102 36, , , European Brands 3,608 3, ,218 16, Japanese Brands 19,382 19, ,499 83, Korean Brands 5,863 5, ,110 24, Acura ,734 1, Alfa Romeo Audi ,800 1, BMW ,926 2, Buick 2,017 2, ,183 8, Cadillac ,336 3, Chevrolet 10,353 9, ,542 40, Chrysler ,205 3, Dodge 1,789 1, ,157 6, FIAT Ford 10,213 9, ,216 40, Genesis GMC 2,688 2, ,905 10, Honda 5,559 5, ,655 24, Hyundai 2,667 2, ,968 10, Infiniti ,682 1, Jaguar Jeep 4,678 5, ,041 19, Kia 3,140 3, ,092 13, Land Rover Lexus ,709 2, Lincoln ,989 2, Maserati Mazda 1,248 1, ,803 5, Mercedes ,724 3, MINI Mitsubishi ,464 1, Nissan 3,471 3, ,627 13, Other Porsche Ram 1,989 2, ,580 8, Subaru 2,772 2, ,742 11, Tesla Toyota 4,770 4, ,070 21, Volkswagen 1,148 1, ,726 5, Volvo *March 2018 figures were estimated by Auto Outlook. Source: IHS Markit The table above shows new retail light vehicle (car and light truck) registrations in the Greater Cleveland area market. Figures are shown for the First Quarters of 2017 and 2018, and annual totals for 2016 and The top ten ranked brands in each category are shaded yellow.

5 Covering First Quarter 2018 Page 5 BRAND SCOREBOARD - PART ONE Land Rover Has Largest Percentage Gain in First Quarter 2018 The graph below provides a comparative evaluation of brand sales performance in the area market. It shows the year-to-date percent change in registrations for each brand, organized by category (i.e., Detroit Three, European, and Asian). Percent Change in Area New Retail Light Vehicle Registrations YTD 2018 thru March* vs. YTD 2017 Jeep 21.6% Cadillac 9.7% GMC 7.0% Chrysler 4.3% Buick Ram Chevrolet -3.7% 2.2% 2.1% Detroit Three Brands Largest % increases in 2018: Jeep and Cadillac Ford -8.0% Dodge -8.0% Lincoln -20.3% Land Rover 43.1% Volvo 21.1% BMW 13.8% Volkswagen 11.6% Porsche 10.3% Audi MINI Mercedes -4.3% -5.4% -5.9% European Brands Largest % increases in 2018: Land Rover and Volvo Maserati -30.0% Jaguar -33.0% FIAT -51.7% Mitsubishi 25.1% Mazda 17.9% Acura 14.5% Lexus 8.7% Subaru 5.1% Toyota 4.0% Genesis Kia Honda -5.1% 1.8% 0.9% Asian Brands Largest % increases in 2018: Mitsubishi and Mazda Hyundai -5.3% Nissan -7.4% Infiniti -15.4% -60.0% -40.0% -20.0% 0.0% 20.0% 40.0% 60.0% *Figures for March, 2018 were estimated by Auto Outlook. Source: IHS Markit.

Brands Non Luxury: Honda, Chevrolet, and Ford Luxury: Mercedes,

Cadillac, Lexus, and Lincoln Top 10 Non Luxury Car Brands in

6 Chevrolet 14.2 Ford 11.3 Toyota 8.1 Hyundai 5.

2 Kia Top 10 Non Luxury Light Truck Brands in Area Market

0 20.0 0.0 Share of non luxury car market (%) 5.0 10.0 15.0

Markit. *Figures for March, 2018 were estimated.

2018* Top 10 Luxury Light Truck Brands in Area Market October

2 Cadillac 5.8 Audi Infiniti 5.7 Infiniti 3.7 2.9 Genesis 0.0 5.

9 Mercedes 9.4 Audi 13.6 Lincoln 10.3 Lincoln 16.4 15.

6 Page 6 BRAND SCOREBOARD - PART TWO Brand Market Share Leaders in Primary Segments Leading Car Brands Leading Light Truck Brands Non Luxury: Honda, Chevrolet, and Ford Luxury: Mercedes, BMW, and Cadillac Non Luxury: Chevrolet, Ford, and Jeep Luxury: Cadillac, Lexus, and Lincoln Top 10 Non Luxury Car Brands in Area Market October 2017 thru March 2018* 15.6 Honda 14.6 Chevrolet 14.2 Ford 11.3 Toyota 8.1 Hyundai 5.5 Nissan Chevrolet 17.5 Ford 17.4 Honda 7.1 Toyota 6.9 GMC Ram Subaru 4.8 Subaru Nissan Volkswagen Dodge 12.3 Jeep 12.2 Kia Top 10 Non Luxury Light Truck Brands in Area Market October 2017 thru March 2018* Buick Share of non luxury car market (%) Share of non luxury light truck market (%) Source: IHS Markit. *Figures for March, 2018 were estimated. Top 10 Luxury Car Brands in Area Market October 2017 thru March 2018* Top 10 Luxury Light Truck Brands in Area Market October 2017 thru March 2018* Mercedes 17.2 Cadillac BMW 17.0 Lexus 11.2 Cadillac 5.8 Audi Infiniti 5.7 Infiniti Genesis Acura Acura Volvo 11.6 BMW 8.4 Lexus 12.9 Mercedes 9.4 Audi 13.6 Lincoln 10.3 Lincoln Share of luxury car market (%) Land Rover 4.7 Volvo Share of luxury light truck market (%) Source: IHS Markit. *Figures for March, 2018 were estimated. 20.0

7 Covering First Quarter 2018 Page 7 BRAND SCOREBOARD - PART THREE Chevrolet, Ford, and Jeep Area Shares are Well Above U.S. The graph below provides a comparison of Cleveland Area and U.S. new retail market share during the first three months of this year for the top 20 selling brands in the area. Brands are positioned on the graph from top to bottom based on area market share. Chevrolet was the area leader, accounting for 15.3% of the market, well above its 11.6% share in the Nation. Area and U.S. Market Share - YTD 2018 thru March* Chevrolet Ford 11.6% 11.8% 14.4% 15.3% Jeep 6.3% 8.7% Honda 8.1% 9.7% Toyota 7.6% 13.0% Nissan 4.9% 6.8% Kia Subaru 3.5% 4.9% 4.5% 4.4% Chevrolet, Ford, and Jeep area market shares were well above U.S. levels. GMC 3.5% 4.4% Hyundai Buick Ram 1.6% 3.9% 3.3% 3.2% 3.1% 2.8% Dodge Mazda Volkswagen Chrysler Cadillac Mercedes BMW Lincoln 2.5% 2.0% 2.3% 2.1% 2.0% 2.3% 1.5% 0.9% 1.1% 0.9% 1.1% 2.1% 1.0% 1.9% 0.9% 0.6% Area U.S. 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% Market Share *Figures for March, 2018 were estimated. Source: IHS Markit.

Viewing both indicators on the same graph makes it easier to identify brands that have posted significant and consistent gains during the past five years.

8 Page 8 BRAND SCOREBOARD - PART FOUR Chevrolet, Jeep, Subaru, & Ram Have Big Gains In Past 5 Years The graph below provides a balanced appraisal of brand sales performance in the Cleveland area market during the past five years. It shows both the unit change in registrations between 2012 and 2017 (orange bars) and the percent change (blue bars) for the top 20 selling brands in Viewing both indicators on the same graph makes it easier to identify brands that have posted significant and consistent gains during the past five years. Only six brands had a decline in registrations during the five year period. 30 percent Eight brands had increases of greater than 30%: Ram, Jeep, Subaru, Buick, Lincoln, GMC, Chevrolet, and Nissan. 3,000 units Eight brands had increases of greater than 3,000 units: Chevrolet, Jeep, Subaru, Ram, GMC, Honda, Buick, and Nissan. Five Year Unit and Percent Change in Area New Retail Light Vehicle Registrations (Top 20 Brands) 2017 vs % Blue bars show percent change in registrations Orange bars show unit change in registrations % Unit change in registrations to 2017 (orange bars) % Percent change in registrations to 2017 (blue bars) 0 0% % Source: IHS Markit.

9 Covering First Quarter 2018 Page 9 MODEL RANKINGS Pacifica, Compass, and Traverse Move Up in Rankings The graph below shows the change in rankings during the first two months of 2017 to the same period this year for the top 25 selling models in the Greater Cleveland Area market. Models are positioned on the graph from top to bottom based on the change in rankings. The biggest gainer was the Chrysler Pacifica. Other big winners were Jeep Compass, Chevrolet Traverse, and Jeep Wrangler Change in Rankings for Top 25 Selling Models - YTD 17 thru February to YTD 18 Models on this side moved down in the rankings Models on this side of the graph moved up in the rankings Chevrolet Cruze Buick Encore Ford Fusion Jeep Cherokee Jeep Grand Cherokee Honda CR-V Ford Escape Honda Civic Kia Forte Nissan Rogue Chevrolet Silverado Ford F Series Subaru Forester GMC Terrain Toyota Camry Ford Explorer Toyota RAV4 Ram Pickup Chevrolet Equinox Chevrolet Trax Jeep Compass Chevrolet Traverse Jeep Wrangler Hyundai Elantra Chrysler Pacifica Change in rankings from YTD 17 to YTD 18 Chrysler Pacifica moved up 14 positions. It was the 39th best seller during the first two months of 17, and moved up to 25th this year. Source: IHS Markit.

Page 10 Three Key Factors Impacting New Vehicle Sales Factor The numbers... Primary conclusion.

of Michigan Consumer Sentiment Index Consumer Sentiment Consumer sentiment 120 100 80 60 40 20 0 '09 '10 '11 '12 '13 '14

(trillions of $'s) U.S. Household Net Worth 100.0 80.0 60.0 40.0 20.0 0.

3 trillion in 2017, up more than 87% from 2009.

10 Page 10 Three Key Factors Impacting New Vehicle Sales Factor The numbers... Primary conclusion... What it means for new vehicle sales... Univ. of Michigan Consumer Sentiment Index Consumer Sentiment Consumer sentiment '09 '10 '11 '12 '13 '14 '15 '16 '17 1Q Years '18 Consumer sentiment index increased to 98.9 thru March of 2018, up from 91.8 in 2016 and 63.8 in Strong consumer sentiment will provide a boost to the new vehicle market Household Net Worth Household net worth (trillions of $'s) U.S. Household Net Worth '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 Years Household net worth was a record $96.3 trillion in 2017, up more than 87% from Rising household net worth will provide a boost to the new vehicle market Labor Market Change in area unemployment rate vs. Same month year earlier Change in unemployment rate Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Months Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Area unemployment rate declined vs. year earlier in each of the past six months Total employment has increased, but further gains will be harder to come by. Bottom line: new vehicle market should remain strong despite mild softening

11 Covering First Quarter 2018 Page 11 COUNTY SCOREBOARD Huron County Had Largest Percentage Gain in Early 2018 COUNTY MARKETS SUMMARY - PART 1 YTD registrations thru February Percent Change Unit Change Light Truck Market Share (%) YTD YTD YTD '17 to YTD '17 to YTD '18 YTD ' YTD '18 Allen % Ashland % Ashtabula % Carroll % Coshocton % Cuyahoga 9,807 9, % Erie % Geauga % Hancock % Holmes % Huron % Lake 2,088 2, % Lorain 2,689 2, % Lucas 3,056 3, % Mahoning 2,476 2, % Medina 1,945 1, % Portage 1,301 1, % Richland % Stark 2,337 2, % Summit 4,178 4, % Trumbull 2,134 1, % Tuscarawas % Wayne % Wood % YTD YTD YTD '17 to YTD Domestic Brands YTD Change COUNTY MARKETS SUMMARY - PART 2 Market Share Summary - YTD thru February Top Ten Selling Brands in Area '17 to '18 Chevrolet Ford Jeep Honda Toyota Kia Nissan Subaru GMC Hyundai Allen Ashland Ashtabula Carroll Coshocton Cuyahoga Erie Geauga Hancock Holmes Huron Lake Lorain Lucas Mahoning Medina Portage Richland Stark Summit Trumbull Tuscarawas Wayne Wood The tables above show new retail light vehicle registrations. Top five ranked counties in each category are shaded. Data Source: IHS Markit.

Page 12 MID SIZE SUV SEGMENT Grand Cherokee is Best-Selling Mid Size SUV in Area Market Share of Greater Cleveland Area Mid Size Suv Segment Previous Six Months (Sept. 2017 thru Feb.

12 Page 12 MID SIZE SUV SEGMENT Grand Cherokee is Best-Selling Mid Size SUV in Area Market Share of Greater Cleveland Area Mid Size Suv Segment Previous Six Months (Sept thru Feb. 2018) Hyundai Santa Fe Sport Source: IHS Markit. Jeep Grand Cherokee Ford Explorer Chevrolet Traverse Subaru Outback Ford Edge GMC Acadia Toyota Highlander Honda Pilot Kia Sorento Buick Enclave Dodge Journey Buick Envision Toyota 4 Runner Dodge Durango Others 2.8% 2.6% 3.0% 4.4% 4.3% 4.1% 4.6% 5.5% 5.8% 6.7% 7.6% 7.5% 7.9% 9.1% 11.6% 12.5% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% Share of Mid Size SUV Segment TOP SELLING MID SIZE SUVS Jeep Grand Cherokee Ford Explorer Chevrolet Traverse is distributed free of charge to all members of the Greater Cleveland Automobile Dealers Association. The publication is sponsored and supported by GCADA. is published and edited by Auto Outlook, Inc., an independent automotive market research firm. Opinions expressed in are solely those of Auto Outlook, Inc., and are not necessarily shared by GCADA. Greater Cleveland Automobile Dealers Association Brecksville Road Brecksville, OH Copyright Auto Outlook, Inc. April 2018

Greater Cleveland Auto Outlook

Greater Cleveland Auto Outlook Covering First Quarter 2014 Volume 22, Number 2 Sponsored by: Greater Cleveland Automobile Dealers Association FORECAST Area New Vehicle Market Up Slightly in First Quarter of 2014 Small improvement predicted