Aftermarket Trends: What will Drive Future Aftermarket Repair Opportunities in North America? Mark Seng Global Aftermarket Practice Leader July 29, 2014 - Vehicles - Powertrains - Technology & How the OEM s are Coming After Our Customers
Key Driver: Vehicles Miles Traveled (VMT)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Change in Driving Volume 3,000 2,750 2,500 2,250 2,000 1,750 1,500 1,250 1,000 750 500 250 0 Historical Vehicle Miles Traveled (billions) First time seeing sustained flat miles driven under 3 trillion miles since 2007 2014 IHS 3 Source: IHS Automotive and FHWA
Change in Driving Volumes Year-o-Year 6.0% 5.0% 4.0% 2012 Up 0.3% 2013 Up 0.6% 07-13 Down 2% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% 2014 IHS Source: IHS Automotive and FHWA
Vehicle Miles Traveled per Capita Total Miles Traveled 2013 = 2004 Miles per Capita 2013 = 1996 1950 2004 Miles traveled + 3.5% per year Milles per capita + 2.5% Since 2005 Miles traveled Flat Miles per capita -1.0% 2014 IHS Source: IHS Automotive, DOT and FHWA
The auto industry is back! Light vehicle sales continue their strong recovery.
U.S. Light Vehicle Registrations 15.4 Million 7.5% Broke 15 million units last year 1 st time since 2007! Source: IHS Automotive
Millions U.S. Light Vehicle Registration Trend 18.0 16.0 7.5% 14.0 12.0-17.5% 11.3% 10.2% 13.2% 10.0-22% 8.0 6.0 4.0 2.0 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014F 2015F 2016F 2017F Source: IHS Automotive
Winners are Offering the Most Options Fueling the comeback Dramatic increase in number of new models and redesigns.
New Launch Activity 50 North American Major Program Launches 43 40 30 30 25 35 27 39 27 33 32 27 27 20 24 23 20 19 19 16 10 0 Source: IHS Automotive Light Vehicle Production Forecast
Winners are Offering the Most Options 260 2013 new models & 2015 redesigns 70 % 150 2010 new models & 2012 redesigns Includes all model changes impacting US registrations. Source: IHS Automotive
MILLIONS Aftermarket U.S. Vehicles In Operation 280 VIO will Increase 6.5% by 2019 270 260 250 240 230 220 210 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 History Forecast Source: IHS Automotive
Impact of New Vehicle Drop Off The market will begin to feel impact of the 40 % drop in new vehicle registrations
Impact on VIO Age Groups - by 2019 Vehicles new to 5 years old grow 32 % Vehicles 6-11 years old decline 21 % Vehicles 12 + years old grow 15 % Is the aftermarket sweet spot changing? Source: IHS Automotive
As registrations recover, the vehicle mix continues to evolve Aftermarket must be ready for changing vehicles and consumers going into the future
4 Segments Emerging as Dominant: Represent over 58% of all new registrations in 2013 16.6% NON LUXURY TRADITIONAL MID SIZE 15.9% NON LUXURY TRADITIONAL COMPACT NON LUXURY COMPACT CUV NON LUXURY FULL SIZE PICKUP 13.8% 12.1% Source: IHS Automotive
4 Cylinder Engines Smaller Size but More Power
US New Vehicle Registrations: 4 Cylinder Engines Gaining in Popularity 2013: 55% market Add pics of share pickups All large vehicle segments in decline except large pickups Large trucks not growing as fast as they once did but segment remains strong 2012: 50% market share 2008: 41% market share Source: IHS Automotive
% of Vehicles in Operation Changing Mix Domestic v Import 100.0% 90.0% 11.0% 14.1% 3.1% 80.0% 70.0% 23.6% 26.5% 2.8% 60.0% 50.0% 40.0% 39.3% 38.1% -0.8% 30.0% 20.0% 10.0% 26.2% 21.3% -5.1% 0.0% 2008 2009 2010 2011 2012 2013 Domestic Car Domestic Truck Imp Car Imp Truck Source: IHS Automotive
Vehicle Population (x000) Cars - Continued Import Strength 80,000,000 70,000,000 15% 60,000,000 50,000,000 40,000,000-23% 30,000,000 20,000,000 10,000,000-2007 2008 2009 2010 2011 2012 2013 Domestic Cars Import Cars Source: IHS Automotive
Vehicle Population (x000) Trucks - Imports Gaining Share 120,000,000 100,000,000 80,000,000-3% 60,000,000 40,000,000 20,000,000 38% 0 2007 2008 2009 2010 2011 2012 2013 Domestic Light Trucks Import Light Trucks Source: IHS Automotive
Vehicle Population (x000) VIO Import Growth - Forecast 180,000,000 160,000,000-15% 140,000,000 120,000,000 100,000,000 80,000,000 89% 60,000,000 40,000,000 20,000,000-2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Domestic Import Source: IHS Automotive
Are Millennials Losing Interest in Cars? 11.5%: Millennial buyers % of total Percent of Total New Vehicles Registered Ages:18-34 16% 14% 12% 10% 8% 6% 4% 2% 0% 2008 2009 2010 2011 2012 2013 Source: IHS Automotive
Consumer The Younger Buyer is Broke -44% -6% +91% Net worth decline between 2001 and 2010 Income decline between 2001 and 2010 Growth in student loan balance between 2003 2012 Source: Pew Research
Consumer The Younger Buyer is Delaying 22% Delayed having children 20% Delayed marriage 24% Moved back home after college Source: Pew Research
Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Average Months Owned Length of Ownership Increasing Average Length of Ownership Trend 96 90 84 78 72 66 60 54 48 42 36 30 24 New & used combined > 22 month increase in ownership over last 10 years 73.4 62.3 56.7 Quarter New Buyers Used Buyers Total (New and Used) Source: IHS Automotive
Length of Ownership & Delayed Purchase Impact 13 vehicles in a lifetime
Length of Ownership & Delayed Purchase Impact 9 vehicles in a lifetime
As production grows, OEM powertrains are evolving Aftermarket must prepare for new technology entering service bays for years to come
Output (Millions) Production Outlook North American Light Vehicle Production by Country 20 18 16 14 12 10 8 6 4 2 0 Mexico Canada US 17.8 18.2 16.8 15.4 15.1 3.2 4.0 4.5 2.0 13.1 2.9 2.5 2.5 2.3 1.8 1.8 2.4 8.6 2.1 1.5 12.0 11.9 1.5 11.3 10.6 10.1 8.5 5.6 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2014 2021 +1,258,000 CAGR = 4.9% -451,000 CAGR = -3.1% +656,000 CAGR = 0.8% Source: IHS Automotive Light Vehicle Production Forecast
North American Vehicle Exports (Millions) Production Outlook North American Vehicle Exports by Region 2.0 North American Vehicle Exports by Region 1.8 1.6 1.4 1.2 1.0 Europe South America Middle East/Africa Greater China Other 0.91 0.93 1.12 1.60 1.33 1.39 1.44 1.69 Greater use of global platforms allows for more export ready product 40+ Free trade agreements drive Mexican output 0.8 0.6 0.67 0.78 0.74 EU sovereign debt crisis tempers EU exports 0.4 0.2 0.0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 So. America & Middle East/Africa markets growing quickly Source: IHS Automotive Light Vehicle Forecast
Production Outlook North American Production Mix by Manufacturer Millions 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 18 15 12 9 6 3 0 17.2 15.6 15.1 0.6 0.5 2.9 0.8 2.4 2.9 4.6 2.9 4.7 2.5 4.4 2.9 5.6 4.9 4.2 8.6 0.5 3.2 0.9 1.9 1.9 13.1 1.0 4.1 2.0 2.7 15.4 1.3 5.5 2.4 2.8 17.3 1.3 6.4 2.5 18.2 3.2 3.0 3.1 3.2 3.4 3.3 1.9 6.7 2.3 Others German 3 Asian 4 Chrysler/ Fiat Ford General Motors Production outlook follows demand recovery with import substitution and export activity providing additional support Most manufacturers are poised to post gains; favors OEMs with further capacity expansion plans: BMW, VW, Nissan, Toyota & Honda Global product/platform strategies enable competitive sourcing shifts Source: IHS Automotive Light Vehicle Production Forecast
North American Outlook The Old 17 the New 17 Year 2000 2016 Volume 17.2 million units (30% of global) 17.7 million units (19% of global) Location ~25% built south of Ohio ~50% built south of Ohio Global Platform Exposure 20% was deemed global mostly Japanese OEMs 62% is deemed global mainly pickups are regional Design Base 72% of volume NA-designed 34% of volume NA-designed Production OEMs Top 5 OEMs = 89% of total (Largest = 32%) Top 5 OEMs = 73% of total (Largest = 19%)
Evolving Powertrains in North America CAFÉ Standards Making an Impact CAFÉ Standards 54.5 MPG 2025 2016 35 MPG CAFÉ requirements dominate product and powertrain planning in the new vehicle industry today
Alternative Powertrains: Share of U.S. New Registrations - 2013 3.6 % Share 2.9 % Share 0.3 % Share Source: IHS Automotive
The Traditional Internal Combustion Engine Gasoline direct-injection Turbo chargers Stop/start capability Cylinder de-activation AWD disconnect More efficient transmissions more speeds and CVTs
Stop Start Mild Hybrid Full Hybrid PHEV EV GDI-T GDI DE-Adv DEAC NAFTA Vehicle Production Powertrain Outlook 2012 2025 70% 60% 50% 40% 30% 20% 10% 0% Far stronger push on GDI-T and GAS-HEV compared to Europe, as the U.S exit s 2016 CAFE and approaches 2025 targets Barriers to diesel (consumer, CNG, gas fuel price) remain Mechanical opportunity centred on on resegmentation, gasoline rightsizing and driveline efficiencies (Elec. Tech) (Mech. Tech)
Aftermarket has the Expertise!
OEM globalization becoming the new norm
Global VIO Growth New Registrations 2013 83 million units 2020 104 million units Source: IHS Automotive
Global VIO Growth Total VIO 2010 1 billion units 2020 1.5 billion units Source: IHS Automotive
Global VIO Growth Changing OEM Production Model Accelerating use of global platforms
Reducing Number of Platforms 2012 212 Top 12 Manufacturers 147 2020 Source: IHS Automotive
Reducing Number of Platforms 50% fewer platforms 40% fewer platforms
More Vehicles per Platform More than double 90% + increase
Million Units New Platform Metrics 1.0 Average volume per platform in 2012 0.9 0.8 0.7 Average volume per platform in 2020 Number of platforms to support 80% of volume in 2020 6 7 6 0.6 0.5 4 4 0.4 0.3 0.2 3 3 3 3 2 3 3 0.1 0.0 Hyundai Honda VW Ford R/N PSA GM BMW Toyota Suzuki Fiat Daimler Average platform volume to double, volume manufacturers have greatest opportunities Premium OEMs lack absolute scale but generate high efficiency Toyota, Fiat-Chrysler and GM lag in terms of consolidation 46
VW MQB Platform Largest single platform 6 million units by 2020 New modular technology revolutionizes production motortrend.co m
Modular Architecture 88% reduction in engine transmission variations 20%-30% reduction in parts costs motortrend.com
Aftermarket Opportunity Lower production costs Improving inventory efficiency Reducing cataloging costs
OEM technology Providing both opportunity & challenges
Dealer Service Retention at Record Lows 35% Retail Non-Warranty Service Retention 30% 25% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Service Retention & Repurchase Consideration 80.0 70.0 Retail Service Retention (% of revenue returning to dealership for retail service) Average New Buyer returns to market at 72.1 months: 60.0 50.0 40.0 30.0 20.0 10.0 0.0 NEW 1 YEAR OLD 2 YEARS OLD 3 YEARS OLD 4 YEARS OLD 5 YEARS OLD 6 YEARS OLD 7 YEARS OLD 8 YEARS OLD 9 YEARS OLD 10 YEARS OLD 11 YEARS OLD
OEM s Focused on Service Loyalty KEY: Relationship with Driver of 3-7yr Old Vehicle Positive connection in repeat buying among those who have vehicles serviced by OEM dealer network 45.1% OEM Brand Loyalty Among Those Servicing with OEM Dealer Network 28.4% OEM Brand Loyalty Among Those Servicing with Aftermarket Based on actual results from OEM study provided by IHS Automotive. Brand loyalty was measured among customers with vehicles that were just outside of the traditional warranty period.
Maintenance Programs
Extending Beyond the Basic Warranty
Oil Service Indicator Light
Growing as Part of U.S. VIO 21% 10% Source: IHS Automotive
Why is This Important to the Aftermarket? Oil Changes Most common service opportunity.
Driver Dealer Connectivity Telematics Hello, You are due for an oil change. Touch here to schedule your appointment.
Embrace Technology = Aftermarket Opportunity Aftermarket Must Also Leverage Technology to Compete for Consumer Loyalty
1. The auto industry is back! Global light vehicle sales continue strong recovery 2. The vehicle mix & the consumer continue to evolve 3. OEM powertrains are evolving 4. OEM globalization becoming the new norm 5. Technology advances bring both challenge AND opportunity
Thank You Mark Seng Global Aftermarket Practice Leader 248.728.7350 Mark.Seng@ihs.com