Key Automotive Trends Impacting the North American Aftermarket Mark Seng Global Aftermarket Practice Leader 31 October 2018
2 Agenda Who is IHS Markit & Where Do Our Insights Come From Key Industry Driver - VMT The Trends > New Vehicle Sales adding to aftermarket pipeline as VIO continues to grow > Vehicle Mix consumer preferences continue to impact VIO mix > Aging Vehicle Population positive impact on future repair opportunities > Battery/Electric Vehicles limited impact for now as I.C.E. continues to thrive > Autonomous Vehicles not a discussion of if just a matter of when but aftermarket must be aware of growing autonomy-supporting technology Summary
3 Integrated Data & Forecasting Company AUTOMOTIVE The automotive sector is one of the biggest and most competitive markets in the world and relies on in-depth analysis for its daily operations. Extensive global team of automotive analysts located in 15 key markets supplies the depth of information and level of comprehension needed for a competitive edge. IHS Markit automotive solutions span the entire value chain, from product inception to sales, marketing and the aftermarket. Insights to address virtually any domain or enterprise, improving the speed, accuracy and impact of business strategy and tactics.
Key Driver: Vehicle Miles Traveled (VMT)
5 U.S. Driving Volume (all vehicles) 3,500,000 Historical Vehicle Miles Traveled - U.S. (Millions of Miles) 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 5 year healthy, positive trend after 8 years of sustained flat or declining miles driven. 2018 5th consecutive year > 3 trillion miles But rate of increase slowing 0 Source: DOT and FHWA
6 Year/Year Change in U.S. VMT U.S. Driving Volume is Up but slowing 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 2012 Up 0.3% 2013 Up 0.6% 2014 Up 1.7% 2015 Up 3.5% 2016 Up 2.8% 2017 Up 1.3% 2018 AUG YTD Up.4% -1.0% -2.0% Source: DOT and FHWA
7 U.S. Gas Prices as of Oct 22 Increasing VMT +65% <3 yrs Flat/Declining VMT
8 U.S. Gas Prices as of Oct 22 +18% 1 st 6 mos -6% 2 nd 6 mos
9 U.S. Vehicle Miles Traveled per Light Vehicle-in-Operation 12,200 Avg Lt. Veh Miles/Year Miles per Year 12,000 11,800 11,600 11,400 11,200 11,000 10,800 10,600 2009-2018 Flat 2002-2018 (-5.9%) 10,400 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: IHS Markit
The Trends
Trend #1: U.S. light vehicle sales continue to level off but doing so at record levels and driving VIO growth.
After 2 record setting years, new light vehicle sales declined to 17.2 million units in 2017 Source: IHS Markit
Another slight decline in 2018 to 17.1 million units Source: IHS Markit
14 U.S. Light Vehicle Sales 2017 = 17.2 million units 18.0 16.0 14.0-17.5% 10.2% 13.2% 7.5% 5.4% 5.8% Flat -1.8% -.6% MILLIONS 12.0 10.0 8.0 6.0-22% 11.3% 4.0 2.0 0.0 History Forecast Peak at 17.6M in 2016 Source: IHS Markit October 2018 Forecast
15 U.S. Light Vehicles in Operation 350 300 VIO will Increase 8% by 2023 Millions of Units 250 200 150 100 50 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019F 2020F 2021F 2022F 2023F Data as of January 1 each year. History Forecast 2018 = 272 million units Source: IHS Markit October 2018 Forecast
Trend #2: The vehicle mix is changing rapidly - impacting future aftermarket repair opportunities for years to come.
17 U.S. Light Vehicle Sales Cars v Light Trucks 20 18 16 US Light Vehicle Sales - History & Forecast 17.6m 17.5m 16.5m 17.2m 17.1m Annual Sales Millions 14 12 10 Current growth fueled by Crossovers/CUVs 11.9m 2018 Lt Trk 70% 8 6 4 5.2m 2018 Car 30% 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 Early growth fueled by minivans & large SUV s Source: IHS Markit October 2018 Forecast
18 U.S. Light Vehicle Sales Mix Crossover Body Style Dominating 20% 23% 2015 22% 20% 4 Body Styles represent 64% of all new U.S. registrations in 2017 2013 15% COMPACT CUV Mid-Size CUV 11% 2015 16% 2015 17% 15% 15% 11% 12% 12% 14% 11% 12.6% 13.1% TRADITIONAL COMPACT TRADITIONAL MID SIZE FULL SIZE PICKUP Source: IHS Markit
19 U.S. Light Vehicle Sales Outlook Model Count by CUV Segment 180 160 U.S. CUV Model Count by Sub-Segment 95% Increase Over 10 Yrs 164 Model Count 140 120 100 80 75 84 126 60 40 20 15 43 0 2000 2005 2010 2015 2020 2025 Mini Subcompact Compact Mid-Size Full-Size Source: IHS Markit October 2018 Forecast
20 Crossover Body Style Dominating Globally Global Light Vehicle Production by Body Type Sport MPV Van PUP Car C/SUV 0.4 0.4 0.5 6.8 6.8 6.1 8.0 8.7 8.7 10.2 9.2 8.1 30.8 11.0 2025 2017 2010 42.5 39.2 39.9 42.7 Global Segment 2017 25 growth (mil.) Share of growth Sport -0.1-0.4% MPV 0.0 0.2% Van -0.7-4.6% PUP 1.0 6.2% Car 3.3 21.2% C/SUV 11.9 77.4% 0 10 20 30 40 50 Millions C/SUV volumes in EU and China are growing at 2x North America Source: IHS Markit October 2018 Forecast
21 U.S. New Light Vehicle Sales: Imports v Domestic 3 Import Makes Outpace Domestics 2019-2025 Gain of 14M Import Units Total Units 2019-2025 Added to Fleet Japanese Korean European -1 pt Flat +2 pts +116 M Domestic Makes 44% Import Makes 56% Source: IHS Markit
22 U.S. Light Vehicle VIO Detroit-3 v Import Makes 300,000,000 250,000,000 200,000,000 150,000,000 49% 100,000,000 46% 50,000,000 28% 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 EUROPEAN ASIAN DETROIT-3 Source: IHS Markit 2018 Forecast
23 U.S. Light Vehicle VIO Domestic 3 v Import Makes by Body Style 100% 90% 7% 19% +12 80% 21% 27% +6 70% 60% 50% 40% 37% 37% Flat 30% 36% 20% 10% 0% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 DETROIT-3 CAR DETROIT-3 LT TRUCK IMPORT CAR IMPORT LT TRUCK 17% -20 Source: IHS Markit
24 U.S. Light Vehicle VIO Domestic 3 v Import Makes 2002 v 2018 Detroit-3 Cars Import Cars Detroit-3 Light Trucks Import Light Trucks -36M Units 26M Units 17M Units 35M Units Net increase of 80M import units v. Detroit-3! Source: IHS Markit
25 U.S. Light Vehicle VIO Unit Growth - 2018-2023 2018 Total European Makes 21M units 2023 Total European Makes 26M units 2018 Total Asian Makes 104M units 2023 Total Asian Makes 119M units 2018 Total Detroit-3 Cars 147M units 2023 Total Detroit-3 Cars 150M units Source: IHS Source: Markit IHS 2018 Markit Forecast
Trend #3: The vehicle population continues to age impacting the aftermarket sweetspot in a good way.
27 Average Age History Cars & Light Trucks Combined 12.5 # of Years 12.0 11.5 11.0 10.5 10.0 9.6 9.7 9.7 9.8 9.8 9.9 10.0 10.3 10.6 10.9 11.1 11.311.4 11.5 11.6 11.6 11.7 9.5 9.0 8.5 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: IHS Markit
28 2002: U.S Light Vehicle VIO by Model Year 20,000 18,000 6 to 11 33% New to 5 36% Thousands 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 12+ Years Old = 31% Total 2002 VIO = 231M Source: IHS Markit
29 2017: U.S Light Vehicle VIO by Model Year 20,000 18,000 16,000 +39MM Units 6 to 11 26% -7% New to 5 34% -2% 14,000 12+ Years Old = 40% Thousands 12,000 10,000 8,000 +9% 6,000 4,000 2,000 0 Total 2017 VIO = 272M Source: IHS Markit
30 Impact on VIO Age Groups - 2018-2023 Vehicles new to 5 yrs old grow 2% Vehicles 6 to 11 yrs old grow 27% -27 % Vehicles 16+ yrs Vehicles 12 to 15 yrs old grow old grow 22% The oldest vehicles - 16+ - will reach same size as new-to-5 age group!! Source: IHS Markit 2018 Forecast
31 Average Age Impact on VIO Units 2002 New 5 Year Old 84m units 2018 New 5 Year Old 83m units 2023 New 5 Year Old 84m units Segment remains flat after decline due to recession s impact on new vehicle sales & current sales plateau. Source: IHS Markit 2018 Forecast
32 Average Age Impact on VIO Units 2002 16+ Year Old 34m units 2018 16+ Year Old 69m units 2023 16+ Year Old 84m units 23 million units will be 25 years or older by 2023! Source: IHS Markit 2018 Forecast
33 Growth of Sweetspot 6-15 Yr Old Vehicles Detroit-3 v Imports 2002 Total Detroit-3 Makes 82M units 2018 Total Detroit-3 Makes 63M units 2023 Total Detroit-3 Makes 58M units 2002 Total Import Makes 31M units 2018 Total Import Makes 58M units 2023 Total Import Makes 67M units Import Makes Grow from 50M Units Behind to 10M Ahead of Detroit-3 for the Key Age Segment of 6-15 Year Old Vehicles! Source: IHS Source: Markit IHS 2018 Markit Forecast
Trend #4: OEM need for and consumer acceptance of battery electric vehicles is keeping the I.C.E. a key repair opportunity well into the future.
35 IHS Markit forecast leads to light vehicle compliance by 2024 Passenger Car Compliance US Industry Light Truck Compliance US Industry 260 240 CO 2 g/mi Alternative 1 Standard 350 CO 2 g/mi 220 300 200 250 180 160 200 140 150 120 100 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 100 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Source: IHS Markit 1H 2018 VPAC 2018 IHS Markit Source: IHS Markit 1H 2018 VPAC 2018 IHS Markit Alternative 1: 37mpg for Model Yrs 2021-26 v. 47.6mpg by 2025 as per 2012 regulations
36 IHS Markit forecast methodology - The virtuous circle of boundary considerations Regulation and incentives Tooling investments Vehicle production ICE powertrain production and sales Plant composition OEM objectives Fuel price R&D life cycle Policy, regulation, and incentives Density and xev cell supply chain Production and Sales Infrastructure Supply chain logistics Consumer preference analysis Cost Charge time Shutdown effects CERA scenarios IHSM takes an holistic approach to technology, volume timing, and sizing when forecasting. Analysts are continually encouraged to understand, question, and evaluate the hype, but not have a predisposition to accept it.
37 Global Platforms Consolidate / Become Vocation-Driven Volume per Platform Global Platform Consolidation 800,000 200 182 700,000 677,000 180 160 600,000 137 140 500,000 120 400,000 100 300,000 80 284,000 60 200,000 40 Global Platform Count Conventional Some conventional platforms can implement batteries, but cannot change the overall architecture to form a battery driven vehicle assembly. Multi-Energy Initially designed to support both BEV and conventional powertrain vehicles. Structure is more flexible than conventional platform. Battery Electric While BEV platforms will demand greater attention (technology), multienergy platforms will have highest volume opportunities over next 15 years Platform is designed only for pure BEV applications. Skateboard style architecture allows for more battery capacity and more interior space with the same vehicle size. 100,000 0 2000 2025 20 0 Global Platform Count Volume/Platform Source: IHS Markit 2018 Forecast
38 Global Powertrain Technology Trends Electrification will Intensify, but Don t Count out the Internal Combustion Engine % of Global Light Vehicle Production 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 94% ICE Only Global Light Vehicle Production by Powertrain Type (%) 0% 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 FCEV BEV PHEV FHEV MHEV ICE 92% ICE 51% ICE Only ICE: Internal Combustion Engine & Stop/Start MHEV: Mild Hybrid Electric Vehicle FHEV: Full Hybrid Electric Vehicle PHEV: Plug-in Hybrid Electric Vehicle BEV: Battery Electric Vehicle FCEV: Fuel-Cell Electric Vehicle Source: IHS Markit 2018 Forecast
39 IHS Markit Forecast Technology Assumptions New technology applied to traditional I.C.E. leads the way Technology Baseline Assumptions IHS Markit 2025 US Technology Assumptions (Baseline Forecast) IHS Markit 2018 US Technology Assumptions (H1 2018 Forecast) IHS Markit 2025 US Technology Assumptions (H1 2018 Forecast) Super/Turbocharging 31.2% 54.9% Cylinder Deactivation (including Dynamic Skipfire) 11.2% 15.8% Advanced Trans (>6 speeds +CVTs+EVTs) 73.4% 90.7% 12V Start Stop 22.4% 60.3% Mild HEV 0.3% 10.7% Full HEV 2.5% 4.4% PHEV 0.7% 5.5% BEV 0.7% 4.6% Source: IHS Markit 2018 Forecast
40 Incentives Supporting EV Sales are Drying Up EV Sales in Georgia 10 Yr History of Monthly Sales 2008-2018 1,400 1,200 1,000 800 600 Removal of state $5,000 incentive GM and Tesla are running out of federal $7,500 credits within the next few months. Ford and Nissan are 12-18 months from the same position. 400 200 0 Source: IHS Markit 2012 2015 2018 IHS Markit Will they continue to be able to sell electric vehicles as a core compliance strategy or will other technology need to proliferate?
41 Electric Vehicles Remain non-factor as Part of VIO 250,000,000 U.S. VIO by Fuel Type 200,000,000 150,000,000 100,000,000 50,000,000 2018 Alt Propulsion 9.6% 2018 Hybrid/Elec 1.8% 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 DIESEL GAS CNG FLEXIBLE PLUG IN HYBRID NON PLUG IN HYBRID ELECTRIC Source: IHS Markit
42 Electric Vehicles Remain non-factor as Part of VIO even in CA California Light Vehicles by Fuel Type 35000000 30000000 2009-2018 VIO = +13% 25000000 20000000 2009-2018 Hybrid/Elec = 8x 15000000 10000000 2009 Hybrid/Elec = 345K 1.3% 2018 Hybrid/Elec = 2.7M 8.7% 5000000 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 DIESEL GAS CNG FLEXIBLE ELECTRIC PLUG IN HYBRID NON PLUG IN HYBRID TOTAL Source: IHS Markit
Trend #5: Autonomous vehicles are on the horizon but the supporting technology is here and entering our repair bays today.
44 Autonomous Vehicles on the Road Today but not for sale
45 Autonomy Short-term vs. Long-term Focus Level 2-3 Customer-focus implementation Autonomous will increasing emerge as a true market differentiator Level 4-5 Regulatory, societal and technical challenges continue Growth accelerates after 2030 to 30+ mil by 2040 ADAS: Advanced Driver Assistance Systems Source: IHS Markit
46 Autonomous Driving: When, Not If But a Longer Term Proposition Growth accelerates post-2025 Autonomous = SAE L4 + L5 33M in 2040 up from 51,000 in 2021 First production-line L4 autonomous vehicles in 2019, all deployed in mobility fleets GM Bolt for Maven, Lyft, or Cruise Waymo FCA Pacifica in Waymo service Volvo Uber s 24,000 XC90 order 2019 21 Mobility services drive early volumes into fleets in China and the United States Ownership remains strong in Europe and the United States
47 The Vehicle Sensing Systems Under Development Ultrasonic Sound wave Short-range (0 9m) Applied in very low speeds Relatively inexpensive Snow and rain interference Radar Electromagnetic wave Short and long-range (0 250m) Other car speed and distance in real time Relatively high cost Robustness to rain, snow and fog interferences Camera Colors and fonts identification Short and long-range (0 125m) Traffic signs, lights, & lane markers identification Requires significant computing resources Weather condition interferences Lidar Laser beam Short & long-range (0 200m) Obstacles identification Even more expensive than radar (cost coming down) No interference or metallic material reflection
48 Significant incremental technology required to reach L4 autonomy Sensors in leading public automated driving platforms Tesla Model S L2 Mercedes S-Class L2 Audi A8 L3 Cruise AV L4 Toyota 3.0 Lidar 0 0 1 5 8 Radar 1 7 6 21 10 Camera 6 1 5 16 12+ L4 Common sensor additions from L2 to L3: > Front lidar > Multiple surround cameras and/or radar > Mid-range central compute system Common incremental sensor additions for L4: > Multiple surround lidar > Multiple surround radar > Multiple surround camera > High performance central computing system* Notes: Does not include non-automated-driving sensors, e.g. park assist cameras. Source: IHS Markit *plus upgrades to vehicle network and adjacent components Source (left to right): IHS Markit IHS Markit Wikimedia, Creative Commons License NHTSA
49 Latency Time Waiting time for signal from vehicle to detect a road obstruction and start communication with the car to avoid the obstacle LT = 50 milliseconds LT = 1 millisecond* * In development
50 Connectivity Telematics Control Unit (TCU) Bandwidth Group TCU Bandwidth Global Light Vehicle Production 100% 90% 7% = 5G 80% 70% 60% 50% 40% 30% 20% 10% 0% Source: IHS Markit 45% <4G 2016 2017 2018 2019 2020 2021 2022 2023 2G+ 3G 3G+ 4G LTE 4G+ 5G 15% <4G 2017 IHS
51 Heads Up Display Evolution or Revolution?
52 Head-Up Display volume surpasses 11m units in 2023 Head-up display, location by volume Global Production 12,000,000 14% 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000-2016 2017 2018 2019 2020 2021 2022 2023 12% 10% 8% 6% 4% 2% 0% Windscreen (Minus CWO) Combiner Collision Warning Only Automotive HUD Penetration Rate HUD volume will more than TRIPLE over 7 year period (2016-2023) HUDs will reach nearly 13% global penetration Windscreen projection and Combiner will essentially split the market Source: IHS Markit Head-up display model level forecast: January 2018 revision 2018 IHS Markit
53 Vehicle sensors proliferate Audi A8 Cadillac CT6 Lucid Air Global ADAS Sensor Summary millions of units 300 250 19.2% CAGR Millions 200 150 Tesla Model 3 Mercedes A-Class Nissan Serena 100 50 0 2016 2017 2018 2019 2020 2021 2022 2023 Camera Radar Lidar Source: IHS Markit 2018 IHS Markit
54 Advanced Driver Assist Systems Growing Rapidly Building Blocks of Autonomy Offer Compelling Near-Term Growth Prospects Park Assist Side & Rear Mirror Camera ADAS Unit Growth CAGR 2016-2023 Global Blind Spot Detection Adaptive Cruise Control Surround View Driver Monitoring Collision Warning & Avoidance Lane Departure Warning Autonomous Park Assist Autopilot 0 10 20 30 40 50 60 Full Driver Control Driver Assisted Fully Autonomous Car Source: IHS Markit
55 Consumers Must Have Confidence The Aftermarket Industry has the needed parts & technicians to service this new technology.
56 Aftermarket Outlook Includes both Challenges & Opportunities Medium Term: VIO growth continues Aging vehicle population selling to 3 rd, 4 th 5 th owner Electrification coming but will see more ICE & transmission technology coming on even faster ADAS technology already here and accelerating Must convince consumer we have parts & trained technicians to repair the next generation vehicles
57 Aftermarket Outlook Includes both Challenges & Opportunities Longer Term: Personal vehicle ownership replaced by fleet services Reduced VIO as mobility model changes Much higher VMT per vehicle Repair model shifts from consumer making decisions to fleet contract service Threat from lack of access to vehicle generated data
58 1. Light vehicle sales plateauing at record levels supporting VIO growth 2. Future repair opportunities being impacted by the rapidly changing vehicle mix 3. Vehicles continue to age and having positive impact on aftermarket sweetspot 4. The I.C.E. remains a key repair opportunity as battery/electric powertrains increase slowly 5. Autonomous vehicles remain on the horizon, but the technology is here today 2017 IHS Markit. All Rights Reserved.
Thank You Mark Seng Global Aftermarket Practice Leader IHS Markit 248.728.7350 Mark.Seng@ihs.com