www.pwc.com Updates on the Automotive Industry PwC Automotive 7. June 2017 Automotive Logistics 2017
Transformation of the automotive industry Updates on the Automotive Industry PwC Automotive PwC 7. June 2017 2
1 Trends of the automotive industry The automotive sector is an industry of large numbers, broken down into smaller entities interconnected by logistics Global Light Vehicle Assembly 2014 2023 (millions) 120 BRIC & ASEAN* 12,9m units (64% of the total growth) 8,1 2,2-0.2 2,1 100 1,3 1,0 1,5 1,3 0,7 2,6 80 112,0 60 86,6 88,3 92,2 CAGR** 2,9% +20,2m units 40 2014 2015 2016 Mexiko USA EU Russland Brasilien Indien China ASEAN Japan Sonstige 2023F Quelle: Autofacts Analysis, Autofacts 2017 Q2 Forecast Release *ASEAN = Indonesia, Malaysia, Philippines, Thailand, Vietnam **CAGR = Compound Annual Growth Rate 3
1 Trends of the automotive industry The vision is clear: The car of the future is eascy electrified autonomous shared connected yearly updated Picture source: Volkswagen 4
1 Trends of the automotive industry Numerous challenges mark the way to the future of the global economy and of the global automotive industry - mobility and welfare are connected Protectionism Brexit Reorganization of the relations between the UK and global markets USA possible protectionism of the American economy against other countries in consequence of the political changes since 2017 Political instability Migration streams lead to a global growing number of refugees and emigrants Long-term consequences are currently not foreseeable, but they could result in changes of economic growth Environmental factors Emissions political initiatives which should reduce smog in urban areas CO 2 -targets uncertain transformation path to ecofriendly powertrain concepts Industry transformation Changed consumer behavior especially for younger customers and as a result of a progressing digitalization Business model transformation Future business models are currently developed and tested 5
Europe sales updates Updates on the Automotive Industry PwC Automotive PwC 7. June 2017 6
2 Europe as a sales market Uncertainty remains a risk factor that could undermine confidence in the months ahead and adversely affect European market EA & Top 5: Real GDP Annual Growth 2016 2018F (percentage change) United Kingdom EA & Top 5: Economic Sentiment Indicator 2014 2017 (101 = long run average) 120 Spain 110 Italy Germany 100 France 90 Euro area - 0,5% 1,0% 1,5% 2,0% 2,5% 3,0% 3,5% 2016 2017F 2018F Source: IHS kit, European Commission (April 2017) 80 2014 Jun 2014 Sep 2014 Dec 2014 2015 Jun 2015 Sep 2015 Dec 2015 2016 Jun 2016 Sep 2016 Dec 2016 EA DE FR IT ES UK 2017 7
2 Europe as a sales market Europe s new passenger car market maintains positive momentum in Q1 and still holds significant structural upside potential EU+EFTA: Rolling 12 Months Car Registrations 2008 2017 (millions) 17 16 15 14 EU+EFTA: New Car Registration Variance 1990 2017F (millions) 5 4 3 28-year high (1990-2017) 2017F 2016 28-year low (1990-2017) 13 12 11 2 1 10 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 0 Germany France United Kingdom Italy Spain Poland Czech Republic Rolling 12-Month Car Registrations Annual Registrations Source: ACEA, Autofacts Analysis 8
2 Europe as a sales market Autofacts expects light vehicle registrations to grow by +3.8% to 17.8m in 2017 with a perspective to higher sales driven by legislation impacts EU+EFTA: New Light Vehicle Registrations 2008 2023F (millions) 25 10% 20 6% 15 2% 10 (2%) 5 (6%) - 2008 2010 2012 2014 2016 2018F 2020F 2022F Car Registrations LCV Registratons YOY Change (R-Axis) (10%) Source: ACEA, Autofacts Analysis 9
Europe as a production location Updates on the Automotive Industry PwC Automotive PwC 7. June 2017 10
3 Europe as a sales market New products and continuous investments in plants are expected to keep utilization above 80% - capacity reductions are not on the horizon EU: Light Vehicle Assembly 2007 2023F (millions) 25 100% 20 3,4 4,8 5,8 4,7 4,1 5,4 4,7 4,5 3,6 3,7 3,6 3,5 4,1 3,7 3,9 3,9 3,8 80% 15 60% 10 18,8 17,4 14,7 16,2 16,9 16,0 16,1 16,8 18,1 18,7 18,9 19,3 19,4 20,2 20,2 20,2 20,2 40% 5 20% - 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F 2022F 2023F Assembly Volume Excess Capacity Utilisation (R-Axis) Source: Autofacts 2017 Q2 Forecast Release 0% 11
3 Europe as a sales market The European alliance group configuration has become much more dynamic with the PSA/ GME takeover but also new overseas OEMs setting up Top 10 Alliance Groups 2016 vs 2023F (millions) 6 5,4 5,1 5 5% 4% 4 3% 3 3,1 3,3 2% 2 2,3 2,3 2,1 2,1 1,8 1,9 1,8 1,5 1,6 1,2 1,1 1,2 1,2 1,0 1% 1 0,7 0,6 0,7 0,5 0% 0 VW PSA (f) RN* PSA Daimler BMW FCA** Ford GM Hyundai Tata (JLR) 2016 2023F CAGR (R-Axis) Source: Autofacts 2017 Q2 Forecast Release *RN=Renault-Nissan **FCA=Fiat-Chrysler Automobile -1% 12
3 Europe as a sales market Alternative drivetrains will be the most important growth area in the foreseeable future up to substituting current business structures EU Powertrain: Alternative Engine Type Distribution 2016 vs 2023F (thousands) 4.000 707,8 3.766,4 EU Powertrain: Hybrid Distribution** 2016 vs 2023F (thousands) 4.000 3.000 824,6 3.000 1.915,4 2.890,2 1.527,1 2.000 2.000 1.000 613,1 93,8 1.000 444,7 530,1-2016 Increase Full Hybrid Increase Mild Hybrid Increase Plug-In Hybrid Alternative Engines Source: Autofacts 2017 Q2 Forecast Release, *BEV = Battery Electric Vehicle, FCV = Fuel Cell Vehicle, **excl. BEV/FCV Increase BEV/FCV* 2023F - 2016 Increase Diesel Hybrid Increase Gasoline Hybrid Alternative Engines 2023F 13
Brexit Whiter Britannia? Updates on the Automotive Industry PwC Automotive PwC 7. June 2017 14
4 Brexit Whiter Britannia? In 2015 there was a massive revenue growth of 11.7% in UK s automotive sector But can this success story continue after the Brexit vote? +6.5% 2.63 million new cars registered in 2015 33.5 million vehicles in use in UK +4.7% +3.9% 1,587,677 cars built in 2015 1,227,881 vehicles exported in 2015-0.1% +11.7% 2,368,477 engines built in 2015 100+ import countries of vehicles out of British production +0.0% Source: SMMT +11.7% 71.6 billion UK automotive turnover 814,000 94,479 commercial vehicles built in 2015 people employed across UK Automotive +33.6% +5.7% 15
4 Brexit Whiter Britannia? With 2.3 million imported vehicles there are 85% more vehicles imported than exported a protective taxation policy would change this dramatically UK: Total imports and Top-4 exporting countries* 2010 (LV), 2015 (PC) (thousands) UK EU-27** 675.3 706.9 Total import 1,906.3 2,274.5 2010 2015 Russia 52.4 24.6 2010 2015 USA 43.4 2010 2015 86.0 Total Export 1,047.0 1,227.9 95.3 133.8 2010 2015 RoW*** 2010 China 2015 180.6 277.5 2010 2015 Source: SMMT, Autofacts Analysis *Export shares only available for Passenger cars **excluding UK ***Rest of World 2010 2015 16
4 Brexit Whiter Britannia? In the worst examined case, vehicle production in the United Kingdom would decrease to 1.1 million units by 2023: no FTA and high exchange rate! UK: Light vehicle assembly scenarios 2015 2023 (millions) 2,5 2,0 1,7 1,5 2,0 1,6 Turkey Scenario FTA* with EU & subsidies & low exchange rate New plants New R&D investment New hires South Korea Scenario FTA* with EU & high exchange rate Most likely under today s conditions Currently planned SOPs take place 1,0 0,5 2015 2016 2017F 2018F 2019F 2020F 2021F 2022F 2023F 1,1 Brasil Scenario No FTA* with EU & high exchange rate Relocation of production capacity to other EU plants No investments in R&D Factory closures Source: Autofacts 2017 Q2 Forecast Release *Free Trade Agreement 17
4 Brexit Whiter Britannia? If decisions were taken today, it would be theoretically possible to shift 2/3 of United Kingdom s light vehicle assembly volume to the EU by 2020 Effort of assembly shifting to the continent 2016 2023 (millions) 2,0 1,5 UK assembly share 2017 2023 16.9% Transfer to EU from UK Immediately feasible 1,0 49.3% Requires plant Refitting (1 years) 0,5 24.8% Brownfield Setup (2 years) 0,0 2016 2017F 2018F 2019F 2020F 2021F 2022F 2023F Source: Autofacts 2017 Q2 Forecast Release No equivalence Equal OEM Equal platform Equal vehicle 9.0% Greenfield Setup (3 years) 18
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Autofacts contact Christoph Stürmer Global Lead Analyst PwC Germany (Europe) T: +49 69 9585 6269 E: christoph.stuermer@de.pwc.com 20
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