MEXICO AUTOMOTIVE OUTLOOK - PDF Free Download

Agenda Global Outlook US Sales NAFTA Production Mexico Production Domestic Market Key Takeaways 2

Jun-2005 Sep-2005 Dec-2005 Mar-2006 Jun-2006 Sep-2006 Dec-2006 Mar-2007 Jun-2007 Sep-2007 Dec-2007 Mar-2008 Jun-2008 Sep-2008 Dec-2008 Mar-2009 Jun-2009 Sep-2009 Dec-2009 Mar-2010 Jun-2010 Sep-2010 Dec-2010 Mar-2011 Jun-2011 Sep-2011 Dec-2011 Mar-2012 Jun-2012 Sep-2012 Dec-2012 Mar-2013 Jun-2013 Sep-2013 Dec-2013 Mar-2014 Jun-2014 Light vehicle sales Millions World auto sales on a roll Auto Demand Trends- Wobbles or bigger worries/ July 2014 World Sales on a roll But the strong climb has tapered off in recent months 90 85 80 75 70 65 60 55 50 45 40 World SAAR and Trend World Without China, SAAR and Trend Source: IHS July 14 3

L,V, Sales in millions Auto Demand Trends- Wobbles or bigger worries/ July 2014 Where the auto sales momentum was last year All the Growth was in the worlds two biggest markets, Europe better than feared, EM s already fading 82 80 78 76 74 72 75.6 Million 79.6 million 14.7% +2.7 million 7.3% -0% -0% 1.5% - 0.6% -4% -1.8% +1.2m -16K -15K 96K -30k -190K -230K 4.5% +3.6M 83.2 million 70 68 66 64 2011 2012 Greater China North America Japan/ Korea South Asia South America Central/ Eastern Europe Middle East/ Africa Western Europe 2013 Source: IHS 4

Jan'07 Jan'08 Jan'09 Jan'10 Jan'11 Jan'12 Jan'13 Jan'14 Seasonally Adjusted Selling Rates Indexed 2007=1 Region light vehicle selling rates China remains on different path than other developing markets 2.8 2.6 2.4 ASEAN C Europe E Europe Gr China India Japan Korea Mid-East/Africa N America S America W Europe GC 2.2 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 2007 Sales Level Lehman Collapse AS IN SA JK MEA NA EE WE CE 0.4 Source: IHS Analysis, X12 Seasonal Adjustment

L,V, Sales in millions Million units Where the auto sales growth is for 2014 Now all three of the worlds biggest markets help (for the first time since 2007).but EM s turn down 86.2 + 0.2 0 0 % - 0.2 + 0.5 +4% -1% - 0.5 85.7 85.2 +8.8% + 1.9 + 0.5 +3% +4% -7.8% - 0.4-7.9% 85.4 million 84.7 84.2 2.7% +2.2M 83.7 83.2 million 83.2 2013 Greater China North America West Europe Middle East/Africa July 14 South Asia Japan/Korea South America Central/East Europe 2014 6

Percent of responses Auto Demand Trends- Wobbles or bigger worries/ July 2014 The financial markets are questioning if emerging market weakness is more than just fall-out from tapering What is the most important risk to financial markets in the next 12 months? 40 35 30 25 20 2013 - Q4 2014 - Q1 15 10 5 0 Eurozone tensions Fed policy withdrawal Weak Developed Market Growth Weak China/EM Growth Geopolitics Source: Barclays Research - Quarterly Survey of Financial Institutions, other risks not included 7

Light vehicle sales Millions Global Light Vehicle Sales Auto Demand Trends- Wobbles or bigger worries/ July 2014 Long term forecast has been lowered despite sales overshoot in 2013 120 110 100 90 80 70 Current July 2013 60 50 40 Source: IHS July 14 8

Light vehicle sales Millions Auto Demand Trends- Wobbles or bigger worries/ July 2014 Forecast Evolution- Reflecting a slower pace of economic reforms in many EM economies Potential of BRIC s and ROW markets lowered, Mature Triad Markets get some momentum 50 45 40 35 30 25 20 15 10 5 0 TRIAD BRIC ROW TRIAD Jun-13 BRIC Jun-13 ROW Jun-13 Notes: Triad is Traditionally US, WE and Japan ( this chart also includes Canada and Korea) Source: IHS July 14 9

TTIP- Transatlantic Trade and Investment Partnership US-EU FTA negotiations are ongoing Economy US EU 47% of world GDP and 35% of global auto sales Estimates a strong FTA could eventually add 0.4 to 0.5% p.a. to US and EU GDP - if so vehicle sales could be 1/2m units higher in the combined block Tariff Free Vehicle Flows Probable total elimination of all Bi-lateral auto tariffs on built up vehicles likely phase in period for trucks (LCV and PUP s) Harmonized standards Components / Supply Chain Enhanced compatibility of regulations and standards more likely than harmonising to same standards (ACEA estimate this to be equivalent to monetary tariff of 26%) Mutual acceptance of safety standards is key issue Can it slow or reverse off-shoring of component sourcing on both sides of the Atlantic? Current trade is quite small -US Exports $5Bn to EU, Imports about $14Bn from EU

Light vehicle sales Auto Demand Trends- Wobbles or bigger worries/ July 2014 Contingency Planning Forecasts :- But what if current EM weakness spirals into recession? Global Auto Sales : Alternative Forecasts for Contingency Planning 120,000,000 110,000,000 100,000,000 Baseline Optimistic Pessimistic Consumer rebound everything goes right Volume sensitivity for 2015 auto sales vs base Region Pess. Case World -7% 90,000,000 WE -3% 80,000,000 70,000,000 Taper panic grows EM weaknesses exposed topple not just wobble NA -5% China -8% 60,000,000 50,000,000 EE -14% SA -15% SE Asia -12% In Pessimistic case World GDP falls to below 2% in 2014 and just 2.5% in 2015 Source: IHS Quarterly service for contingency forecast planning Vehicle Production and Sales 11

Agenda Global Outlook US Sales NAFTA Production Mexico Production Domestic Market Key Takeaways 12

Intention to Buy New Vehicle in 6 Months 6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 (Percent Yes) Not just a needs based recovery, but wants driven Conference Board 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 6 Month Moving Average Actual 13

Auto Loans Delinquency Rates 4.0 (% - Accounts past due 30 days or more) 3.5 3.0 2.5 2.0 1.5 1.0 The first uptick in dealer delinquency rates in a year 0.5 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 Direct (Bank) Loans Indirect (Dealer) Loans Source: American Bankers Association Months 14

New Vehicle Buyers - Average Credit Score 760 740 720 700 680 660 640 Avg. Score 25% 23% 21% 19% 17% 15% 13% 11% 9% 7% 620 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 5% FICO SCORE % UNDER 670 Source: CNW Marketing 15

New Vehicle Sales By Credit Score 25% Subprime credit has started to become available 20% 15% 10% 5% 0% Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Source: CNW Marketing Near 620-679 Sub 619 Months 16

New Auto Loan Application Approvals 85% Growth in jobs will return loan approvals back into the seventies 80% 75% 70% 65% 60% 55% Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Source: CNW Marketing Unweighted Average of Prime, Near and Subprime Months 17

Incentives to MSRP 25 (Percent) 23 21 19 17 15 13 Incentives activity is still under control 11 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 CNW Marketing Months

Residual Value Index 100% Residual values are strong for all manufacturers, the playing field is level (Index = Lease contract residual value versus CNW estimate of residual at end of lease term) 90% 80% 70% 60% 50% 40% 30% Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 GM Ford Chrysler Industry Toyota Honda Nissan Source: CNW Marketing Months 19

U.S. New Light Vehicle Sales Lease Penetration (Share) 30% Lease activity is close to where it should be 28% 26% 24% 22% 20% Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Source: CNW Marketing Leases by Month 20

U.S. New Light Vehicle Inventory Days Supply Incentives will get rid of unwanted inventory, not production cuts 120 (Days Supply) 110 100 90 80 Light Trucks 70 60 50 40 Cars 30 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Months Seasonally Adjusted 21

U.S. Light Vehicles Scrappage 14500 (Units / Thousands) 6.0% 13500 5.5% 12500 11500 5.0% 10500 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 4.5% Total Vehicles Scrapped - L % of PARC - R 22

United States Light Vehicle Sales, SAAR June s SAAR was the best single month selling rate since July 2006 (Units in Millions) 22 21 20 19 18 17 16 15 14 13 12 11 10 9 8 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 23 ACTUAL

Light vehicle sales Millions United States Auto Demand Trends- Wobbles or bigger worries/ July 2014 Broaden tax base, consumption tax s Structural reform agenda* Education to reduce income inequality 18 16 Pent up demand played out Financial regulation 14 12 10 IHS Forecast from 2010 8 6 Notes: * Reform agenda based on prescriptions by OECD Going for Growth 2012 Source: IHS July 14 24

U.S. Light Vehicle Sales: Relative to Employment 19% (Percent) 17% 15% 13% 11% 9% 7% 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 Non-farm Payroll Linear (Non-farm Payroll) 25

U.S. Sales Manufacturers Market Share (Light Vehicle Share) 24% Market share is wide open and up for grabs 20% 16% 12% 8% 4% 2005 2007 2009 2011 2013 2015 2017 2019 2021 GM FORD CHRYSLER/FIAT TOYOTA HONDA NISSAN HYUNDAI/KIA 26

U.S. Sales Manufacturers Market Share 6% (Light Vehicle Share) 5% 4% 3% 2% 1% 0% 2005 2007 2009 2011 2013 2015 2017 2019 2021 HYUNDAI KIA SUBARU MAZDA MITSUBISHI VW GROUP 27

Agenda Global Outlook US Sales NAFTA Production Mexico Production Domestic Market Key Takeaways 28

Exports Expansion Localization Millions N. America - LV Sales and Production 22 20 18 Post Restructuring 16 14 12 10 8 Sales Production 6 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 From 2001-2009, regional sales eclipse output by 27% or 3.7 million units 2017 2021, future sales levels outpace production by less than 8.0% or by ~1.25 million units Positive sales trajectory tapers after peak in 2017 Long-term output nears 18.5M units far surpasses 16.0M unit pre-2009 levels 29

Output (Millions) North American Market Structure 2014 2020 20 United States Mexico Canada Change 50% 18 40% 16 30% 14 12 10 8 20% 10% 0% Y-O-Y % Change CAGR 1.2% 6-10% 4-20% CAGR 6.2% 2 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020-30% -40% CAGR -3.6% 30

North America Light Vehicle Production 2013 vs 2014 OEM 2013 (000s) 2014F (000s) % Units (000s) GM 3,287 3,375 2.7% 89 Ford 3,080 3,020-1.9% -60 Chry/Fiat 2,509 2,749 9.5% 240 Detroit 3 8,876 9,144 3.0% 269 Toyota 1,863 1,960 5.2% 97 Honda 1,782 1,828 2.6% 47 Ren/Nissan 1,470 1,718 16.9% 248 Hyundai 769 767-0.3% -2 Asian 4 5,884 6,273 6.6% 389 VW 654 626-4.2% -28 BMW 297 349 17.3% 51 Daimler 206 248 20.1% 41 German 3 1,157 1,222 5.6% 65 Others 260 379 45.9% 119 Total 16.2M 17.0M 5.2% ~842 Healthy production growth rate as recovery progresses Ford Down time for F- 150 and 2015 programs and less exports (MEX) Chrysler Fiat-based product ramps-up Nissan Migration of CUV production; Mexico expansion Honda and Mazda start new operations in Mexico! Source: IHS Automotive Light Vehicle Production Forecast 31

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Millions North America Light Vehicle Production Growth Prospects 18 15 12 9 6 3 0 1.6 15.6 0.6 15.1 1.4 German 3 0.5 2.4 2.9 4.4 4.9 17.2 2.9 2.9 4.7 5.6 0.8 4.6 2.5 2.9 4.2 8.6 0.5 3.2 0.9 1.9 1.9 13.1 1.0 4.1 2.0 2.7 3.1 15.4 1.3 5.5 2.4 2.8 3.2 17.3 6.4 2.4 2.4 3.1 3.4 18.1 6.8 3.2 3.4 Others Asian 4 Chrysler/ Fiat Ford General Motors Source: IHS Automotive Light Vehicle Production Forecast 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 32

North American Vehicle Exports (Millions) North America Light Vehicle Production Exports bolster prospects 2.0 1.8 1.6 1.4 North American Vehicle Exports by Region Europe South America Middle East/Africa Greater China Other 1.73 1.58 1.30 1.35 1.29 1.83 Greater use of global platforms allows for more export ready product 40+ Free trade agreements drive Mexican output 1.2 1.0 0.8 0.6 0.4 0.2 0.0 1.09 0.89 0.90 0.77 0.71 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Expansion of luxury segment capability across the region into Mexico EU sovereign debt crisis tempers EU exports, yet BRIC demand grows Sourcing patterns favor NA expansion as a safe haven; with currency hedge & export prospects Source: IHS Automotive Light Vehicle Forecast 33

Agenda Global Outlook US Sales NAFTA Production Mexico Production Domestic Market Key Takeaways 34

Mexico Light Vehicle Production More growth to come 5.0 4.5 (Millions of units) Forecast at risk due to Brazil 4.0 3.5 3.0 2.5 2.0 1.5 1.0 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 PROD

North American Vehicle Exports (Millions) North America Light Vehicle Production Exports bolster prospects 4.0 3.5 3.0 2.5 2.0 1.5 1.64 Mexico Vehicle Exports by Region Europe South America Middle East/Africa Asia North America 2.64 2.32 2.37 2.14 1.98 1.71 1.76 1.37 2.94 3.25 Greater use of global platforms allows for more export ready product 40+ Free trade agreements drive Mexican output Expansion of luxury segment capability across the region into Mexico SA exports hurt by Brazil and Argentina 1.0 0.5 0.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: IHS Automotive Light Vehicle Forecast Sourcing patterns favor NA expansion as a safe haven; with currency hedge & export prospects 36

Global Top 10 Production Countries 2010 2013 2015 2020 1 China China China China 2 Japan United States United States United States 3 United States Japan Japan Japan 4 Germany Germany Germany India 5 South Korea South Korea India Germany 6 India India South Korea Mexico 7 Brazil Mexico Brazil Brazil 8 Spain Brazil Mexico South Korea 9 Mexico Thailand Spain Thailand 10 France Canada Thailand Spain Mexico is definitely on the industry s radar Will continue to ascend among Top 10 in the 2015-2020 time period Could build more than Brazil! 37

Agenda Global Outlook US Sales NAFTA Production Mexico Production Domestic Market Key Takeaways 38

Mexico Light Vehicle Sales SAAR vs. Consumer Confidence 1200 Thousand Units Index 120 1100 110 1000 100 900 90 800 80 700 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 70 LV Sales (left scale) Consumer Confidence 39

Millions Mexico Light Vehicle Sales More manufacturing bring us to new highs? 1.3 1.2 Units Forecast calls for increased competition and more credit 35% 25% 1.1 15% 1.0 5% 0.9-5% 0.8-15% 0.7-25% 0.6 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 Light Veh -L Annual Change -R -35% 40

Mexico Light Vehicle Sales Market Share 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% Percentage Nissan, GM and VW will face competition 0% 2005 2007 2009 2011 2013 2015 2017 2019 Others Mitsubishi Daimler Suzuki BMW Mazda Honda Toyota Ford Fiat Volkswagen General Motors Renault/Nissan

C S E D A N Mexico OEM Positioning for Strategic Segments 2020 200000 2005 100000 0 2010 Renault/Nissan Volkswagen Toyota Mazda C S U V 2020 30000 2005 20000 10000 0 2010 Honda Renault/Nissan Fiat Toyota 2015 2013 General Motors 2015 2013 Ford B S E D A N 2020 2015 2005 150000 100000 50000 0 2013 2010 General Motors Ford Volkswagen Honda Toyota A H A T C H 2020 2015 2005 60000 40000 20000 0 2013 2010 General Motors Fiat Daimler Ford Volkswagen B H A T C H 2020 2015 2005 100000 50000 0 2013 2010 Volkswagen Renault/Nissan Ford Suzuki Honda B S U V 2020 2015 2005 30000 20000 10000 0 2013 2010 General Motors Ford Renault/Nissan Suzuki Fiat 42

Millions Mexico Light Vehicle Sales Global Segmentation 0.70 Units 0.60 0.50 0.40 0.30 0.20 0.10 0.00 A B C D E F HVAN 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Millions Mexico Light Vehicle Sales Bodystyle 0.60 Units 0.50 0.40 0.30 0.20 0.10 0.00 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Agenda Global Outlook US Sales NAFTA Production Mexico Production Domestic Market Key Takeaways 45

Key Takeaways Global growth is driven by TRIAD as opposed to emerging nations in 2014 US Sales in 2014 will present road map for future years NAFTA production looking healthy and exports will grow Mexican domestic market is showing signs of major slowdown Production investments see fruition in 2014! We are now a 3 million unit market quickly ascending to 4 million units! Continues to rely heavily on the US Domestic market, Colombia, Chile and Peru are promising Luxury Segment is key 46

Thank You for Your Participation! Guido Vildozo Manager, Latin America Vehicle Sales guido.vildozo@ihs.com

For more information, please contact IHS Customer Care 800 447 2273 (IHS CARE) +44 (0) 1344 328 300 Customer.Care@ihs.com 48