Wholesale Market Insights Through March 2018 J o n a t h a n S m o k e & Zo R a h i m - C o x A u t o m o t i v e
T R A N S F O R M I N G T H E W A Y T H E W O R L D B U Y S, S E L L S & O W N S C A R S
Manheim Used Vehicle Value Index Concept: A single measure of used vehicle price change that is independent of underlying segment shifts in the characteristics of vehicles being sold Steps: All Manheim U.S. sales Classify by market segment Account for differences in mileage Weight to provide unchanging segment mix Seasonally adjust 3
Manheim Used Vehicle Value Index Down From Record Levels March was down slightly versus February but saw a 5.4% increase from March 2017 135 130 130.8 125 120 115 110 105 100 January 1995 = 100 95 90 Jan-95 Jan-98 Jan-01 Jan-04 Jan-07 Jan-10 Jan-13 Jan-16 Source: Manheim, Cox Automotive 4
Manheim Used Vehicle Value Index Y/Y Trend The year-over-year trend saw improvement in March from 4.9% and 5.1% in two prior months 25% 20% 15% 10% 5% 5.4% 0% -5% -10% -15% Jan-96 Jan-99 Jan-02 Jan-05 Jan-08 Jan-11 Jan-14 Jan-17 Source: Manheim, Cox Automotive 5
Wholesale Used Vehicle Prices vs. New Vehicle Prices $14,000 Y/Y new prices now up 2% while wholesale up 5% and inflation up 2% $39,000 $13,500 $13,000 $12,500 $12,000 $37,000 $35,000 $33,000 $11,500 $11,000 $10,500 $10,000 $31,000 $29,000 $27,000 $9,500 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 $25,000 Manheim Non-Adjusted Price (LHS) Average new vehicle transaction price per KBB (RHS) Source: Manheim, Kelley Blue Book, Cox Automotive 6
Weekly Tax Refunds (in billions) $80 2014 2015 2016 2017 2018 $70 Week ending 2/16/18 $60 $50 $40 $30 $20 $10 $0 Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8 Week 9 Source: IRS 7
3-Year-Old Vehicles Saw Abnormal Depreciation Pattern in 2017 110.0% 2018 started softer but price level of 3YO Models now stronger 3-Year-Old Model Index by Week 105.0% 100.0% 95.0% 90.0% 85.0% 80.0% 1 2 3 4 5 6 7 8 9 10111213141516171819202122232425262728293031323334353637383940414243444546474849505152 2015 2016 2017 2018 Source: Manheim Manheim Market Report (MMR) 3 Year Old Model Weekly Trend, Cox Automotive8
Retention Values Now Slightly Up From Last Year 63% 61% 59% Retained Value as a % of MSRP 57% 55% 53% 51% 49% 47% CY 2016 CY 2017 CY 2018 (1 to 3 year old models) 45% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Kelley Blue Book Auction Values as a % of MSRP and New Vehicle Sales Weighted 9
Percent Change in Wholesale Prices for Major Market Segments All major segments saw year-over-year gains in March 30% 25% 20% 1 year 2 years 3 years 4 years 15% 13.4% 10% 5% 0% 5.4% 5.4% 0.9% 4.1% 5.5% 5.1% -5% -10% -15% Industry Compact cars Midsize cars Luxury cars Pickups SUV/CUV Vans Source: Manheim, Cox Automotive 10
Shifting Consumer Preferences Not Reflected in Used Volumes Cars still dominate the wholesale market, while the SUV reigns supreme in new New Vehicle Sales by Category Manheim Sales in March CAR PICKUP SUV VAN 60% 50% 46% 6% 40% 30% 33% 32% 51% Car Pickup SUV 20% 16% Van 10% 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 5% 11% Source: Motor Intelligence/Autodata, Manheim, Cox Automotive 11
Average Auction Price Rental Risk Units $17,500 $17,000 $16,500 Average price for rental risk units sold in March up 7% y/y and up 4% m/m 2015 2016 2017 2018 $16,000 $15,500 $15,000 $14,500 $14,000 $13,500 (mix and mileage adjusted) 1 2 3 4 5 6 7 8 9 10 11 12 Source: Manheim, Cox Automotive 12
Average Mileage Rental Risk Units Sold at Auction Average mileage for rental risk units sold in March was 13% above a year ago 60,000 55,000 50,000 45,000 40,000 45,081 35,000 30,000 25,000 20,000 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Source: Manheim, Cox Automotive 13
Distribution of Rental Risk Vehicles 2016 Q1 2017 Q1 2018 Q1 Number of unique year, make, model, body configurations sold 3,481 2,736 3,005 Share accounted for top 10 YMMB 18.3% 13.4% 13.1% Share accounted for top 25 YMMB 30.0% 25.1% 23.3% Number of YMMB to reach 50% share 74 82 108 Source: Manheim, Cox Automotive 14
Rental Risk Units Sold by Condition 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2 2017 Q3 2017 Q4 2018 Q1 0-1.9 2.0-2.9 3.0-3.9 4.0-4.9 5 Source: Manheim, Cox Automotive 15
Rental Risk Units Sold by Make 100% 90% 80% 70% 60% 50% 40% 30% 20% All other Mazda Kia Jeep VW Chrysler Hyundai Dodge Toyota Nissan Ford Chevrolet 10% 0% 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2 2017 Q3 2017 Q4 2018 Q1 Source: Manheim, Cox Automotive 16
Rental Risk Units Sold by Market Segment 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% Van SUV Sports Car Pickup Luxury Car Midsize Car Compact Car 20.0% 10.0% 0.0% 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2 2017 Q3 2017 Q4 2018 Q1 Source: Manheim, Cox Automotive 17
Manheim Market Report (MMR) Vehicle Insights Most top selling vehicles in March at Manheim showed appreciation in the last 30 days (Mar 5- April 4), while depreciation over the last 12 months has been normal to below normal. Rank Source(Rank) Category Subcategory Vehicle 4-Apr Past 30 Days Last Year Current Dep L12M Dep/Mo 1 All Midsize Car Midsize Car Premium 2015 NISSAN ALTIMA 4C 4D SEDAN S $10,800 $10,550 $11,300 2.4% -0.4% 2 All Van Van Compact 2017 CHRYSLER PACIFICA 4D WAGON TOURING-L $21,900 $22,100 $24,900-0.9% -1.0% 3 All Luxury Luxury Car Premium 2015 MERCEDES-BENZ C CLASS 4D SEDAN C300 4MATIC $9,350 $9,175 $9,200 1.9% 0.1% 4 All Midsize Car Midsize Car Premium 2013 VOLKSWAGEN PASSAT 5C 4D SEDAN SE $15,100 $15,100 $16,700 0.0% -0.8% 5 All Compact Car Compact Car Premium 2017 HYUNDAI ELANTRA 4D SEDAN SE $11,000 $10,900 $12,100 0.9% -0.8% 1 Dealer Dealer Midsize Car Midsize Car Premium 2015 NISSAN ALTIMA 4C 4D SEDAN S $10,800 $10,550 $11,300 2.4% -0.4% 1 Lease Lease Midsize Car Midsize Car Premium 2015 NISSAN ALTIMA 4C 4D SEDAN S $10,800 $10,550 $11,300 2.4% -0.4% 1 Rental Rental Midsize Car Midsize Car Entry 2017 CHEVROLET MALIBU 4D SEDAN 1LT $13,850 $13,650 $16,350 1.5% -1.3% Source: Manheim, Cox Automotive 18
While Used Sales Continue to Climb 40,000,000 Annualized Used Vehicle Sales 39,000,000 38,000,000 37,000,000 36,000,000 35,000,000 34,000,000 33,000,000 Source: Cox Automotive estimates based on IHS Markit Registrations 19
Dealer Sentiment Points to a Strong Spring Cox Automotive s Q1 2018 Dealer Sentiment Index indicated that dealers are more positive about the current market than they were in Q4, but their expectations for the next quarter (2Q 2018) were up even more substantially. The index for the next three months was 70, indicating substantially more dealers expect conditions to be strong in the future compared to those who believe conditions will be weak. Other significant improvements include a decline in pressure to lower prices, an increase in dealers ability to get credit, and increases in new- and used-vehicle inventory levels. The Q1 2018 CADSI also included questions about impact of tax reform. The majority of dealers expect the 2018 tax reform plan to have a positive impact on their business, as their customers will have more disposable income. Franchises were the most positive about tax reform and were more likely to cite tax reform as an opportunity to invest more in employees. Source: Q1 Dealer Sentiment Research, March 2018 20
Growth of Off-Lease Is Decelerating 4.5 4.2 4.3 4 3.9 3.6 3.5 3.1 3 Millions of Vehicles 2.5 2 1.8 2.0 2.1 2.5 1.5 1 0.5 0 2012 2013 2014 2015 2016 2017 2018F 2019F 2020F Source: Cox Automotive 21
The Composition Gets Richer 60.0% SHARE OF LEASE MATURITIES CAR CUV SUV PICKUP VAN 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 2016 2017 2018 2019 2020 Source: Cox Automotive 22
The Top Growing Vehicles Are Trucks and SUVs Source: Cox Automotive 23
Source: Cox Automotive 24
Jonathan Smoke & Zo Rahim Economic Industry Insights jonathan.smoke@coxautoinc.com zohaib.rahim@coxautoinc.com 25