THE AUTOMOTIVE INDUSTRY: GLOBAL DEVELOPMENTS OF SALES AND PRODUCTION

Paper constructed by

THE AUTOMOTIVE INDUSTRY: GLOBAL DEVELOPMENTS OF

SALES AND PRODUCTION

Paris : Jamel Taganza, Jean-Michel Prillieux

Introduction

Between 1980 to 2014, global vehicle production has increased by 125%. During this period, production has increased or decreased by a single digit. Only 2004 (+10%), 2009 (-12%) and 2010 (+24%) experienced a 2 digit increase or a decreased.

The main events of these last 10 years where the high growth of China and the automotive crisis in Europe (-20% of vehicles produced between 2007 and 2009) and the US (-47% of vehicles produced between 2007 and 2009). Since 2010, automotive production has increased continuously and surpassed pre-crisis level, except for Europe, which didn’t recover completely.

The Worldwide market has also increased, naturally driving global production upwards. Between 1980 and 2014, Asia-Oceania was the only region which had significantly increased. Other regions (Americas, Europe and the rest of the World), experienced variations but keeping the same volume of sales.

During the last decade, the combination of the economic crisis and its impact on historic automotive markets, political and economic instability in markets showing potential, the tremendous growth of China, but also the development of alternative ways of mobility gives a complex view of the Worldwide automotive industry.

What will the automotive market be like in the “realistic” term (2020-2025)? Which regions will increase, remain stable or decrease? Will China exports vehicle all around the World? Can a new economic crisis impact the automotive industry?

The objective of this presentation is to shed light on: The future of the Worldwide automotive market. We will scrutinize the current situation, analyse key factors of changes and build scenarios for future.

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Inovev is a worldwide automotive analysis company giving professionals access to continuously updated

information and analyses.

Economic data Technical data

PRODUCTION AND REGISTRATIONS DATA Quantities of cars Produced and registered in the world

country by country, carmaker by carmaker, plant by plant, model by model, year by year.

Period: 2005-2020 (achieved, current and forecasted)

DAILY ANALYSIS OF THE AUTOMOTIVE MARKET Analysis of the automotive market put into perspective with

production and registrations data compiled by Inovev

TECHNICAL ANALYSIS Analysis of products and processe innovations

for different technical communities (powertrain, materials, fasteners, bodies-in-white...)

TECHNICAL FILES

Main elements to support our customers’ analyses : Technologies evolution, benchmarking, supply chain,

competitors, market analysis

INOVEV: THE AUTOMOTIVE KNOWLEDGE PLATFORM

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Methodology

Collecting Raw Data

Source: Car Industry and Governments bodies

Type of data: -Economic (production and registrations) -Technical (innovations, processes, materials…)

1 Handling

Technical data: - Post of information and

analyses by automotive players on the Inovev Internet platform.

- Disassembly of cars.

Economic data: -Putting into Inovev’s norms -Estimation of production figures from sales data

2

Output 3 Analyses

- Market information and analyses

- Technical information and analyses

Experts: -Inovev analysts -Inovev’s worldwide network

4

Full and coherent databases

Technical information related to

customers’ interest

MARKET AND

TECHNICAL DATA

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Presentation map

Introduction Methodology

Key factors of change

World

Europe

Asia-Oceania

Americas

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Current situation: Sales and Production

World

Europe

China

USA

Future of the Automotive Industry: Production and Sales

Europe

Asia-Oceania

Americas

World

Conclusion

Focus on the powertrain market

Understand and forecast

What is production for a country/region? Production = Local Market + Exports + stocks variation.

What is a market for a country/region?

Market = Production for the local market + Imports.

To understand and forecast the variation of the production of one country/region, it is critical to analyse:

The local market evolution: From an economic and structural point of view. Countries where vehicles will be exported: Evolution, political stability, barriers to

entry… The local production capacity (opening and closing of plants, capacity variation,

success of the vehicles produced).

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Current situation: Sales and Production

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Worldwide PC+LUV Market (1980-2014)

8

Worldwide Sales and Production between 1980 and 2014 were characterised by: The tremendous growth of Asian market, driven by China.

A slow decrease of the European market and European production.

The dramatic variation of the American market in a short period between 2007 and 2009. The ratio sales/production is different between regions: The Americas import more vehicles than other regions, when Asia-Oceania exports more than other regions.

Sales Production

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oducts/products-comparison




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European PC+LUV Market (1980-2014)

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The European market was characterised by: A lot of variation for many countries. But France is one of the EU markets that experienced the least variation between 1980 and 2014.

The European production was characterised by: The increase of German production, driven by exports, despite strong variations during the crisis. The share of German production is higher in 2014 than in 1980. The drop of French production since 2006. The strong increase of Spanish production between 2000 and 2007. Spain is now the 2nd producing country in Europe. The drop of the Italian production. The relative stability of the UK production since 1995.

Sales Production

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European PC+LUV Exports (2014)

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European Exports by country destination (2014-TOP 10)

4 million vehicles exported in 2014:

Exports increased since 2009. Germany contributed to more than 50% of total European exports. USA and China are the main destination countries of European exports (40% of European exports).

European Exports by origin country (2014)

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European PC+LUV Imports (2014)

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Most imported models in Europe (2014)

2 million vehicles imported in 2014 Remain stable since 2009. Are mainly from Turkey (23%), Korea (17%), Japan (13%).

B-segment vehicles and SUVs are those mainly exported

European Imports by origin country (2014-TOP 12)

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Japan PC+LUV Market (2005-2014)

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The Japanese automotive industry is characterised by: A stabilisation of the local market. Despite the economic crisis in 2009 and the tsunami event in 2011, a relatively stable production market A high volume of exports (nearly 50% of the Japanese production). But the development of localised production since 2009. Japanese carmakers took advantage of the economic crisis to decrease the production in Japan A low level of imports.

Sales Production

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China PC+LUV Market (2005-2014)

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The Chinese automotive industry is characterised by: The most important potential market in recent automotive history. The most important growth of production volumes in a short period (+360% in 10 years!) A high percentage of localised production (Barriers to entry, JV). A low volume of imports (upper segments and Premium vehicles are imported). A low volume of exports (Mainly CVs. Trade Protectionism, Economical and political stability of markets targeted). A high percentage of the market acquired by non-Chinese carmakers (70% of vehicles sold in China and produced are by non-chinese carmakers).

Sales Production

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US PC+LUV Market (2005-2014)

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The US automotive industry is characterised by: A cyclic market with high variations during economical crisis. During the crisis period, it is local production that suffers, more than imports. 2014 production volume reached pre-crisis levels once again. A high volume of imports. US market is the country which imports the highest volume of vehicles. Exports mainly dedicated to Canada and Mexico.

Sales Production

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Future of the Automotive Industry: Production and Sales

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Europe 29 - PC+LUV Production (2014-2025)

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The global economic environment is a factor that affects the variation of the automotive market in the short term but societal factors should also be taken into account in this analysis and may impact the market in depth and in the long-term. Inovev market forecasts:

The Europe 29 market will increase, but remains under the 2007 level. Stabilisation of developed markets: Germany, UK, France. Recovery of Spain and Italy, which were more impacted by the crisis. The Europe 29 market will be driven by the rest of Europe

Inovev production forecasts: The European production will continue to increase (19,6 millions unit in 2025) close to the 2007 level (19,8 millions of units). European exports will stabilise for USA, increase slowly for China, Russia and Turkey. Other countries such as Korea and Algeria have a potential for exports.

Sales Production

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Asia-Oceania PC+LUV Production (2014-2025)

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Forecasts for Japan The Japanese market is mature (as is the European one) and will remain constant for coming years. The Japanese production will increase slightly, following the growth of ASEAN markets, but will be more and more localised in North and South America countries.

Forecasts for China The Chinese demand will be more and more focused in Central and West China instead of East China. The Chinese production will mainly follow local demand. Exports will remain low if the markets targeted still remain politically instable and restricted by trade protectionism.

Forecasts for the Rest of Asia Indian market and production will increase significantly by2025, depending on economic conditions. ASEAN markets and production countries will also increase, following the economic growth of each country.

Sales Production

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Americas PC+LUV Production (2014-2025)

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Forecast for USA The US market should recover to pre-crisis levels and then remain stable. The US consumers are still attracted and need vehicles US exports will remain at a low level, due to the characteristics of the models exported. US imports will increase from 2015 to 2025 but the origin of imports will change: Some imports from Europe, Japan and Korea will be transferred to Mexico. The US production will consequently remain stable, around a volume of 12 millions units

Forecast for other American countries The Canadian market will remain stable and production should decrease due to the competition of Mexico. The Mexican market and production will increase, due to economic growth and US demand. Brazilian market will experience variations. The production should be more and more focused on the local market.

Sales Production

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Worldwide PC+LUV Production (2014-2025)

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Sales Production

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Sales Forecasts

Region 2015/2014 From

2015 to 2020 From

2020 to 2025

Asia-Oceania +3% +4%/year +3%/year

Americas +0% +0,3%/year +0,3%/year

Europe 29 +5% +2%/year +1%/year

Rest of the World +6% -1%/year +0%/year

Production Forecasts

Region 2015/2014 From

2015 to 2020 From

2020 to 2025

Asia-Oceania +2% +3%/year +3%/year

Americas -1% +1%/year +0,5%/year

Europe 29 +5% +1,5%/year +1%/year

Rest of the World +12% +5%/year +4%/year








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s/products-comparison


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/products-comparison

















Worldwide PC+LUV Production (2005-2025)

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Sales Forecasts World: 2015/2014: +3% - from 2015 to 2020: +2%/year - from 2020 to 2025: +2%/year

Production Forecasts World: 2015/2014: +1% - from 2015 to 2020: +2%/year - from 2020 to 2025: +2%/year

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Focus on the powertrain market

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Use of diesel powertrain is restrained to some regions of the world BREAKDOWN OF FUEL REGISTRATIONS 2013

Diesel: 13% of the PC in the world. 53% of PC in Europe. Europe: 72% of diesel PC in the world.

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World diesel/gasoline powertrain market: registrations 2013











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ducts/products-comparison

















Current diesel powertrain market in Europe Gasoline Diesel/Gasoline

Fierce competition from capacities of 1400 CC

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European diesel/gasoline powertrain market in 2014






Key factors of change in Europe

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Different factors may change the market in the next years:

Car market by itself (all motorisations included)

Tax policies of the European States.

Technological improvement

• diesel technologies

• technologies of competing motorisations: gasoline and electric/hybrid powertrains.

Carmakers strategies.

European norms.

• 2021 targets for CO2

• EURO VI

2015 and 2021 targets for CO2

Targets

2015 target

• The law requires that the new cars registered in the EU do not emit more than an average of 130 grams of CO2 per kilometer (g CO2/km) by 2015.

• This means a fuel consumption of around 5.6 liters per 100 km (l/100 km) of petrol or 4.9 l/100 km of diesel.

• The average emissions level of a new car sold in 2014 is estimated at 123.4 g CO2/km, well below the 2015 target. Since monitoring started under current legislation in 2010, emissions have decreased by 17 g CO2/km (12 %).

2021 target

• By 2021, phased in from 2020, the fleet average to be achieved by all new cars is 95 grams of CO2 per kilometer.

• This means a fuel consumption of around 4.1 l/100 km of petrol or 3.6 l/100 km of diesel.

• The 2015 and 2021 targets represent reductions of 18% and 40% respectively compared with the 2007 fleet average of 158.7g/km.

Calculations

Emission limits are set according to the mass of vehicle, using a limit value curve. The curve is set in such a way that the targets set for new cars fleet average emissions are achieved.

The limit value curve means that heavier cars are allowed higher emissions than lighter cars. Only the fleet average is regulated, so manufacturers are still able to make vehicles with emissions above the curve provided these are balanced by vehicles below the curve.

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Makes’ distance in 2013 to 2021 targets (new passenger cars)

2013

Average mass (kg) – CE definition

For carmakers registering more than 100 000 vehicles per year

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Different ways of reducing CO2

Traffic management

Reduce by regulations maximum speed on roads and develop vehicles adapted to the maximum speed

Traffic flow

Car sharing

Fuel

Keep diesel at a high level of use

Develop sales of electrified vehicles

Vehicles

Replacement of functions

• Cameras instead of mirrors

• Multiplexing decreasing wires

Reduce CX

Decrease frictions

Material selection

HSLA

Aluminium

Polymers

Powertrain

• Better combustion

• Electrification

• downsizing: more power for the same cylinder capacity

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EURO VI

Anti-pollution standards are more stringent for diesel engines from Euro V.

Particulate filters have been and are widely used in order to comply with Euro V. Some improvements are in progress in order to filter smaller and more toxic particles.

Selective NOx reduction catalysts should be used in order to pass Euro VI standards in September 2015 (SCR systems with added urea or catalyst).

Convergence of standards between diesel and gasoline over time: Euro 3 (2001), Euro 4 (2006), Euro 5 (2011),

Euro 6 (September 2015)

Emissions in mg/km - Passenger cars

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As the overall passenger cars production will increase in Europe, diesel engines production may also increase even if its market share will decrease.

Diesel production share will decrease slowly from now to 2020. However the decrease of diesel share might be stronger in case that European states decide new

scrapping bonuses (which will favour the purchase of small gasoline engines) or measures in favour of electric-equipped vehicles.

Future of diesel/gasoline Powertrain: Europe

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Average capacities weighted by the number of vehicles (production in Europe) Share of Diesel/Gasoline/BEV/HEV in the European PC+LUV production


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cts/products-comparison


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products-comparison









Conclusion

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Market (consumers’ demand)

The global market will continue to increase at a good pace in the next ten years even if growth may be smaller in some years compared to what we have experienced in the last decade.

The New developing countries will continue to induce the growth in the next 10 years.

• China will continue to increase its passenger vehicles fleet. However they will never reach the same number of cars per inhabitant as the USA or Europe. Alternative ways of mobility will be developed. Chinese government will take great care to decreasing pollution, in particular in big megacities. This might lead to development of advanced electric vehicles, even if China is currently behind developed countries.

• The Indian market will continue to grow slowly, even if there is currently a temporary decrease in the passenger car market.

Europe has probably reached the lower end of the spectrum. The market will grow again but societal factors will hamper its growth and prevent it to reach once more 2000-2007 levels. The Russian market should grow in the next years, boosted by a stronger offer, in spite of a disappointing 2014 and 2015 years due to economical and political instability.

The USA market has started to recover and will remain at this level. It will be less damaged by societal factors than the European market.

Brazilian market will experience variations following the economic growth of the country.

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Conclusion

Production

China will continue to induce worldwide production. The question is how strong will the growth be in the next decade. The share of vehicles imported will decrease, even if its volume will increase. Imports to China decrease and will continue to decrease as foreign carmakers make more and more cars in China. Local Chinese carmakers will also increase their share. What is more surprising is that exports have also declined in 2013 and 2014. Export forecasts remain uncertain, depending on the business model chosen by Chinese carmakers.

NAFTA region has well recovered. However USA lost production that now benefits Mexico and will import from this country.

In Europe production should increase slowly. Thanks to an increase of local demand on one hand and of exports on another hand.

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Conclusion

Future and beyond : some questions which arise beyond 2025

Some questions which will arise and impact the answers of the automotive industry

Will Chinese export or/and manufacture in Europe?

Will hybrid and electric vehicles develop significantly in Europe? In China?

Will North America be hit by societal factors like Europe?

Is North Africa an alternative to European Eastern countries?

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Postal address: 34 rue Camille Pelletan 92300 Levallois-Perret France Stationary telephone: + 33-952 96 06 68

Contacts: Managing director

Michel Costes [email protected]

Sales and marketing Jamel Taganza [email protected]

Postal address: 34 rue Camille Pelletan 92300 Levallois-Perret France Phone: + 33-952 96 06 68

Contacts: Managing director

Michel Costes [email protected]

Sales and marketing Jamel Taganza [email protected]

THE AUTOMOTIVE INDUSTRY: GLOBAL DEVELOPMENTS OF SALES AND PRODUCTION

Automotive

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