North America Light Vehicle Outlook

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1 North America Light Vehicle Outlook October 3, 2012 Guido Vildozo Manager, Latin America IHS Automotive

3 External Shocks to The Global Auto Industry Sub-Prime Crisis Bear Sterns Oil Hits $147 Lehman Bros Confidence Slumps Liquidity Freeze Event or Shock Global Great Recession Banking System is Stabilized Greek Debt Crisis kicks off Economies Rebound (inventory) Inflation Surges in Emerging Markets Mature Economies Growth Fades Libya, Arab Spring, Oil Surges Japan Disasters US Debt Ceiling Debacle Downgraded Markets Drag Italy Into PIIGS Class Is Greece Confidence Europe's Slumps Lehman Bros? Successive EU Summits -no silver bullet Iran embargo RECOVERY Re-ignites Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Policy Response World Auto Sales Track Interest Rates Slashed, QEI TARP China Stimulates Banks Recapitalised, Nationalised, Guaranteed Fiscal Pump Priming Auto Bail Outs, Financing and Restructuring Consumer De-leveraging Copyright 2012 IHS Inc. All Rights Reserved. Auto Incentives Europe, China, Brazil, Japan, US India Private Sector Debt => Sovereign Debt Auto Incentives Phasing out QEII Cooling Measures In EM Auto Incentives Ending Japan Supply Chain Crisis Fiscal Tightening Accelerated ECB (LTRO) Consumer De-leveraging Still There ESM Spluttering Along Greece Exits Spain & Italy Defaults, Eurozone Breaks Apart Global Financial Crisis II (Early Vortex)?

5 Light Vehicle Sales: Top Ten Manufacturers Millions Units/MM Global players, look for more cooperation among OEMS in the future Volkswagen-Porsche Toyota General Motors Renault-Nissan Hyundai-Kia Ford Fiat Auto-Chrysler Honda PSA Suzuki Copyright 2012 IHS Inc. All Rights Reserved

6 Light Vehicle Sales: Greater China the New Colossus Millions Sales struggling a bit this year, soft landing is key to long-term growth % CHANGE BASE 3.6% 7.2% 8.7% 10.7% 8.9% Copyright 2012 IHS Inc. All Rights Reserved.

8 Light Vehicle Sales: Western Europe Millions Southern Tier takes big hit, Northern Tier never regains scrappage peak % CHANGE France -1.4% -10.5% -4.2% 5.9% 2.7% Germany 9.7% -2.2% -0.1% 4.1% 1.7% Italy -9.9% -21.5% -1.0% 7.6% 11.8% Spain -17.0% -16.7% -2.4% 13.1% 24.3% UK -2.3% 1.1% -0.8% 5.6% 5.6% France Germany Italy Spain United Kingdom Copyright 2012 IHS Inc. All Rights Reserved.

9 Light Vehicle Sales: Eastern and Central Europe Units/MM Millions Russia drives short term gains, other EE and CE sustain long term growth % CHANGE BASE 23.8% 3.3% 3.0% 9.3% 6.0% Copyright 2012 IHS Inc. All Rights Reserved

10 Millions Light Vehicle Sales: North America US leads recovery, but Canada and Mexico having a strong 2012 % CHANGE BASE 9.3% 10.3% 3.8% 5.2% 3.7% Copyright 2012 IHS Inc. All Rights Reserved. BASE OPTIMISTIC PESSIMISTIC

12 Auto Industry, Balancing the Old World and New Frontiers BRIC (Brazil, Russia, India, China) G7 (Germany, France, Italy, Japan, United Kingdom, Russia, Canada, USA) Triad Markets (West Europe, Japan, North America) VISTA (Vietnam, Indonesia, South Africa, Turkey, Argentina) GCC (Gulf Cooperation Council) E7 (China, India, Brazil, Russia, Indonesia, Mexico and Turkey) CEMENT (Countries in Emerging Markets Excluded by New Terminology) CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa) MIST (Mexico, Indonesia, South Korea, Turkey) N-11 (Next 11 - Bangladesh, Egypt, Indonesia, Iran, South Korea, Mexico, Nigeria, Pakistan, Philippines, Turkey and Vietnam). Copyright 2012 IHS Inc. All Rights Reserved. 12

Country Vehicle Penetration Scatterplot Reveals Strong GDP-Vehicle Need Relationship Vehicles In Use Per 1000 People Poland Czech Rep Hungary Russia Mexico Thailand Chile Turkey Brazil Slovenia

13 Country Vehicle Penetration Scatterplot Reveals Strong GDP-Vehicle Need Relationship Vehicles In Use Per 1000 People Poland Czech Rep Hungary Russia Mexico Thailand Chile Turkey Brazil Slovenia Taiwan Spain S Korea Italy Japan US Australia Canada France UK Germany Sweden Linear Trend: Each $1000 increase in wealth leads to 15 more vehicles per 1000 people. China India GDP Per Capita (in thousand 2005 US$) Source: CY2010 Data, IHS Data Insights Copyright 2012 IHS Inc. All Rights Reserved. 13

14 Global Light Vehicle Developments International Passenger Car Saturation Model Car density per 1000 pop GDP Per Capita PPP in USD (2005) y = x x R 2 = Copyright 2012 IHS Inc. All Rights Reserved. 14

15 Global Light Vehicle Developments Global Sales Forecast 120,000, ,000,000 80,000,000 60,000,000 40,000,000 20,000,000 0 Beyond BRIC BRIC Mature 78.7 million million Key Information: In 2000 about 80% of global light vehicle demand came out of mature markets. In 2012 this already decreased to 48% and by 2019 it will have reached 40%. Mature markets are not forecast to return to pre crisis 2007 volumes again. The general economic situation in various countries, demographic changes, increasing costs of ownership and different trend perceptions are only a few reasons for this development. China itself will contribute around 28% of global demand by Copyright 2012 IHS Inc. All Rights Reserved. 15

16 Millions Old Worlds and New Frontiers Units/MM Emerging markets no longer just about growth, but size and stability BRICS = Brazil, Russia, India, China TRIAD = North America, Western Europe, Japan TRIAD BRICS ROW ROW = Rest of World ROW Iran, Saudi Arabia, South Africa are the volume leaders Copyright 2012 IHS Inc. All Rights Reserved. 16

17 Global Light Vehicle Developments The Next Wave of Growth Markets Population in Mio GDP/Capita in Real US-$ Population in Mio. GDP/Capita in Real US-$ Population Change 2011 vs GDP/Capita Change BRIC China 1,347 3,142 1,385 5,547 3% 77% BRIC India 1,241 1,065 1,372 1,802 10% 69% BRIC Brazil 197 5, ,486 6% 31% BRIC Russia 143 6, ,849-1% 29% Beyond BRIC Beyond BRIC Beyond BRIC 1 Indonesia 242 1, ,419 7% 46% 2 Mexico 115 8, ,455 9% 25% 3 Philippines 95 1, ,834 14% 28% 4 Turkey 74 8, ,528 9% 26% 5 Thailand 70 3, ,112 3% 36% 6 South Africa 50 5, ,896 4% 32% 7 Colombia 47 4, ,403 11% 31% 8 Argentina 41 6, ,685 7% 28% 9 Malaysia 29 5, ,979 13% 39% 10 Chile 17 8, ,490 6% 34% Source: IHS August 2012 Forecast Copyright 2012 IHS Inc. All Rights Reserved. 17

18 Capacity Shifts 2012 vs Straight Time Capacity Change (Millions) Change 2012 Utilization 2019 Utilization % 90% 80% 70% 60% 50% 2019 Capacity Utilization % 0 Brazil China India Russia ROW 40% Straight-Time Capacity = Core shift set up 1, 2 or 3 shifts Copyright 2012 IHS Inc. All Rights Reserved.

19 Capacity Expansion Brazil Russia Fiat VW Ren/Niss Honda Chery Jianghuai GM PSA Mitsubishi Ford VW Fiat GAZ Group PSA Ren/Niss Straight-time Capacity - Thousands Straight-time Capacity - Thousands Copyright 2012 IHS Inc. All Rights Reserved. 19

20 Capacity Expansion India China Maruti /Suzuki Mahindra Bajaj Auto Ford GM VW Hyundai Tata Ren/Niss Honda *S-VW Changan- Ford-Mazda Chery **S-GM SAIC- GM-Wuling Great Wall Dongfeng -Yueda-Kia FAW-VW Dongfeng Geely Straight-time Capacity Thousands Straight-time Capacity - Thousands * S-VW = Shanghai VW, ** S-GM = Shanghai GM Copyright 2012 IHS Inc. All Rights Reserved. 20

21 Worldwide Trends Growing personal wealth is increasing the motorization rate in developing markets Air quality (smog, health effects) issues are spreading throughout the world as motorization increases, especially in cities Climate change (decarbonization) is becoming a global issue There is a growing sense of need for energy independence: some countries are turning inward to maximize the use of their own resources Demand for petroleum is increasing globally while lower-cost resources are largely in politically sensitive regions The need to import energy creates a difficult balance of trade for many countries Copyright 2012 IHS Inc. All Rights Reserved. 21

Global CO 2 Legislation Trend The countries

regulation by 2020 Have already introduced

23 Technology Islands start to merge Legislative Convergence CO 2 (g/km) Normalized to NEDC Test Cycle US (FTP75/US06) Europe (NEDC) Japan (JC08) China (NEDC) S.Korea (NEDC) Global CO 2 target number range now starting to converge Global non-co 2 emission norms continue to tighten and converge PGM loading intensifies globally as last few regions adopt Euro3> Standards coming in other countries as well Likely to follow European standards Possible global standardization of test procedures? Copyright 2012 IHS Inc. All Rights Reserved. 23

Emission Summary: Most Countries Will Follow European Standards With Some Lag Largely follows

26 Worldwide Harmonized Light Vehicle Test Procedure (WLTP) Characteristics of WLTC Ver.4 WLTC ver WLTC ver.4 Acceleration 4.0 Reflection of validation1 Set minimum 10km/h Eliminate the micro transient portions Set maximum 95 percent tile Vehicle speed in km/h Acceleration in m/s² Cum. Frequency of Vehicle speed Cum. Frequency of V * a_positive ,200 1,500 1,800 Time in s Cum. frequency mid, WW database mid, WLTC v2 Cum. frequency mid, WW database mid, WLTC v2 Apply supplemental methodology 0.2 mid, WLTC v3 mid, WLTC v mid, WLTC v3 mid, WLTC v mid, WLTC v4 0.1 mid, WLTC v Speed (km/h) v*a_pos in m²/s³ Copyright 2012 IHS Inc. All Rights Reserved.

Pure Raw Material Cost in a Car Debt Crisis Lowers Input Costs 2,200 2,000 1,800 1,600 Steel Aluminium Plastic Resins Rubber Glass Iron Total Raw Material Cost in a Car US Vehicle @ 3500 Lbs In $

28 Pure Raw Material Cost in a Car Debt Crisis Lowers Input Costs 2,200 2,000 1,800 1,600 Steel Aluminium Plastic Resins Rubber Glass Iron Total Raw Material Cost in a Car US 3500 Lbs In $ Latest Data Point July ,400 1,200 1, European 2700 Lbs in Euro 200 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Total Cost (Euro) Total Cost (US$) (Excludes Fuel, Processing and Transportation costs) Copyright 2012 IHS Inc. All Rights Reserved.

29 New Auto Loans Delinquency Rates 4.0 (% - Accounts past due 30 days or more) Direct (Bank) Loans Months Indirect (Dealer) Loans Source: American Bankers Association Copyright 2012 IHS Inc. All Rights Reserved. 29

30 New Auto Loan Application Approvals 85% 80% 75% 70% 65% 60% 55% Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Unweighted Average of Prime, Near and Subprime Source: CNW Marketing Months Copyright 2012 IHS Inc. All Rights Reserved. 30

32 Manufacturer Incentives $7,000 $6,500 $6,000 $5,500 $5,000 $4,500 $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 Jan- 04 Jul- 04 Jan- 05 Jul- 05 Jan- 06 Jul- 06 Jan- 07 Jul- 07 Jan- 08 Jul- 08 Jan- 09 Jul- 09 Jan- 10 Jul- 10 Jan- 11 Jul- 11 Jan- 12 Jul- 12 Source: CNW Marketing GM Ford Chrysler Toyota Nissan Honda Copyright 2012 IHS Inc. All Rights Reserved. 32

33 Residual Value Index 100% 90% (Index = Lease contract residual value versus CNW estimate of residual at end of lease term) 80% 70% 60% 50% 40% 30% Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 GM Ford Chrysler Industry Toyota Honda Nissan Source: CNW Marketing Months Copyright 2012 IHS Inc. All Rights Reserved. 33

34 US Light Vehicle Sales: Lease Penetration 29% (Share) 28% 27% 26% 25% 24% 23% 22% 21% 20% Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Source: CNW Marketing Leases by Month Copyright 2012 IHS Inc. All Rights Reserved. 34

US Light Vehicle Inventory: Units 4,500 (Units in thousands) 4,000 3,500 3,000 2,500 2,000 1,500 1990 1992 1994

US Light Vehicle Inventory: Days Supply 120 (Days Supply) 110 100 90 Light Trucks 80 70 60 50 40 Cars 30 1992 1994

40 US Sales: By Car Segment (54%) 22% 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% (Light Vehicle Share) Compact Full-Size Micro + Mini Mid-Size Sports Subcompact Copyright 2012 IHS Inc. All Rights Reserved. 40

42 North America - Light Vehicle Production Millions (Units in millions) ` (Share of NA Prod.) 24% 22% 20% 18% 16% 14% 12% 10% 8% Volume - L Canada- R Mexico - R Copyright 2012 IHS Inc. All Rights Reserved. 42

45 US Auto Market Overview Pent Up demand is driving the auto recovery. Sales have exceeded expectations, despite a sluggish economy. There has been a heavy dose of fleet activity in the first half of the year. Sales have improved, as Japanese cars return to the showrooms. High gasoline prices actually helped sales (trade-in gas guzzlers) Incentive spending has risen modestly, as inventories rebuild, but there is more pricing discipline today. There is an over-supply of 2012 models; inventories are getting heavy. Auto credit quality is excellent and availability is almost back to normal. The used car and truck market is the healthiest it has been in years. Cost pressures are easing and industry profits in North America are good. Bottom Line A weak economy will hurt the release of pent up demand, slowing not derailing, the auto market recovery Copyright 2012 IHS Inc. All Rights Reserved.

46 Mexico Light Vehicle Sales: Seasonally Adjusted Annual Selling Rate - SAAR 1.3 (Units in Millions) Monthly Annual Average 0.3 1/1/1997 1/1/1999 1/1/2001 1/1/2003 1/1/2005 1/1/2007 1/1/2009 1/1/2011 Copyright 2012 IHS Inc. All Rights Reserved. 46

48 Mexico:Light Vehicle Sales 1,500,000 1,400,000 Units Used car imports and credit availability limit growth 30% 1,300,000 20% 1,200,000 1,100,000 10% 1,000,000 0% 900,000-10% 800, ,000-20% 600, Light Veh -L Annual Change -R -30% Copyright 2012 IHS Inc. All Rights Reserved. 48

Mexico: Market Share 100% Percentage 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Nissan grows in coming years 2005 2007 2009 2011 2013 2015 2017 2019

49 Mexico: Market Share 100% Percentage 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Nissan grows in coming years Others Suzuki Daimler BMW Mitsubishi Mazda Honda Toyota Chrysler Ford Volkswagen General Motors Renault/Nissan Copyright 2012 IHS Inc. All Rights Reserved.

53 Mexico to Brazil ACE 55 Imports from Mexico [US$] Imports from Mexico [Units] Vehicle price per unit [US$] ,500,00 1,260,900,000 2,070,000,000 1,450,000,000 1,560,000,000 1,640,000,000 60,138 76, ,745 93, , , ,755 16,429 17,003 15,500 15,600 15,700 Very little impact YOY to 2012 figures, but we had expected K. Impact will be hardest for 2013 and Difficult to compete after quota is hit, so far Asians are down 20-40% Copyright 2012 IHS Inc. All Rights Reserved. 53

55 Bottom Line With the exception of Western Europe, global demand will continue to gather momentum BRICs will outsell TRIAD (USA, WE and Japan) within a few years Mexico has to explore new opportunities given this scenario, South America presents great potential The US has turned the corner, promising outlook for sales and production Mexican demand has broken the million unit mark! Production is promising but big uncertainties lie in the future Copyright 2012 IHS Inc. All Rights Reserved.

56 Thank You for Your Participation! Guido Vildozo Manager, Latin America IHS Automotive Contact: 24 Hartwell Ave Lexington, MA USA Ph: Em:

US Light Vehicle Outlook. George Magliano Senior Principal Auto Economist Americas, HIS May 31, 2012

US Light Vehicle Outlook. George Magliano Senior Principal Auto Economist Americas, HIS May 31, 2012 US Light Vehicle Outlook George Magliano Senior Principal Auto Economist Americas, HIS May 31, 2012 External Shocks to The Global Auto Industry - A Critical Timeline Sub-Prime Crisis Bear Sterns Oil Hits