Automotive)Outlook 2018%FTA%Revenue%Estimation%&%Tax%Research%Conference October)8,)2018 Kim)Hill,)President
Economic'factors Agenda Forecast'of'sales' next'three'years'' Rise'of'the'trucks Revenue'implications'for'car'replacement'by'trucks'and'new'for' used'vehicles
State%of%Automotive%(it s%kind%of%boring ) Sales&on&a&plateau market&is&flat Educated,&better&off&households&in&the&market Potential&for&revenue&loss&with&slowing&sales&and& increased&used&vehicle&sales Average&transaction&price&is&higher driven&by&truck& sales $35,000&& Many&car&models&are&being&discontinued rise&of&the& trucks New&technologies&adding&cost,&uncertainty,&fear
Economic'factors
Source:%BMI%Research/US%Bureau%of%Labor%Statistics% Real%GDP%%9/2008%through%9/2018
Consumer)Confidence)Index)08/2008)through)08/2018 Source:)OECD)(data.oecd.org))
Household)Income)08/2008)through)08/2018 Source:)BMI)Research)< Fitch)Solutions/National)Statistics
USA$% Total$Employment$08/2008$through$08/2018 Source:$BMI$Research$% Fitch$Solutions/Bureau$of$Labor$Statistics
USA$ Total$Unemployment$08/2008$through$08/2018 Source:$FRED$ St.$Louis$Federal$Reserve$ US$Bureau$of$Labor$Statistics
USA$ New$Home$Prices$08/2008$through$08/2018 Housing$market$slows$as$prices$outpace$wages Will$we$see$the$same$with$auto? Source:$FRED$ St.$Louis$Federal$Reserve$ US$Bureau$of$Labor$Statistics
USA$ Existing$Home$Prices$08/2008$through$08/2018 Source:$FRED$ St.$Louis$Federal$Reserve$ US$Bureau$of$Labor$Statistics
Automotive)Sales
U.S.$Light$Vehicle$Sales Percent$Change$YTD$Through$August:$$2018$vs.$2017 Total 1.1% Light$Trucks 9.3% Passenger$Cars A13.1% A15% A10% A5% 0% 5% 10% 15%
Percent'Change'in'Sales'of'Light'Vehicles'Per'OEM: YTD'Through'August:'2018'vs.'2017 TOTAL'LV'Sales 1.1% Nissan F5.2% FCA 5.2% Honda F1.3% HyundaiF'Kia F1.8% Ford F1.2% Toyota 1.0% GM 0.9% F6% F4% F2% 0% 2% 4% 6%
U.S.$Market$Share$$2000$ 2018$YTD$ 35% The$automotive$companies$are$all$playing$to$their$strengths and$holding$market$share 30% 28.2% Percent$of$U.S.$Market$Sales 25% 20% 15% 10% 16.9% 14.7% 14.1% 13.0% 9.4% 8.7% GM Toyota Ford Chrysler Nissan 5% 7.4% Honda 0% HyundaiKKia 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Year
U.S.$Sales$on$a$Declining$Plateau?$$We$hope Million 20 18 16 14 12 10 8 6 4 2 0 17.5 17.5 16.1 16.5 17.1 17.0 16.5 15.6 14.5 13.2 12.8 11.6 10.4 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
2018%U.S.%Sales%Forecasts%(millions) 17.0 (9/18) 17.0 (8/18) 16.8 (8/18) 17.0 (8/18) 17.2 (8/18)
Revenues'Have'Never'Been'Higher Bubble'economy'helped'sales'99J06;'recession'took'wind'out'08J10;'post'recession'growth'and'efficiencies'2011Jpresent Billion&$&(2005&dollar) 650 600 550 500 450 400 350 300 250 1 Both&spending&and&vehicle& sales&exceed&2006&level 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 In'Spending'(Billion'of'2009'$) In'Units 18 16 14 12 10 8 Million&Units
Average'sale'price'grew'3%'in'one'year driven'by' truck'sales Cars'make'up'only'31'percent'of'August'sales,' Down'from'36'percent'just'one'year'ago,'' Consumers'purchasing'pricier'SUVs'and'trucks.' Prices'also'are'likely'to'strengthen'as'the'average'days'in'inventory'has' begun'to'recede'for'the'first'time'this'decade Automakers'seem'to'be'managing'production'well keeping'prices' high
Average'transaction'price=more'profits Segment' 'July'2018' Jul017 Percent'Change' Compact'Car $20,412 $20,316 0.50% Mid0size'Car $25,424 $24,734 2.80% Compact'SUV/Crossover $28,365 $28,122 0.90% Electric'Vehicle $36,948 $37,755 /2.10% Hybrid/Alternative'Energy'Car $26,969 $26,309 2.50% Full0size'Pickup'Truck $48,644 $46,475 4.70% Full0Size'SUV/Crossover $61,557 $60,761 1.30% High0end'Luxury'Car $98,360 $95,874 2.60% Luxury'Car $59,519 $57,562 3.40% Luxury'Compact'SUV/Crossover $44,524 $42,899 3.80% Luxury'Full0size'SUV/Crossover $88,038 $81,811 7.60% Minivan $34,635 $34,174 1.30% Subcompact'Car $15,026 $14,925 0.70% Subcompact'SUV/Crossover $24,008 $24,152 /0.60% Van $34,902 $33,696 3.60% Average'Transaction'price $35,359 $34,374 2.90%
Transaction*price*change by*company Manufacturer July-18 July-17 Percent2Change American)Honda)(Acura,)Honda) $28,179 $27,346 3.0% Fiat)Chrysler)(Alfa)Romeo,)Chrysler,)Dodge,)Fiat,)Jeep,)RAM) $37,666 $37,490 0.5% Ford)Motor)Company)(Ford,)Lincoln) $39,756 $38,210 4.0% General)Motors)(Buick,)Cadillac,)Chevrolet,)GMC) $40,889 $39,546 3.4% HyundaiQKia $25,090 $25,178 Q0.3% Nissan)North)America)(Nissan,)Infiniti) $29,550 $28,802 2.6% Subaru) $28,637 $28,451 0.7% Toyota)Motor)Company)(Lexus,)Toyota) $32,321 $31,593 2.3% Volkswagen))Group)(Audi,)Volkswagen,)Porsche) $40,577 $38,983 4.1% Industry $35,359 $34,374 2.9%
The$trucks$are$taking$over
31% 69% 30% 35% 40% 45% 50% 55% 60% 65% 70% 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50 5.00 Mar/03 Aug/03 Jan/04 Jun/04 Nov/04 Apr/05 Sep/05 Feb/06 Jul/06 Dec/06 May/07 Oct/07 Mar/08 Aug/08 Jan/09 Jun/09 Nov/09 Apr/10 Sep/10 Feb/11 Jul/11 Dec/11 May/12 Oct/12 Mar/13 Aug/13 Jan/14 Jun/14 Nov/14 Apr/15 Sep/15 Feb/16 Jul/16 Dec/16 May/17 Oct/17 Mar/18 Aug/18 DollarsEPerEGallon RealEGasEPrice CarsEShareEofESales LightETrucksEShareEofESales $2.83/gal. Are$Low$Gas$Prices$Affecting$the$Mix?$
Implications,for,states
Automation)threatens)jobs)in)plants)and)at)supplier)companies) Motor.Vehicle.and.Parts.Manufacturing.Employment.2001.to.2021.Forecast. 350,000 1,050,000)US)Empl 1,200,000 300,000 833,000)US)Empl 1,000,000 250,000 573,000)US)Empl 800,000 200,000 150,000 100,000 600,000 400,000 50,000 200,000 0 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 State.Employment US.Employment United.States Michigan Ohio Indiana Tennessee Kentucky Texas
Implications,for,states sliding,car,production,threatens,jobs Illinois Taurus,at,Chicago,(also,Explorer,,though) Michigan Flat,Rock,(Continental,,Mustang);,Lansing,(Camaro,,Cadillac);, Orion,(Sonic,,Bolt);,FCA,already,bailed Ohio Lordstown (Cruze) Kentucky Georgetown,(Lexus,,Avalon,,Camry) Kansas Fairfax,(Malibu) Tennessee Chattanooga,(Passat small,suv,could,help) Alabama Montgomery,(HyundaiSSonata,,Elantra) Mississippi Blue,Springs,(Corolla) California Fremont,(Tesla)
Trump&and&Trade NAFTA%replacement more%u.s.%production%predicted%for%foreign%automakers More%engine,%transmission%production%in%U.S.%to%meet%content%quotas Typically%$300B$500%million%investment%in%new%plant,%up%to%750%employees% 75%%built%in%N.A. up%from%62% 40%%B 45%%of%vehicle%made%by%$16/hremployees NonBcompliance%vehicles 2.5%%tariffs% Automakers%who%source%a%lot%of%parts%from%overseas%at%risk Hyundai,%Kia,%VW Phased%in%over%2B5%years%(enough%time%to%build%a%plant%and%find%domestic%suppliers Steel%and%aluminum%tariffs%still%in%place Will%impact%suppliers%and%OEMs Higher%required%N.A.%content%will%increase%jobs%in%N.A.%but%maybe%not%U.S. In%the%end,%companies%will%adjust%and%cost%will%not%climb%and%more%plants%will%be% built%in%u.s.
How$the$Industry$Is$Changing Substitution$used$for$New$Vehicle$Purchases Higher$New$Vehicle$Prices Costly$post$2020$regulations these$could$go$away Advanced$safety$features$driving$up$costs Technological$changes$are$a$bumpy$road Distracted$driving$(unintentional),$automated$vehicle$ crashes,$luddites
How$the$Industry$is$Not$Changing:$$Yet Automated$trucks Amazon,$Uber,$UPS$ much$talk,$no$action Autonomous$cars Drivers$needed?$ Always for$now. Can t$run$automated$in$bad$weather$or$on$bad$roads No$regulatory$push$from$NHTSA$under$current$administration No$funding$for$true$connectivity Yet$some$driver$assist$safety$features$will$be$implemented Ride$sharing$is$not$growing$quickly RideMshare,$onMdemand,$only$replaces$taxis$and$rentMaMcars$for$travelers$ maybe$a$$30$billion$ annual$market Scooters,$most$other$microMtransit$options$do$not$impact$sales
Understanding+Autonomous Talent+is+(still)+number+one+issue,+and+not+getting+easier No+less+than+Mary+Barra+(GM)+is+recruiting+at+Harvard+University,+ MIT+and+Boston+University Perhaps+we+follow+the+NASDAQ,+as+there+are+so+many+tech+companies+ crossing+over+to+autonomous+vehicles/mobility Are+autonomous+vehicles+a+means+to+solve+society s+problems+ (emissions,+congestion,+highway+deaths,+etc.),+or+a+plan+to+make+sure+ everyone+can+access+a+car,+and+technology+captures+the+data?
Time%to%follow%the%NASDAQ?
These%Will%Affect%State% Revenue%Stream Light&Truck&Share/production Used&for&New&Purchases Trade&Impacts Used&vehicles&cost&$14K&less×&sales/use&tax&rates no&jobs& multiplier&(except&dealer)
Strong'Economy'Maintaining'Vehicle'Sales The$Good: Economy$growing$at$3%$or$higher$$(2 nd Q$4.2%) Unemployment$at$record$low$of$3.9%$(was$4.4%$a$year$ago) Duration$of$unemployment$is$very$short$(9$weeks$or$less) DowFJones$at$record$peak$(again) Wages$are$climbing$just$above$inflation$(finally)$ Gas$prices$at$or$below$$3/gallon see$oil$below The$Bad: Labor$force$participation$is$still$low$ Total$employment$growth$is$slow stuck$around$63% Loan$rates$are$rising,$amount$borrowed$over$90% Record$leasing$levels$producing$flood$of$returning,$used$vehicles$(soon,$used$CUVs) Record$price$gap$between$new$vehicle$and$used$vehicle$prices$ buyers$switching Hiring$is$slow$due$to$labor$shortagesFF Price$of$oil$is$surging$to$$80/barrel$and$beyond Gas$could$climb$over$$3$unless$U.S.$output$surges The$Ugly: CUVs/SUVs/Pickups$are$expensive$($35,000$avg$price$for$all$vehicles),$used$vehicle$sales$are$climbing$fast Economic$recovery$is$very$old$ a$correction$is$inevitable$ especially$in$auto$sales$and$stock$market$(see$upcoming$election ) PlugFin$sales$are$less$than$1%,$Hybrids$about$2%$F no$growth$and$no$push$from$federal$govt.$this$could$change$with$democrats$in$2020. Fuel$economy$regulations$will$top$out$now$in$2020$ but$democrats$could$reverse$that$in$2020.$$industry$won t$be$ready
Thank&you kimhill@hwa)analytics.com 734)355)1740