Mexican Light Vehicle Outlook - PDF Free Download

The Global Economic Outlook: Slower Growth Ahead A global economic slowdown is under way, exacerbated by a financial market turbulence Hit by soaring oil prices and the subprime credit crisis, the U.S. economy has slipped into a mild recession Europe faces headwinds from rising currencies, tightening credit, and house price corrections Emerging markets are better positioned than in 1997-98, but vulnerable to a China hard landing A deeper U.S. recession combined with much weaker growth in China could trigger a world recession (30% probability) Copyright 2008 Global Insight, Inc. 3

The Global Auto Market Overview Growth of light vehicle demand and production projected at roughly 3.0% annually in the 2007 2012 period Light vehicle demand and production forecast to increase in all regions over the next five years, although at widely differing rates Emerging markets will generate 91% of total global light vehicle demand growth in the same period, with Asia alone (excl. Japan) contributing 60% Almost 89% of global light vehicle production growth will come from emerging markets, with 66% coming just from Asia (excl. Japan) A strong commitment to developing regions, Asia in particular, is absolutely essential for a successful growth strategy for both OEMs and suppliers The allure of growth in emerging markets comes with risk Exogenous issues, or change drivers, are changing the competitive landscape adding to the intense pressure in the market Copyright 2008 Global Insight, Inc. 4

Global Economic Growth & Light Vehicle Sales 5% 4% Global GDP growth (% chg) 3% 2% 1% 0% 84 80 76 72 68 64 60 56 52 48 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 World Light Vehicle Sales (millions) 4.6% 3.6% 2.4% 4.5% 4.1% 3.2% 3.3% 2.5% 4.1% 5.7% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Copyright 2008 Global Insight, Inc. 5

Light Vehicle Sales By Region 24 22 20 18 16 14 12 10 8 6 4 2 0 Units/MM Asia dominates but South America and Eastern Europe do well 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 NA WE OASIA EE JAPAN SA OTHER Copyright 2008 Global Insight, Inc. 6

Key Global Auto Impact Change Drivers Global Warming and Energy Security creates a confluence of opinion which is now politically actionable. The era of higher fuel economy and tighter environmental standards is upon us. Globalization has accelerated boosting global economic growth and generating a new pool of potential car buyers. Development of Ultra Low Price Cars will drop the entry price point in emerging markets accelerating 4 wheel motorization. The global fuel efficiency drive (led by Europe due to stringent CO2 targets) effectively means that OEMs will have to reconsider future vehicle weight/dimensions. Reduction of the number of parts reduces complexity, and improves costs, opens up opportunities to offer budget cars aimed at developing markets. Copyright 2008 Global Insight, Inc. 7

Ultra Cost Out Cars Will CREATE Demand Millions, new vehicle sales 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Tata Nano - 1 Lakh Car 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 TOYOTA SMALL CAR VW POINTER TATA NANO DACIA LOGAN VW project gol NISSAN 1 LITRE Top Markets India Iran Russia China Romania Brazil Copyright 2008 Global Insight, Inc. 8

Risk-Growth Trade-Off in Key Automotive Markets LV unit sales growth, CAGR %, 2007-12 18% 16% 14% 12% 10% 8% 6% 4% 2% Cluster of USA Can. Australia Thailand Poland Mexico India Average Global Overall Country Risk Brazil Russ ia Turkey Circle Size = Unit Sales in 2007 Growth can be associated with risk China Average Global Automotive Growth Iran 0% -2% -4% Cluster of WE Big 5 Japan & S. Korea 0 5 10 15 20 25 30 35 40 45 50 55 60 Overall country risk score - 5 year Copyright 2008 Global Insight, Inc. 9

Risk-Growth Trade-Off in Key Automotive Production Centers 18% 16% India Circle Size = Unit Production in 2007 LV unit production growth, CAGR %, 2007-12 14% 12% 10% 8% 6% 4% 2% 0% -2% -4% Cluster of USA Can. Australia Poland Average Global Manufacturing Risk Mexico Thailand Brazil Turkey Russia China Average Global Automotive Growth Iran Cluster of WE Big 5 Japan & S. Korea 0 5 10 15 20 25 30 35 40 45 50 55 60 Manufacturing risk score - 5 year Copyright 2008 Global Insight, Inc. 10

Overview Despite its size, the internal Mexican auto market is extremely diverse brands, segments, models and is very sensitive to new models Despite strong economic growth, since 2004 Mexican sales have stalled Mortgage and housing market has been extremely strong, oil is a plus Sales were down in 2007 and are still falling Pricing of imported cars & trucks is an issue Remittances have been down starting in 2007 Flood of used cars Long-term economics and demographics remain very favorable Production booming, prospects remain excellent Copyright 2008 Global Insight, Inc. 12

The Northern Express The World Feeds Mexico and Mexico Feeds U.S. Mexican automotive industry has focused on building vehicles for the U.S. market (Detroit) and set up the trade agreements for others to satisfy the demands of the domestic market The Mexico auto industry lacks internal design capability, relying on designs supplied by the manufacturers The Mexican market has seen an incredible increase in the variety of brands and models available to domestic consumers, largely from imported cars and trucks Mexico has won many high volume programs and is attracted new auto plant investment Mexico has lost some, however, to the U.S. and Canada Economically, the plan made sense. Mexican vehicles are of higher value and margin than those imported, especially those coming from Brazil Average value of Mexican light vehicle imports from Brazil US$8,800 Average value of Mexican light vehicle exports to the US US$21,900 This Strategy has worked until now, but needs reworking Copyright 2008 Global Insight, Inc. 13

Mexico Light Vehicle Sales Seasonally Adjusted Annual Selling Rate - SAAR (Units in millions) 1.20 Monthly 1.10 1.00 0.90 0.80 Annual Average 0.70 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Copyright 2008 Global Insight, Inc. 16

Mexico Light Vehicle Sales: SAAR Annual Average (Units in millions) 0.50 0.45 0.40 0.35 Import Mexico 0.30 0.25 US & Canada 0.20 0.15 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Copyright 2008 Global Insight, Inc. 17

Mexico Light Vehicle Sales Units 1,200,000 1,100,000 1,000,000 900,000 800,000 700,000 600,000 1998 2000 2002 2004 2006 2008 2010 2012 Light Veh -L % Change - R 40% 35% 30% 25% 20% 15% 10% 5% 0% -5% -10% Copyright 2008 Global Insight, Inc. 18

Mexico Import Light Vehicle Sales Sourced Outside of Mexico 700,000 Units Truly an open market 65.0% 500,000 55.0% 300,000 45.0% 100,000 1998 1999 20002001 20022003 2004 20052006 2007 20082009 20102011 2012 2013 Volume - L Share -R 35.0% Copyright 2008 Global Insight, Inc. 19

Sales All Car Segments Units 750,000 75.0% 700,000 650,000 600,000 550,000 500,000 450,000 400,000 70.0% 65.0% 60.0% 350,000 300,000 1998 19992000 20012002 20032004 20052006 20072008 20092010 20112012 2013 Volume - L Market Share - R 55.0% Copyright 2008 Global Insight, Inc. 21

A & B Seg. City & Mini Cars Units 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 37.0% 33.0% 29.0% 25.0% 21.0% 50,000 1998 1999 20002001 20022003 2004 20052006 2007 20082009 20102011 2012 2013 Volume - L Market Share - R 17.0% Copyright 2008 Global Insight, Inc. 22

C1 / C2 / D1 Seg. Medium Cars Units 385,000 365,000 345,000 325,000 305,000 285,000 265,000 245,000 225,000 205,000 1998 19992000 20012002 20032004 20052006 20072008 20092010 20112012 2013 Volume - L Market Share - R 45.0% 43.0% 41.0% 39.0% 37.0% 35.0% 33.0% 31.0% 29.0% 27.0% 25.0% Copyright 2008 Global Insight, Inc. 23

D2 / E1 / E2 Luxury Cars Units 40,000 3.5% 35,000 30,000 25,000 3.0% 20,000 15,000 10,000 2.5% 5,000 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2.0% Volume - L Market Share - R Copyright 2008 Global Insight, Inc. 24

Light Commercial Vehicle Sales 500,000 Units 45.0% 450,000 400,000 40.0% 350,000 300,000 35.0% 250,000 200,000 30.0% 150,000 100,000 1998 19992000 20012002 20032004 20052006 20072008 20092010 20112012 2013 Volume - L Market Share - R 25.0% Copyright 2008 Global Insight, Inc. 25

Sales MPV Segments Units 60,000 5.0% 50,000 40,000 4.5% 30,000 20,000 4.0% 10,000 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Volume - L Market Share - R 3.5% Copyright 2008 Global Insight, Inc. 26

Sales PUP Segments Units 200,000 180,000 160,000 140,000 120,000 100,000 1998 1999 20002001 20022003 2004 20052006 2007 2008 2009 20102011 2012 2013 Volume - L Market Share - R 23.0% 22.0% 21.0% 20.0% 19.0% 18.0% 17.0% 16.0% 15.0% 14.0% 13.0% Copyright 2008 Global Insight, Inc. 27

Sales SUV Segments Units 250,000 200,000 150,000 100,000 50,000 19.0% 17.0% 15.0% 13.0% 11.0% 9.0% 7.0% 0 1998 1999 20002001 20022003 2004 20052006 2007 20082009 20102011 2012 2013 Volume - L Market Share - R 5.0% Copyright 2008 Global Insight, Inc. 28

Sales M & H Van Segments Units 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 4.0% 3.5% 3.0% 2.5% 2.0% 0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Volume - L Market Share - R 1.5% Copyright 2008 Global Insight, Inc. 29

Light Vehicle Sales By Major Manufacturer 30% 25% Manufacturer mix is different vs. US 20% 15% 10% 5% 0% 1999 2001 2003 2005 2007 2009 2011 2013 GM FORD CHRYSLER NISSAN VW GROUP TOYOTA HONDA OTHERS Copyright 2008 Global Insight, Inc. 30

Mexico Light Vehicle Production Seasonally Adjusted Annual Selling Rate - SAAR (Units in millions) 2.40 Monthly 2.20 2.00 1.80 1.60 1.40 Annual Average 1.20 1.00 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Copyright 2008 Global Insight, Inc. 32

North American Light Vehicle Production 18.0 17.0 16.0 15.0 14.0 13.0 12.0 11.0 10.0 Millions of Units 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Volume - L Mexico Share - R 16% 15% 14% 13% 12% 11% 10% 9% 8% Copyright 2008 Global Insight, Inc. 33

Producing for the United States 2.4 Heavily focused on satisfying U.S. market, primarily for the Big 3 Mexico Light Vehicle Production (millions of units) 1.9 1.4 0.9 0.4 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Export Domestic Copyright 2008 Global Insight, Inc. 34

U.S. Light Vehicle Sales Detroit Big 3 12,000,000 11,000,000 Units Close ties to Detroit can be risky 75% 70% 10,000,000 65% 9,000,000 60% 8,000,000 55% 7,000,000 50% 6,000,000 1998 2000 2002 2004 2006 2008 2010 2012 45% BIG 3 VOLUME - L BIG 3 - MARKET SHARE - L Copyright 2008 Global Insight, Inc. 35

New Products Drive Outlook 2.0 1.5 1.0 0.5 0.0 Light Vehicle Production for Export (millions of units) Mexico is getting more of the new programs 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Volume - L Share -R 85% 83% 81% 79% 77% 75% 73% 71% 69% 67% 65% Copyright 2008 Global Insight, Inc. 36

Nissan Production 550,000 500,000 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 Units 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Volume - L Export Share - R 80% 70% 60% 50% 40% 30% 20% Copyright 2008 Global Insight, Inc. 37

General Motors Production 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 Units 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 100% 95% 90% 85% 80% 75% 70% 65% 60% 55% 50% Volume - L Export Share - R Copyright 2008 Global Insight, Inc. 38

Chrysler Production 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 Units 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Volume - L Export Share - R 100% 95% 90% 85% 80% Copyright 2008 Global Insight, Inc. 39

VW Group Production 450,000 Units 80% 400,000 350,000 300,000 250,000 200,000 150,000 ``` 70% 60% 50% 40% 30% 100,000 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20% Volume - L Export Share - R Copyright 2008 Global Insight, Inc. 40

Ford Production 360,000 320,000 280,000 240,000 200,000 160,000 120,000 80,000 40,000 0 Units 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Volume - L Export Share - R 100% 90% 80% 70% 60% Copyright 2008 Global Insight, Inc. 41

Toyota Production 120,000 100,000 Units 104% 100% 80,000 96% 60,000 92% 40,000 88% 20,000 84% 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 Volume - L Export Share - R 80% Copyright 2008 Global Insight, Inc. 42

Conclusion Two-prong approach incomplete; the domestic market is being satisfied and is booming, the output side needs work It still makes sense to focus on servicing the growing U.S. market Over-reliance on Big Three, however, is a negative Need to make sure to keep abreast of changing consumer trends in the U.S. market World car is a possible option Mexico must concentrate on winning high value products and spacing the launches out Staggered releases and facelifts would minimize the life-cycle induced swings in output Made in Mexico China is the wrong threat, look to Alabama and Canada instead China is, as of yet, an unknown quantity and is unlikely to enter the U.S. market in the near future. Mexico is in competition with Canada and the Southern U.S. states to win the projects for the U.S. market, and should concentrate on that. Copyright 2008 Global Insight, Inc. 43