AUTOMOTIVE Vehicle Sales in CEE How Far Can it Go? Light Vehicle Sales Forecast Scenarios in Central and East Europe 26 January 2017 Frankfurt, Germany Tatiana Hristova, Light Vehicle Sales Forecast Manager, CEE +49(0)69 20 973 331, tatiana.hristova@ihsmarkit.com. All Rights Reserved.
Contents Vehicle Sales in Central Europe Is there more potential for growth? Vehicle Sales in East Europe Which markets can bring incremental volumes? What are the obstacles for growth? What is going on in Russia? 2
Light Vehicle Sales in Central Europe Poland and Czech Republic leading sales in the region 2006 ~1.4m 2016 ~1.3m 2026 ~1.8m Total European Sales CE Share 6.4% Total European Sales CE Share 6.8% Total European Sales CE Share 7.9% *CAGR (2016-2026) Other (50%) - Serbia +9.8%* Romania +8.0%* Bosnia-Herz. +5.8%* Croatia +4.0%* 3
Vehicle Sales Evolution in Central Europe Optimistic and pessimistic scenario 2500000 2000000 Stable econ growth Subsidy programs Reduced demand for used cars 1500000 1000000 500000 Decrease in incomes Strong emigration More used cars 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 CE Base CE Opt CE Pes 4
Scenario Assumptions Available resources restricting faster growth Pessimistic Scenario Optimistic Scenario 5
Vehicle Sales Evolution in Central Europe Optimistic and pessimistic scenario Scenario probabilities Scenario Probability 2500000 2000000 Stable econ growth Subsidy programs Reduced demand for used cars 10% 70% 1500000 1000000 500000 Decrease in incomes Strong emigration More used cars 20% 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 CE Base CE Opt CE Pes 6
Light Vehicle Sales in East Europe Substantial uncovered potential in the region 2006 ~3.1m 2016 ~2.6m 2026 ~4.9m Total European Sales EE share 14.5% Total European Sales EE share 13.2% Total European Sales EE share 22.1% *CAGR (2016-2026) Other (15%) - Ukraine +17.8%* Uzbekistan +6.5%* Kazakhstan +18.2%* Belarus +8.3%*
Light Vehicle Sales in East Europe Huge potential in the region restricted by unfavorable environment 7000000 6000000 5000000 Oil price >80USD/bar in the short term Reforms in pol and econ starting 18 Geopolitical improvements Scenario Probability 10% 60% 4000000 30% 3000000 2000000 1000000 Oil price below 50USD/bar Low production Slumped crediting market Sanctions prolongation beyond 2017 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 EE Base EE Opt EE Pes 8
Russia - Forecast Assumptions Market in a deep stagnation but recovery already in sight Most of diversification projects turned ineffective Huge dependence on energy exports remains Reform of financial system Lack of institutional reforms Insufficient success in anticorruption campaign Economics Politics Market Assumptions Oil prices to recover to 80USD (critical level for Russian budget) by 2021 and reach the desired 100USD by 2024 Current oil extraction on record level Energy Prices Geo- Politics Unpredictable events leading to political tensions and economic constrains Sanctions to end mid 2017 (Trump implications?)
Russia - Governmental Support Same money, different channels Couple more programs under consideration e.g. circulation tax withdrawal for companies, LCV purchasing program Russian Stimulus Program - Started in Sept.2014, expected to end Dec. 16 - Only for families or first time purchase next year - ~890K vehicles sold, ~500K incremental 80K total payback Subsidy Program (3rd round) - Started in 2015 and should end by mid 2017-2/3 of the key policy rate reimbursed -~1/2 of all car loans were subsidized in 2015 and 2016 Direct OEM s Support - Direct subsidies will be reduced in 2017 -Export subsidies - High import barriers - Special Investment Contracts to replace Decrees 166 11
2013-Q1 2013-Q2 2013-Q3 2013-Q4 2014-Q1 2014-Q2 2014-Q3 2014-Q4 2015-Q1 2015-Q2 2015-Q3 2015-Q4 2016-Q1 2016-Q2 2016-Q3 2016-Q4 2017-Q1 2017-Q2 2017-Q3 2017-Q4 2018-Q1 2018-Q2 2018-Q3 2018-Q4 2013-Q1 2013-Q2 2013-Q3 2013-Q4 2014-Q1 2014-Q2 2014-Q3 2014-Q4 2015-Q1 2015-Q2 2015-Q3 2015-Q4 2016-Q1 2016-Q2 2016-Q3 2016-Q4 2017-Q1 2017-Q2 2017-Q3 2017-Q4 2018-Q1 2018-Q2 2018-Q3 2018-Q4 2017 New Year s Briefing 26 January 2017 Russia Short Term Development Market reached is bottom stagnation is expected 4,00 3,00 2,00 1,00 0,00-1,00-2,00-3,00-4,00-5,00 Real GDP Growth, quarterly, Year-on- Year, % 30,00% 20,00% 10,00% 0,00% -10,00% -20,00% -30,00% -40,00% -50,00% Russia, Light Vehicles Sales, Year-on- Year, % First positive rate in 2Q2017 will be translated into the vehicles sales market in the 2H 2017 What looks like a strong growth, isn t really low comparison base makes the growth rates high, but volumes are still very low
Russia Specific Contingency Forecast 3m mark reachable only in optimistic scenario 4500000 4000000 3500000 3000000 2500000 2000000 80USD/bar by mid 18, 100USD/bar by 21 Election campaign with stimulus programs Notable improvements in econ reforms and anti-corruption programs after 18 Full sanctions withdrawal mid 2017 Scenario Probability 20% 65% 15% 1500000 80USD/bar by 21, 100USD/bar by 24 1000000 80USD/bar by mid 24, 100USD/bar Sanctions to end mid 2017, long term by 30 sanctions to remain Sanctions prolongation (long term 500000 Stagnation in econ and pol reforms sanctions) Slow down in reform programs 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Russia Russia Opt Russia Pes 13
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2017 New Year s Briefing 26 January 2017 Premium and LCV Market Pent-up demand on the LCV market, pay-back on the Premium 300000 Prem+Lux 250000 LCV+HVAN 250000 200000 200000 150000 150000 100000 100000 50000 50000 0 0 14
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