www.pwc.com Automotive Markets Update ECG Conference, Hamburg 21 October 2016 Christoph Stürmer PwC Autofacts
An Industry of Global Growth Automotive Markets Update ECG Conference, Hamburg PwC 21 October 2016 2
1 A Sector in Transformation Light vehicle assembly is forecasted to grow by 25.6% between 2015 and 2022 with emerging markets driving future industry growth on a volume basis Global Light Vehicle Assembly Outlook 2015 2022 (millions) 120 110.8 Emerging Markets Mature Markets 100 80 60 88.2 41.6 42.1 41.5 41.8 43.1 43.0 42.9 43.0 Volume Change +21.2m Mature: 6.3% +1.4m 40 20 46.6 49.4 53.3 57.6 61.5 64.4 66.4 67.8 Contribution to Growth - 2015 2016F 2017F 2018F 2019F 2020F 2021F 2022F Emerging Mature Emerging: 93.7% Source: Autofacts 2016 Q4 Forecast Release 3
1 A Sector in Transformation Growth in global vehicle assembly follows demand, but also leverages location factors and free trade agreements Global: Light Vehicle Sales vs. Assembly 2016 2022 (millions) EU + EFTA NAFTA China Japan RoW 17.0 20.1 19.0 20.2 2016 18.3m 2022 2016 15.8m 2022 4.7 4.8 8.2 8.2 2016 2022 2016 2022 21.0 21.6 17.7 19.8 2016 2022 2016 2022 South Korea 24.9 31.8 25.5 33.0 2016 2022 2016 4.9m 2022 1.6 1.5 4.3 4.1 2016 2022 2016 2022 Sales 24.3 32.1 16.7 23,4 25.5 2016 2022 2016 2022 Assembly Source: Autofacts Analysis, Autofacts 2016 Q4 Forecast Release 4
1 A Sector in Transformation Global Production Capacity continues to increase, as new products are launched to meet local and international market demand Global Light Vehicle Assembly Capacity 2015 2022 (millions) North America +2 plants +209 product launches 2.9 19.9 22.8 2015 2022 South America +2 plants +98 product launches 0.6 5.8 6.4 2015 2022 European Union +4 plants +301 product launches 1.3 22.2 23.5 2015 2022 Middle East & Africa +6 plants +62 product launches 3.7 0.7 4.4 2015 2022 Eastern Europe +3 plants +133 product launches 1.1 5.9 7.0 2015 2022 Asia-Pacific +10 plants +978 product launches 9.0 68.1 77.0 2015 2022 Source: Autofacts 2016 Q4 Forecast Release 5
1 A Sector in Transformation The shares of powertrain systems are shifting as sales of electrified vehicles are pushed in selected areas, spurring a long-term revolution Percentage Share of Powertrain Systems in Light Vehicle Registrations 2014 2030 (percentage share) 100% 80% 60% 40% 20% 0% 2014 2018 2022 2022 2026 2030 2014 2018 2022 2026 2030 2014 2018 2022 2026 2030 2025 will mark the begin of an era of change. After a slow start, hybrids gain momentum beyond 2020, but are seen as a transitory technology. Electric cars get a jump-start from local regulation, but are expected to become the dominating technology in the long term. Source: Autofacts Analysis Gasoline Diesel Mild-hybrid Full-hybrid Plug-In-hybrid Electric 6
EU Markets with upward potential Automotive Markets Update ECG Conference, Hamburg PwC 21 October 2016 7
2 A Sector in Transformation Recovery patterns of the main EU markets have been diverse, and will continue to develop individually driven by economic growth and technology EU+EFTA: New Car Registration Variance 1990 2016F (millions) 5 26-year high (1990-2015) EU+EFTA: Contribution to Growth 2016-2022 (percentage) Germany UK Italy France Spain EU-13 4 2016F 2015 3 26-year low (1990-2015) 9.8% 9.9% 21.4% 13.4% 20.4% 17.6% 2 Regional Sales: Comparison & Growth 2022 vs. 2016 1 +7.3% +8.9% +29.6% +15.0% +42.0% +36.5% 3.9m 3.3 m 2.6m 2.8m 1.9m 1.8m 0 Germany UK Italy France Spain EU-13 3.6m 3.0m 2.0m 2.4m 1.3m 1.3m Source: ACEA, Autofacts Analysis 8
2 A Sector in Transformation 17.1 million new light vehicle sales expected for 2016 backed by various supportive factors such as low fuel prices and improving employment EU+EFTA: New Light Vehicle Registrations 2015 2023 (millions) 25 20 15 16.0 1.8 17.1 2.0 17.7 18.0 18.0 2.1 2.1 2.1 18.7 2.2 19.6 2.3 20.2 2.4 20.8 2.5 In 2016, new car registrations are likely to increase by almost 1 m or 6.4% to 15.1 m new cars. Backed by dynamic LCV market growth of 10.9%, light vehicle sales are now expected at 17.1 m units in 2016. 10 5-14.2 15.1 15.6 15.9 15.9 16.5 17.3 17.8 18.3 2015 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F LCV Registratons Car Registrations Source: ACEA, Autofacts Analysis 9
2 A Sector in Transformation As Europe continues to grow, local manufacturers plan to develop their assembly base there in competition with Turkey and North Africa Growth in developing Asia- Pacific and other emerging markets will continue to drive the large majority of volume opportunities for the world s largest alliance groups, with little to no consolidation expected to occur. Top 10+1 Alliance Groups 2015 vs. 2022 (millions) 6 5 4 5.0 5.5 3 2 1 2.3 2.1 2.0 2.1 1.5 1.9 1.9 1.7 1.1 1.5 1.0 1.3 1.2 1.2 0.6 0.7 0.7 0.5 0.4 0.5 0 VW Group Renault-Nissan PSA Group BMW Group Daimler Group FCA Group GM Group Ford Group Hyundai Group JLR Volvo Cars 2015 2022F Source: Autofacts 2016 Q4 Forecast Release ** Includes Kia ***FCA = Fiat-Chrysler Automobiles 10
Brexit as a big concern Automotive Markets Update ECG Conference, Hamburg PwC 21 October 2016 11
3 A Sector in Transformation While there is uncertainty, there are somethings we do know Brexit is a process not an act, with a period of negotiation in the midst of other political events 24 June UK votes to leave the EU. Brexit wipes $2 trillion off global markets and the pound tumbles to a 30 year low. David Cameron announces he will step down as PM in September 13 July Theresa May is elected Conservative leader Q3/4 2016 UK Government attempts informal negotiations with the EU and starts to negotiate global trade deals Q1/Q2 2017 Q2 2017 UK Government triggers Article 50 thus notifying the European Council of its intention to leave the EU French Presidential Election (Depending on the outcome this could have a large impact on the UK/EU negotiations) Q2/Q3 2017 Q4 2017 Negotiations commence between the UK and the European Commission German Parliamentary Election? To be continued? 2019 and beyond??? Formal negotiation period ends and the UK leaves the EU. It is likely that the negotiations on the UK s future relations with the EU will continue for more than two years. The timings of this are uncertain but could last from 5-10 years. The UK would also continue to pursue a number of free trade agreements with its key trading partners which will take time Investments on hold 12
3 A Sector in Transformation Article 50 negotiations Potential deals Scenario Case Study EEA member A Bespoke bilateral deal B No access agreement C Norway Switzerland US Analysis The UK remains part of the EEA and keeps the four freedoms of labour, capital, goods and services UK will need to make a substantial contribution to the EU budget and comply with EU social, employment and product regulation The UK enters into a bilateral integration treaty with the EU UK would have access to some areas of the Single Market, at the cost of adopting the relevant EU regulations The UK does not establish any new trade agreements with the EU Only WTO terms are still applied UK goods and services would be treated in the same way as American ones in the EU Disruption to economy Low Medium High Access to single market High via passport/regulatory equivalence Medium Low Influence over EU regulations Some no voting rights but limited formal engagement. Some autonomy in other areas. No No Application of EU regulations Yes, including social and labour law (Working Time Directive) Technically no, but required in practice if domiciling in other territories (e.g. Swiss banks operating out of UK) Technically no, but limited discretion in reality if third country equivalence is required Independent immigration policy No all four freedoms retained Some autonomy, but Switzerland cannot restrict EU immigration Yes Independent trade policy Yes UK may negotiate free trade agreements (FTA) with other countries Yes UK may negotiate FTAs with other countries Yes UK may negotiate FTAs with other countries in FS and other services Automotive Sector Impact 13
3 A Sector in Transformation The UK is a preferred location for European manufacturers due to experienced personnel, strategic positioning, and local sales expectations UK: Light Vehicle Assembly of Top Alliance Groups 5 7 4 2 3 1 EU member states Non-EU states No. Alliance Group Brand Volume* City 1 Tata Group Jaguar-Land Rover 505,414 Bromwich, Halewood, Solihull 2 Renault-Nissan Nissan 474,844 Sunderland 3 BMW Group Mini 201,207 Oxford 4 Toyota Group Toyota 190,161 Burnaston 5 GM Group Opel-Vauxhall 153,077 Ellesmere Port, Luton IBC 6 Honda Group Honda 119,414 Swindon 7 VW Group Bentley 10,888 Crewe 6 1,655,005 Source: Autofacts 2016 Q4 Forecast Release 3 1 2 4 5 *in 2015 **in 2020 ***excl. United Kingdom EU27***: Excess Capacity of UK-located brands No. Alliance Group Brand Excess Capacity** Country/City 1 BMW Group Mini 100,000 & 50,000 NL / Born, AT / Graz 2 Tata Group Land Rover 150,000 SK / Nitra 3 Renault-Nissan Nissan 125,000 ES / Barcelona 4 Tata Group Jaguar 50,000 AT / Graz 5 Toyota Group Toyota 50,000 FR / Onnaing 525,000 14
3 A Sector in Transformation Numerous manufacturers could be considering a shifting of light vehicle assembly from UK to the European mainland 2019 Brexit Exit!?!? to be continued New decision phase New Investments No new Investments Disinvestments 2021 Realisation of investments Upside Scenario Possible effects New plants New dealerships Implementation of new trainings Hiring new personnel Base Scenario Possible effects Plant closures Dealership closures Reduction of existing trainings Staff reduction Downside Scenario UK: Light Vehicle Assembly Scenarios 2015-2023 (millions) 2.5 2.0 1.5 1.0 0.5-2015 2016 2017 2018 2019 2020 2021 2022 2023 Source: Autofacts Analysis, Autofacts 2016 Q4 Forecast Release 15
Thank you for your attention! Autofacts
Autofacts contact Christoph Stürmer Global Lead Analyst PwC Germany (Europe) T: +49 69 9585 6269 E: christoph.stuermer@de.pwc.com 17
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