Automotive Industry Forecast Sean P. McAlinden, Ph.D. Executive Vice President, Chief Economist Center for Automotive Research Steel Manufacturers Association Ypsilanti, Michigan March 25, 2014 The Center for Automotive Research conducts leadingedge research that impacts the future of the global automotive industry. • Automotive industry contract research and service organization • CAR is a standalone Non-Profit 501(c)3 since 2003 • Based in Ann Arbor, MI – 30+ Employees • CAR forecasts industry trends, advises on public policy, and sponsors multi-stakeholder communication forums CAR’s Automotive Industry Affiliates GDP Outlook Through 2015 – U.S., China, NAFTA, and Rest of World (In 2005 $Billions, constant PPPs) U.S. China NAFTA excl. U.S. ROW 40,000 35,000 GDP Growth Rate: ROW: 3.3% 30,000 25,000 20,000 15,000 U.S.: 2.6% 10,000 China: 7.7% 5,000 NAFTA excl. U.S.: 2.7% - 1970 1975 1980 1985 1990 1995 2000 2005 2010 Source: OECD Economic Outlook, No 94 – November 2013 - OECD Annual Projections, Gross domestic product, volume, at 2005 PPP, USD. 2015 Vehicle Density and GDP Per Capita, 2003-2012 Vehicles Per 1,000 Population USA 100 RUS BRA 1,000 JPN DEU KOR MEX 100 CHN IND 1,000 10,000 GDP Per Capita, PPP Current $ Source: Ward’s World Motor Vehicle Data; The World Bank 10 100,000 20 18 16 14 12 10 25 China 22.0 17.2 16.9 16.9 16.8 16.8 17.0 16.6 16.5 16.2 16.0 15.5 19.3 15.4 15.4 15.4 15.1 15.0 15.0 15.0 14.9 14.5 18.5 14.7 18.1 14.5 14.2 13.9 13.9 13.8 13.2 12.8 12.8 12.3 12.1 11.6 11.2 13.7 10.6 10.4 10.4 20 U.S. 8 Japan 6 4 15 10 9.4 8.8 7.2 5.8 5.1 4.4 3.2 2.02.3 1.31.61.41.8 5 Germany 2 Canada S. Korea 0 1978 1983 0 1988 1993 Source: Automotive News; Ward’s Auto Yearbook; CAAM; JAMA 1998 2003 2008 2013 Millions Millions Motor Vehicle Sales in Units 1978 – 2013 Motor Vehicle Production By Regions 1997-2013 Millions East Asia China Europe N.A. 25 22.1 20 18.3 18.4 15 13.6 10 7.6 5 - 19.3 1.6 1.6 1.8 2.1 2.3 3.3 8.9 9.2 5.7 4.5 5.1 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 East Asia: Japan and S. Korea; Europe: Germany, Spain, France, UK, Czech Rep., Slovakia, Italy, Poland, Belgium, and Romania; N.A.: Canada, USA, and Mexico. U.S. Light Vehicle Sales Percent Change YTD Through February: 2014 vs. 2013 Total 2,203,668 -32,404 100% Light Trucks 1,130,004 + 50,009 51.3% Passenger Cars -7.1% Source: Automotive News; CAR Research 1,073,664 -82,413 48.7% -1.4% 4.6% U.S. Light Vehicle Monthly Sales and SAAR February 2012 – February 2014 1.8 15.5 15.8 15.6 15.4 15.2 15.3 15.3 15.2 14.9 15.9 14.5 14.4 14.4 14.3 14.1 14.1 13.8 1.4 1.2 1.5 1.4 1.3 1.3 1.2 1.1 1.4 1.3 1.2 1.2 1.1 1.4 15.4 15.4 15.3 15.2 1.5 15.2 1.4 1.2 1.1 1.2 16 14 1.4 1.3 1.3 1.1 16.4 16.1 12 1.2 1.2 10 1.0 1.0 Source: Automotive News; CAR Research Feb-14 Jan-14 Dec-13 Nov-13 Oct-13 Sep-13 Aug-13 Jul-13 Jun-13 May-13 Apr-13 Mar-13 Feb-13 Jan-13 Dec-12 0 Nov-12 0.2 Oct-12 2 Sep-12 0.4 Aug-12 4 Jul-12 0.6 Jun-12 6 May-12 0.8 Apr-12 8 Mar-12 1.0 Feb-12 Monthly Sales (Millions) 1.6 15.1 SAAR Monthly SAAR SALES Are Sales Back? 1995-2013 17.2 479.9 18 450 16 400 15.53 14 Spending back to 2006 level Vehicle sales at mid-90s 350 12 300 10 250 8 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Billion $ (2005 dollar) 500 In Units Source: BEA Million Units In Spending (Billion of 2009 $) Percent Change in Sales of Light Vehicles Per OEM: YTD Through February: 2014 vs. 2013 -1.4% TOTAL Nissan 14.0% 9.9% Fiat-Chrysler Hyundai-Kia -1.5% Honda -4.8% Toyota -7% GM -6.1% Ford -6.7% -10% Source: Automotive News; CAR Research -5% 0% 5% 10% 15% 2,203,688 -32,384 100% 205,830 + 25,275 9.3% 282,049 + 25,303 12.8% 171,237 -2,594 7.8% 192,036 -9,577 8.7% 305,649 -18,453 13.9% 393,590 -25,423 17.9% 336,843 -24,330 15.3% 20% N.A. Light Vehicle Production Percent Change YTD Through February: 2014 vs. 2013 TOTAL 1.0% Fiat-Chrysler 32.4% Nissan 18.3% GM 4.6% -4.8% Hyundai-Kia Honda -9.4% Toyota -9.7% Ford -13.4% -20% Source: Automotive News; CAR Research -10% 0% 10% 20% 30% 40% 2,726,796 + 25,905 100% 491,626 + 120,360 18.0% 279,108 + 43,217 10.2% 570,225 + 24,835 20.9% 126,923 -6,364 4.7% 283,730 -29,561 10.4% 265,437 -28,486 9.7% 445,770 -68,799 16.3% Big 7 Inventory in Days (Jan 2013-Mar 2014) 600 62 61 500 400 73 300 200 Toyota Nissan 80 Hyundai-Kia 87 Honda GM 91 100 Source: Automotive News Jan-14 Dec-13 Nov-13 Oct-13 Sep-13 Aug-13 Jul-13 Jun-13 May-13 Apr-13 Mar-13 Feb-13 Jan-13 Month-Year Mar-14 85 0 Feb-14 Total Big 7 Days in Inventory 700 Ford Chrysler 2013 Per Vehicle Profits*, North America $2,844 3,000 2,500 $2,307 2,000 1,500 $1,323 $1,254 $1,225 Chrysler Honda Toyota 1,000 500 0 GM Ford *EBIT or automotive operating income per vehicle sold. Global average for Chrysler figure. Honda also excludes motorcycle, finance, and power products. Now We’re Talking. . . North American Automotive Revenue Per Vehicle 2006 – 2013 GM Ford Chrysler $34,000 $31,632 $32,000 $30,859 $29,639 $30,000 $27,669 $28,000 $31,333 $28,700 $30,000 $29,406 $28,789 2012 2013 $29,991 $27,931 $26,700 $25,798 $26,000 $24,900 $24,348 $24,154 $24,176 $22,604 $21,969 $22,839 $22,896 2006 2007 $24,267 $24,000 $22,793 $21,845 $22,000 $20,000 2008 2009 Source: CAR Research based on companies’ financial reports. 2010 2011 Per Vehicle Profits*, North America 2006 - 2013 $3,000 $3,000 $1,921 $2,000 $1,391 $1,000 $2,058 $2,275 $2,000 $1,237 $1,543 $1,094 $2,226 $995 $1,000 $975 $452 $(306) $$(1,000) $- Detroit Three $(1,054) $(1,416) Toyota and Honda $(2,000) $(1,000) $(2,000) $(3,308) $(3,229) $(3,000) $(3,000) $(4,000) $(4,000) 2006 2007 2008 2009 2010 2011 2012 *EBIT or automotive operating income per vehicle sold. Global average for Chrysler figure. Honda excludes motorcycle, finance, and power products. 2013 Market Share: Segment Breakdown – U.S. LV Sales February YTD 2014 21.1% Middle CUV Middle Car 18.9% Small Car 18.7% 13.3% Pickup 7.4% Luxury Car 6.3% SUV 5.0% Van Small CUV 3.5% Large CUV 3.3% Large Car 0.0% Source: Ward’s Automotive Reports 2.5% 5.0% 10.0% 15.0% 20.0% 25.0% Segment Breakdown - U.S. LV Sales Percent Change February YTD 2014 vs. February YTD 2013 -1.5% Total 38.7% Large Car 24.9% Small CUV 10.7% Middle CUV 3.7% Van 1.9% Luxury Car -2.3% Pickup SUV -3.9% Large CUV -4.3% -5.5% Small Car Middle Car -15.4% -25.0% Source: Ward’s Automotive Reports -15.0% -5.0% 5.0% 15.0% 25.0% 35.0% 45.0% 2014 U.S. Sales Forecasts (Units in Millions) 16.2 (3/14) 16.2 (3/14) 16.4 (12/13) 16.3 (3/14) 16.0 (1/14) 16.4 (3/14) 16.0 (1/14) 16.4 (1/14) 16.5 16.5 Sources: Various (1/14) CAR Forecast – Notes March 2014 • • • • • • • • • • 2013 ended with 1.9% GDP growth, but corporate profitability reached to a new high. Good news for long term employment growth? Maybe not . . . Employment has grown back to near pre-recession level, despite record share for part-time jobs. However, majority of 2013 job creation was full-time. Bad weather slowed 1Q 2014 economic activities. Vehicle output was cut. But for the rest of 2014, vehicle demand will be strong, backing by a bullish employment outlook. Vehicle supply will be in shortage. Vehicle price will be even higher. Young people delay entering labor market. Unemployment rate will no longer be back to pre-recession level. 6% is the natural unemployment rate from now on. Without young generation entering labor market, labor participation rate will remain low. GDP growth will be hindered. Labor productivity won’t grow forever. Household net worth growth rate was much higher than income growth rate. Interest rate was low. Good time to buy big-ticket items such as cars. Consumer confidence was marginally up from a year ago. Gas prices should be stable, credit very available. Housing starts are still low comparing to pre-recession levels. It is correlated to employment growth and vehicle sales. Operating vehicles still getting older but since over half are over 11 years old – scrap should increase a lot soon . . . They are Getting Old . . . U.S. Light Vehicle Age and Scrappage Rate Average Age 8.6 8.8 8.8 6.78 8.9 6.74 5.88 5.76 8.9 9.0 9.1 9.4 Scrappage Rate (%) 9.5 9.7 9.8 10.0 6.40 6.19 5.50 4.76 5.03 5.24 4.35 10.3 5.66 10.6 5.21 10.9 11.2 11.4 5.70 4.90 4.80 4.12 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: R.L. Polk Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Price Per Gallon Gasoline Prices (Nominal) Jan. ‘03 – Jan. ‘14 $4.50 $3.99 $4.00 $3.50 $3.00 $2.50 $2.00 $1.64 Source: EIA $3.90 $3.96 $3.12 $3.06 $2.86 $2.92 $2.85 $3.36 $2.60 $2.21 $1.95 $1.62 $1.50 $1.00 Household Net Worth and Vehicle Sales 1978-2013 Household Net Worth Net Worth (Real $) 18 90 16 80 14 70 12 60 10 50 8 40 6 30 4 20 2 10 0 0 1975 1980 1985 1990 1995 2000 Source: Federal Reserve Statistical Release , Z.1, Flow of Funds Accounts of the United States Real Household net worth is deflated by CPI. 2005 2010 Household Net Worth in Trillions Light Vehicle Sales Light Vehicle Sales U.S. Sales Forecast: 2014-2018 18 16 14 Million 12 16.1 15.6 14.5 13.2 12.8 11.6 10.4 10 7.6% 16.8 16.2 16.4 16.5 16.7 3.8% 13.3% 10.4% 11.6% 8 6 4 2 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: CAR Research, March 2014 24 U.S. Production Forecast: 2014-2018 14 12 Million 10 10.8 10.4 8.7 8.7 7.8 8 6 5.8 11.1 6.7% 12.2 11.7 11.9 11.9 12.0 5.4% 19.5% 11.5% 34.5% 4 2 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: CAR Research, March 2014 25 North American Production Forecast: 2014-2018 20 18 16 Million 14 15.6 15.2 12.0 12 10 5.8% 13.3 12.7 17.5 17.7 18.0 17.3 16.5 16.8 1.8% 17.3% 10.8% 8.6 39.5% 8 6 4 2 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: CAR Research, March 2014 26 U.S. Light Vehicle Sales & Production Forecasts 2007 – 2013; 2014F-2020F U.S. Sales U.S. Production U.S. Light Vehicle Sales/Production in Million Units 20 18 16 16.1 10 16.1 16.5 17.0 17.2 17.4 17.6 14.4 14 12 15.5 16.8 13.2 12.7 11.6 10.5 10.4 10.1 8.5 7.6 8 10.9 11.2 11.7 11.8 12.2 12.3 12.2 12.3 8.4 5.6 6 4 2 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: CAR Research; LMC Automotive. N.A. Sales N.A. Production N.A. Light Vehicle Sales/Production in Million Units 25.0 20.0 18.9 18.4 19.0 19.5 19.8 20.1 20.3 20.6 20.8 17.1 15.9 15.0 15.2 13.9 12.7 10.0 15.4 15.4 12.9 5.0 12.2 16.2 16.6 17.3 17.7 18.3 18.5 18.6 18.6 13.1 8.8 0.0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: CAR Research; LMC Automotive. Trends in Fuel Economy Standards for Select Countries and Regions, MPG, 2000-2025 Miles per Gasoline Gallon normalized to CAFE Test Cycle 65 60 Solid dots and lines: historical performance Solid dots and dashed lines: enacted targets Solid dots and dotted lines: proposed targets Hollow dots and dotted lines: target under study EU 2020: 60.6 Japan 2020: 55.1 55 China 2020[1]: 50.1 50 US 2025[2]: 49.1 45 US-LDV Korea 2015: 39.3 40 Canada-LDV EU Mexico 2016: 35.1 Canada 2016: 34.5 35 Japan China 30 S. Korea 25 Australia Mexico 20 2000 2005 2010 2015 2020 [1] China's target reflects gasoline vehicles only. The target may be higher after new energy vehicles are considered. [2] United States , Canada, and Mexico light-duty vehicles include light-commercial vehicles. © Center for Automotive Research, March 2013 2025 Source: The World Bank 29 54.5 MPG Goodbye to the American Pickup? (38.0 MPG for All Trucks w/ AC/credits) Dodge Warren Truck Assembly, MI GM Flint Truck Assembly, MI GM Fort Wayne Truck, IN Ford Dearborn, MI Truck Assembly Ford Kansas City, MO Truck Assembly GM Arlington, TX Truck Assembly Ford Kentucky Truck, Louisville, KY GM Powertrain Romulus, MI GM Powertrain Toledo, OH Ford Powertrain Windsor, ON Ford Powertrain, Romeo Michigan Chrysler Mack Ave. V8 Detroit, MI Ford Livonia/Sharonville, MI/OH Transmission Chrysler Kokomo, IN Transmission Lightweighting High Strength Steel, Aluminum & Composites Take on the Heavyweights Why Light Weighting? “Excess weight kills any self-propelled vehicle. There are a lot of fool ideas about weight … Whenever anyone suggests to me that I might increase weight or add a part, I look into decreasing weight and eliminating a part!” – Henry Ford, 1922 Every automotive manufacturer is pursuing light weighting as a key strategy to reduce fuel consumption—irrespective of the powertrain technology pathway. A 10% reduction in vehicle weight generates a 6-7% improvement in fuel consumption © Center for Automotive Research, March 2013 32 Lightweighting Material Architectural Strategy Ford 2015 F-150 All technology pathways anticipate lightweighting The “monolithic” car with one dominant material is: – Easier to design, and – Easier to manufacture, but – Not optimum for reducing mass and cost • Future Steel Vehicle – 35% reduction in body mass Source: Center for Automotive Research • Aluminum Intensive – 45% reduction in body mass Aluminum body & bed Steel frame • Composite Car - 55% reduction in body mass Key Material Trends (Next 10 years) • Increased use of ultra high strength steel for structural components around the “safety cage” to prevent intrusion • Aluminum use for chassis and exterior panels is increasing • Fiber reinforced plastics (glass and carbon) for structural components are still several years away from high volume production • Joining complexity: more laser welding, fasteners and adhesives Structural Adhesive Rise of Aluminum – Hasn’t Affected Total Steel Yet . . . 1985 - 2012 56.0% 3,694 3,187 3,902 4,040 Steel% 4,044 4,097 % of Vehicle Weight Alum% 4,039 3,939 3,962 4,035 60.0% 3,920 52.3% 3,141 50.0% 40.0% 30.0% 20.0% 9.3% 10.0% Year 2012 2011 2010 2009 2008 2007 2006 2005 2000 1995 0.0% 1990 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 - 1985 Pounds per N.A. Vehicle Total Weight Materials and Mass Reduction Expectations Material Magnesium Carbon Fiber Composites Material Replaced Steel, Cast Iron Mass Reduction % 60 – 75% Steel 50 – 60 Aluminum Matrix Composites Steel, Cast Iron 40 – 60 Aluminum Steel, Cast Iron 40 – 60 Alloy Steel 40 – 55 Glass Fiber Composites Steel 25 – 35 Advanced High Strength Steels Mild Steel, Carbon Steel 15 – 25 Mild Steel 10 – 15 Titanium High Strength Steel Source: US Department of Energy Materials’ manufacturing challenges Why Steel is Better (for now) • • • • • • • • Supply chain exists Manuf. Equipment/Tooling exists Cheaper Improving Repair aftermarket exists! More durable Easier recycling Easier to manufacture? -maybe not HSSs
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