Presentation to MBS 2017 - Forecast Panel
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Presentation to MBS 2017 – Forecast Panel Michael Robinet Managing Director, Automotive Advisory Solutions © 2017 IHS Markit. All Rights Reserved.
2
AUTOMOTIVE
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© 2017 IHS Markit. All Rights Reserved. MBS 2017 Conference / August 2017Past IHS Markit Forecast Panel Themes • 2012: Constant Structural Change > Global platforms, pressure to add capacity while building profitability • 2013: Opportunities and Bottlenecks > Rise of non-Detroit 3, need to look outside the traditional structures • 2014: A Proactive Supplier > No longer wait for RFQs and ‘innovation ideas’ from customers – find the right business • 2015: The Next Stage > Describing a market with faster cadence, driven by regulations and production localization • 2016: Foresight Reigns > Need for suppliers to take greater control of their destiny • 2017: Focus On The Journey …. > Level 5 & BEVs are the destination – The journey will separate winners from losers © 2017 IHS Markit. All Rights Reserved. MBS 2017 Conference / August 2017
Focus on the Journey Presentation to MBS 2017 – Forecast Panel Michael Robinet Managing Director, Automotive Advisory Solutions © 2017 IHS Markit. All Rights Reserved.
5
Improving US Economy Will Keep Vehicle Market Steady
• Real GDP – Economic signals mixed; Consumer confidence and many sectors
Real GDP Growth Rate improving, but strong dollar hurting trade. Growth improving this year, 2.2%,
and next year towards 3% before declining.
4%
• Monetary Policy – FED expected to continue to raise interest rates, weak global
conditions causing delays. US labor market key; do rising wages support
3% tightening?
• Fiscal Policy – Spending will rise in 2017 thanks to proposed infrastructure and
2% military outlays, contributing to growth for first time in years. Impact of 2017
Tax rate cut viewed as positive though replacing declining revenues will be an
1% issue.
• Consumption – Real consumer spending improving – stronger labor markets,
0% falling energy prices and improved household balance sheets all contributing.
• Housing – Plenty of recovery left to go, Housing Starts only at 2/3 of pre-crash
-1% averages. Sector will gain momentum as household formation and labor
markets improve.
-2% • Employment – The good times of monthly job gains averaging 200,000 or
better are probably over; the rest of this year and next should be more
-3% moderate than the past couple of years.
2008
2002
2003
2004
2005
2006
2007
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
• Foreign Trade – Strong dollar is hurting trade balances, a drag on the US
economy through 2018. Recent yuan devaluation, coupled with already weak
euro and yen, will impact OEM sourcing decisions.
Real GDP Growth Rate
• Investment – Strong profits, stock prices, suggest business fixed investment
will accelerate; low oil prices are a “surprise” cost savings, but within the oil
sector a major pullback is occurring.
© 2017 IHS Markit. All Rights Reserved. MBS 2017 Conference / August 20176
Crude Slowly Recovers Amid New Supply
• In a six-month accord that took effect in
Price of Dated Brent crude oil (USD/Barrel)
January 2017, OPEC agreed to cut its
$150 production 1.2 million barrels per day. Russia’s
energy minister announced a reduction of
$125 300,000 barrels per day.
• The US onshore oil industry is proving effective
$100
at cutting costs and achieving efficiencies. US
crude oil production bottomed in fourth-quarter
$75
2016 near 8.6 MM b/d and will increase about
400,000 b/d during 2017.
$50
• Under the Trump administration, reduced
$25 regulation, fewer hurdles for pipeline
construction, and an opening of public lands to
exploration and production could lead to
$0
2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 higher-than-expected oil and gas supplies.
Current US dollars 2016 US dollars • The price of Dated Brent crude oil is projected
to increase from USD44/barrel in 2016 to
Source: IHS Markit © 2017 IHS Markit USD54 in 2017 and USD57 in 2018.
© 2017 IHS Markit. All Rights Reserved. MBS 2017 Conference / August 20177
US: Light Vehicle Sales Forecast
Market Dynamics Shifts – Conquest & Loyalty are Critical, Mix Shifts and More Players/Nameplates
20
Market peaks in 2018 – weaker buying conditions,
Millions
2017
18
slower job creation, rising oil prices start next cycle. 17.1m
Successful tax reform required ….
16
14 LT – peaks in 2018, weaker
housing, higher fuel &
12
Pre-Crash
regulations force decline
40 year trend:
10 +140k annually
8 Model 2010 2016 2023
Count 335 371 409
6
Car – sales flatten - rises as
4
affordability declines
Sales Vol Car Light Truck Linear (Sales Vol)
© 2017 IHS Markit. All Rights Reserved. Source: IHS Markit Automotive, current light vehicles sales forecast MBS 2017 Conference / August 20178
Global LV Production Outlook
Over 70% of Total Growth From Emerging Asia
Region 2016 2017 2018 2019 2020 2022 2024 CTG Notes
2016-24
China 27.4 27.6 27.9 29.4 30.5 31.9 33.1 37% • Tier 3 & 4 city growth
• Slow rebound of Russia
Europe 21.5 22.1 22.4 22.5 23.0 23.6 24.0 16% and shift from West EU
NA 17.8 17.4 17.5 17.7 18.4 18.1 18.0 1% • D3/A4/G3 Realignment
• India domestic &
South Asia 8.4 8.7 9.2 9.7 10.7 11.9 13.3 31% export, ASEAN rise
• Slow domestic mkts,
Japan/Korea 12.9 13.4 13.0 12.7 12.6 12.5 12.4 -3% production co-location
• Well below 2013 record
South America 2.7 3.1 3.4 3.5 3.8 4.3 4.7 13% of 4.5 mil
Middle • Focus of more attention
East/Africa
2.3 2.5 2.7 2.9 3.1 3.3 3.2 6% by OEMs
Total 93.1 94.9 96.1 98.4 102.0 105.6 108.7
CTG – Contribution to Growth
© 2017 IHS Markit. All Rights Reserved. MBS 2017 Conference / August 20179
Top OEM Cooperative Groups by Production Volume 2024
Top-15 OEM Groups
Global Production Volume
20
Millions
18
16 Top-15 OEMs Total Volume
14 • A4: 44.6 M
• D3: 21.8 M
12
• G3: 20.2 M
10 • Others: 12.0 M
8
6
4
2
0
Toyota+ VW+ Tata R/N+ GM+ SAIC Hyundai Ford Honda FCA PSA Daimler BMW Geely+ Changan BAIC Great Wall
Mazda+ Mits. Proton
Fuji+
Suzuki
© 2017 IHS Markit. All Rights Reserved. MBS 2017 Conference / August 201710
Global Program Launches by Region
Increased Launch Activity Raises Risk
200
Increased industry pace places pressure 175
175 on talent, resources and infrastructure.
150 45
124
125 32
116
45
# of Launches
100 33
25 30
51 39 32
100 21 22 25 41
27 37 25 41
39 39 23
75 33 36
31 27 19 31 39
23 16 29 12 31
16 23
50 17 15 15
17 14 24 13 9
19 27 12 31 11 8
25 26 24 23
22 23 29 30 18
25 22
21 36 26
17 24 18 19 17 18 24 22 18
10 11 13 8 11
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
North America Europe Japan/Korea China Other
© 2017 IHS Markit. All Rights Reserved. MBS 2017 Conference / August 201711
NAFTA Production
Customer Dynamics Changing …
• Rise in Mazda, Fuji Heavy, Volvo and Tesla underscores ‘Other’ OEM rise – Supply base shifts.
• Detroit 3 output declines due to new competition, comparative lack of exports and inflexibility to shift to
CUVs from sedans.
NAFTA Production Share
20
18.4 18.1
Millions
18 17.4
Other
16 7%
Germ 3
14 10%
3%3%
NA LV Production
Det 3
12
45%
Asian 4 17%
10 38% 77%
8
6
2000
4
2 2024
-
2000 2003 2006 2009 2012 2015 2018 2021 2024
Detroit 3 Asian 4 German 3 Other
© 2017 IHS Markit. All Rights Reserved. MBS 2017 Conference / August 201713
NA Regional Shift
Logistics and Supply Structure Under Pressure
Midwest/Ontario
9 8.0
7.2 6.9
Mil
6
• Mix towards D/E-segment and
Prod Vol
5.6 5.4
4.6 4.5 4.4 4.5 4.5 4.3 4.3 4.3 Full Frame
3 • Detroit 3 still account for +60%
-
2.4 2.4 2.3 2.3 2.2 2.2 2.2 2.3 2.2 2.2 of MW/ONT volume by 2024
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Southeast
6 4.8
4.6 4.7
Mil
• Remarkable stability – newer
0.8 0.8 0.8 0.9 0.9 0.9 0.9 0.9 0.9
0.8
facilities w/export focus
Prod Vol
0.9 0.9 1.0 1.0 1.1 1.0 1.0 0.9 1.0 1.0
3
• Higher concentration on C & D-
2.8 2.8 2.8 2.8 2.7 2.7
2.7 2.7 2.6 2.6
segment CUVs
-
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Mexico
6
4.6
Mil
4.5
• Mid-Mexico now accounts for
3.5
~70% of Mex volume
Prod Vol
0.8 0.8 0.9 0.9 0.9 1.0 1.0
0.6
3 0.5 0.4
1.6 1.6 1.8 1.7 1.8 1.7 1.7 1.7 1.6 1.7 • Rise of B & C-segment products
1.1 1.3 1.4 1.5 1.6 1.7 1.7 1.6 1.6 1.6 with increasing luxury focus for
-
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 export
A4 D3 G3 Oth
© 2017 IHS Markit. All Rights Reserved. MBS 2017 Conference / August 201714
Detroit Three Volumes Peak …
Quarterly NA Light Vehicle Production
1.0
Millions
0.9
Peak
0.8
Peak
0.7
0.6 Peak
0.5
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019
General Motors General Motors Run Avg Ford
Ford Run Avg FCA FCA Run Avg
© 2017 IHS Markit. All Rights Reserved. MBS 2017 Conference / August 201715
SUV/CUVs Dominate Production – Flexibility in Question
Quarterly NA Light Vehicle Production
2.0
Millions
1.8
1.6
SUV Peak
1.4
1.2
Sedan
Trough
1.0
0.8
Pickups Peak
0.6
0.4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019
SUV SUV Run Avg Sedan Sedan Run Avg
Pickup Pickup Run Avg All Other All Other Run Avg
© 2017 IHS Markit. All Rights Reserved. MBS 2017 Conference / August 201716
U.S. Production In Decline as Mexico Steadily Grows
Quarterly NA Light Vehicle Production
3.4
Millions
2.9
2.4 Peak
Shows no
1.9 signs of
slowing
1.4 Peak
0.9
0.4
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019
United States United States Run Avg. Canada
Canada Run Avg. Mexico Mexico Run Avg.
© 2017 IHS Markit. All Rights Reserved. MBS 2017 Conference / August 201717
EPA vs. NHTSA vs. CARB vs. the EU vs. China – Many Considerations …
Two key milestones for the future are the 2016 requirement and then the more difficult 2022-2025
requirement
60
New US • US Administration is in the
50
Plan midst of a mid-term review
with a recent note that
40 ?? standards may be reduced or
CAFÉ Standard (MPG)
Cars
frozen as of Model Year 2021.
30
Trucks • Complicating factors include
Cars
Trucks
Combined
the California Exemption, the
‘177’ states which follow
20
10
California as well as emission
reduction/electrification
0 efforts of China, EU and
Quebec.
Model Year
© 2017 IHS Markit. All Rights Reserved. MBS 2017 Conference / August 201718
Global & NA Electrification Trends
Led by EU & China, Global has higher ‘electrification’ share, while North America will be slower
N.A. Electrification Penetration
Global Electrification Penetration
115 100% 17.5 100%
Greater emphasis on
N.A. Production Vol. – Millions
Global Production Vol. - Millions
% Share of Production
% Share of Production
90%
Start/Stop tech. in N.A. 90%
110 17.0
110 80%
80%
105 107
16.5 70%
70%
104 63%
100 56%
55% 60% 60%
16.0
95 45% 50% 50%
98
15.5 17.0
34% 40% 16.7 16.7 40%
90
95 33%
30% 15.0 30%
85 29% 20%
15.6
13% 20% 14% 20%
15.2 11%
80 11% 14.5
7% 15%
3% 2.2% 3.8% 10% 2% 3.8% 4.8%
10%
75 0% 14.0 0%
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Volume Electrification Share Stop/Start Share Hybrid Share BEV Share
© 2017 IHS Markit. All Rights Reserved. Electrification includes: Mild-/Full-Hybrid, BEV, Fuel Cell MBS 2017 Conference / August 201719
ADAS – Several Strategies Toward a Common Goal
Blue = Full Autonomy
• Paving the way: Tesla Autopilot 2.0 Hardware
suite
• Autopilot Expected 10% market share by 2022
• Autonomy hurdles: 50% Auto expertise, 50%
tech expertise
• OEMs strategy: fund 3rd parties, opposed to in-
house
• Essential tech investments
> Autonomous Software
> Cybersecurity
> Driver safety tools Features currently
> Connected vehicle, V2V, V2X, data
management Intuitive pedestrian detection with steering
> Fleet telematics Lane change/evasive steering
Remote control parking
© 2017 IHS Markit. All Rights Reserved. ADAS: Advanced Driver Assistance Systems MBS 2017 Conference / August 201720
North American Engine Launches
Combination of Engine Family, Displacement and Engine Plant
16
14
14 13 OEMs are spending a
greater share of
12 resources on
10 electrification,
10
batteries and power
# of Launches
8 structures.
6
4
2 1
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
GM Ford FCA Toyota Honda Nissan Hyundai VW Daimler BMW Others
© 2017 IHS Markit. All Rights Reserved. MBS 2017 Conference / August 201721
The Journey to Level 5 & Battery Electric
Substantial Change/New Modest Change • Shift towards soft from hard parts
Thermal Propulsion (Engine/Trans)
> Many suppliers focus resources on
Electrical/ Power Supply Fuel mechatronics, electric actuation,
software and system integration
Body In White Exhaust
> Share of ‘value’ devoted to hard parts
Steering Suspension
decline – the pie slices thinner
Braking Interior
• System shifts will be rampant
Aerodynamics/ NVH Seating
> Major transitions in body, braking,
Driveline Exterior chassis, steering and thermal as
Electronics Passive Safety electrification and autonomy have a
profound impact.
Battery
> Increase in 48 volt systems and the
Vision/Lighting need for efficient distribution
ADAS/ Active Safety systems all underscore looming
change.
Wheels/Tires
© 2017 IHS Markit. All Rights Reserved. MBS 2017 Conference / August 2017A Looming Cost Cliff Alters The Ecosphere
OEMs, Suppliers, Regulators and Customers Are All Impacted
Success in a Rising
Cost Environment
~2030
Level 5 Emerges, New Content Suppliers/Integrators
• Understand your
+
Optimization of BEV Packaging – Vehicle Longevity Extends
Competitive Dynamics Shift – ‘Old’ Industry versus ‘New’ Industry costs, markets & risk
profile
~2025
L3/4 Autonomy, Global influences, System Profit Pools Shift
• Your systems in the
Full Hybrid, BEV and Alternative Drive Formats Rise new structure?
Integration of ‘Non-Standard Materials’ & Joining Methods
• Hedge technologies
• Smart vertical
~2020
L3 Autonomy, More ADAS Content, Warranty Visibility
Mild Hybrid Rise Starts in Larger Segments, 48V
integration
Mass Reduction Shifts Beyond The ‘Edge Segments’ • Proactive
engagement
ADAS & Connectivity Content Rises, Warranty Costs
Today
• Today’s
Down Displacement, Multi-speed Trans & S/S differentiators are not
BIW & Chassis System Lightweighting Begins tomorrow’s
© 2017 IHS Markit. All Rights Reserved. MBS 2017 Conference / August 2017Summary
• Plateauing volumes alter the landscape
> OEMs feeling the pressure of increased incentives, warranty exposure and competition –
i.e. enhanced productivity/currency ‘adjustment’ requests
> Existing suppliers begin to cannibalize as new suppliers enter the market
– Indian & Chinese-owned concerns, Tier II Japanese/Korean and EU suppliers (following
expanding Tier Is) and Silicon Valley entities
• Looming cost cliff drives urgency into system cost reductions
> Increased evidence of incremental cost transparency driven by OEMs
• Supplier strategies vary by system
> Vertical integration to offer enhanced capability to blunt margin erosion
> Smart capital deployment, priority opportunity targeting, less may be more
© 2017 IHS Markit. All Rights Reserved. MBS 2017 Conference / August 201724 Thank You Michael Robinet Managing Director, IHS Markit Automotive Advisory Services michael.robinet@ihsmarkit.com IHS Markit Customer Care: Americas: +1 800 IHS CARE (+1 800 447 2273); CustomerCare@ihs.com Europe, Middle East, and Africa: +44 (0) 1344 328 300; Customer.Support@ihs.com Asia and the Pacific Rim: +604 291 3600; SupportAPAC@ihs.com COPYRIGHT NOTICE AND DISCLAIMER © 2017 IHS. All rights reserved. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent of IHS. Content reproduced or redistributed with IHS permission must display IHS legal notices and attributions of authorship. The information contained herein is from sources considered reliable, but its accuracy and completeness are not warranted, nor are the opinions and analyses which that are based upon it, and to the extent permitted by law, IHS shall not be liable for any errors or omissions or any loss, damage, or expense incurred by reliance on information or any statement contained herein. In particular, please note that no representation or warranty is given as to the achievement or reasonableness of, and no reliance should be placed on, any projections, forecasts, estimates, or assumptions, and, due to various risks and uncertainties, actual events and results may differ materially from forecasts and statements of belief noted herein. This presentation is not to be construed as legal or financial advice, and use of or reliance on any information in this publication is entirely at your own risk. IHS and the IHS logo are trademarks of IHS. © 2017 IHS Markit. All Rights Reserved.
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