Etude PwC Autofacts production mondiale (mai 2014)

Analyst Note>
AutofactsR
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1 Autofacts
A historically frigid winter in the US, political turmoil in South America and
Eastern Europe, and seemingly endless recall announcements around the
globe highlight some of the hurdles the industry has encountered to start the
year. The good news? Global sales and production are still expected to grow.
What else could go wrong?
Many US consumers who had to endure the polar
vortex this past winter are finally breathing a warm
sigh of relief with the start of spring. The near record
snowfall experienced across the Midwest and
eastern US significantly depressed sales in January
and February. Fortunately, a strong March helped
get sales back on track and Autofacts is still
anticipating a full year sales topline of 16.2m units.
Meanwhile, political unrest across several regions
emerged during the first quarter of 2014. Civil
unrest continues in Venezuela as currency control
issues have prompted shortages of basic needs,
essentially halting vehicle assembly in the country. It
remains unclear when, or if, any assembly will
resume. As a result, Autofacts is forecasting a nearly
50% YoY decline in 2014 with a very real possibility
of an indefinite suspension of vehicle production. A
potentially larger impact on vehicle assembly and
sales exists in Eastern Europe as the recent
annexation of the Crimean Peninsula by Russia has
increased tensions within the region, resulting in
economic sanctions with possibly more on the way.
While both the length and depth of this
development remain largely unclear, it continues to
be closely followed by industry participants looking
to invest within the growing Russian market.
Another major setback in recent months has been
the onslaught of vehicle recalls related to a myriad of
past and current issues. This is not entirely
surprising, as the best time to make a recall is
generally when your competitor(s) are as well. The
real surprise has been the sheer volume of
recalls…almost 12 million to date globally. Despite
this and a number of other issues that have arisen
during Q1 2014, both consumer and industry
confidence remain high. Autofacts is forecasting
global light vehicle production to reach ~86.8m
units in 2014, a modest 4.8% YoY increase but a sign
that the industry will weather the storm – or polar
vortex, so to speak.
Quarterly Forecast Update
A stumble may prevent a fall
April 2014
Source: Company Announcements, Autofacts Analysis, Autofacts 2014 Q2 Data Release
4.8%
Forecasted
increase in YoY
global light
vehicle assembly
for 2014
(82.8m → 86.8m)
104m
2018 global light
vehicle assembly
forecast, up
from 82.8m
units in 2013
12m
Announced
global product
recalls during
the first quarter
of 2014
4.6%
Forecasted light
vehicle assembly
Compound
Annual Growth
Rate (CAGR)
from 2014-2018

2 Autofacts
www.autofacts.com
Analyst Note Plus
China Sales and Assembly
Though the Chinese economy grew at 7.7% in 2013,
the automotive industry enjoyed more robust growth
of 14.1% for light vehicles. The beginning of 2014 has
shown a similar rate of growth, but underneath this
topline is a definitive shift in consumer preferences,
with major gains for both SUVs and MPVs by 53.2%
and 23.7% respectively. As the market continues to
evolve , catering to dynamic consumer tastes will be
a key consideration for automakers going forward.
Unfortunately for domestic Chinese brands, this
growth has not translated in increased sales or
market share. As of February, Chinese brands have
collectively suffered six consecutive months of
market share losses, shrinking by 4.8% to 38.4% as
compared to last year. As Western joint ventures
continue to penetrate the market in every segment,
from entry level to premium, this trend is expected
to continue at the expense of domestic brands.
Following the trajectory of 2013, light vehicle
assembly has grown 11.9% through the first two
months of the year and is expected to continue
through the year to meet the seemingly endless
appetite for new cars. Autofacts anticipates total
light vehicle production will reach 21.4m in 2014,
which would be a 10.7% improvement on 2013’s
total. One aspect assemblers will need to
increasingly consider quality, given recent consumer
protection measures that will require more stringent
quality checks. Though this will likely have minimal
impact on the total volume produced, it may involve
an increased level of investment and oversight all
along the automotive value chain.
India Sales and Assembly
The sales malaise experienced in India through 2013
has carried into the first quarter of 2014. The weak
Key Statistics
(YTD through March)
% Change
(YoY)
China light vehicle sales
(through Feb)
+11.3%
China light vehicle assembly
(through Feb)
+11.9%
India light vehicle sales -10.4%
India light vehicle assembly -10.6%
rupee, elevated inflation rates, and high fuel costs
continue to plague the market, driving transaction
costs and total cost of ownership ever higher for
potential consumers. Despite the difficult
environment, select OEMs, including Honda and
Ford, managed to achieve marked growth in the first
three months of the year, but at the expense of other
established manufacturers. This weakened domestic
demand was doubly concerning as exports fell by
0.5% during Q1 in the wake of unfavourable custom
duties to key export markets in Europe, Latin
America, and Africa. Despite these factors, the
overall short to mid-term sales outlook is slightly
positive, given the reductions in excise taxes by 4%
to 6% in February. Many are also hopeful that, with
the upcoming elections in May, a more positive
investment and business climate will help drive
consumer sentiment up even further. The recent
rise in Purchasing Manager Index and general
improvement in business sentiment are indicators
that optimism is abound, suggesting that an
economic recovery could be near for India.
Given the anemic demand and reduction in exports
from the past year, total light vehicle assembly has,
in turn, declined. OEM capacity investments from
recent years remains underutilized, hovering in the
55% range for 2014. However, production levels are
expected to rise with the anticipated market recovery
along with the slew of new products from various
automakers. These positive assumptions are the
basis of Autofacts’ forecasted increase in light
vehicle assembly by 2.2% for 2014.
Sales
Though the harsh winter weather of January and
February slowed down light vehicle sales in the US,
March results were resurgent, confirming that the
polar vortex was indeed keeping would-be buyers
Developing Asia-Pacific
China and India
Key Statistics
(YTD through March)
% Change
(YoY)
US light vehicle sales +2.0%
Canada light vehicle sales +0.9%
Mexico light vehicle sales (through
February)
+0.6%
North America

3 Autofacts
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Analyst Note Plus
from dealer lots. March’s daily sales rate reached
nearly 59k units – the highest level seen since 2007.
Also helping the continued sales push is record high
lease take rates, which reached 29% in Q4 2013.
Additionally, a high number of vehicles are expected
to come off lease in the 2014, pushing drivers back to
the dealership for new lease vehicles.
Both Canadian and Mexican sales have come in very
closely to expected numbers and our sales forecasts
for both regions remain consistent with prior
quarters, reaching nearly 1.8m units and 1.2m units,
respectively.
Assembly
In terms of assembly, the US and Mexico are still
enjoying a heightened appetite to add capacity.
Automakers are increasingly turning towards
Mexico, given the low-cost labor and inviting
business environment. In fact, Mexico is expected to
soon overtake Japan as the top source for imports
for the US. In the near term, the North American
topline is expected to reach 16.8m units in 2014
across the three markets, with the US accounting for
68% of total assembly volume.
Italy, Spain and the UK) achieved growth since the
fourth quarter of 2009.
The light commercial vehicle (LCV) sector tends to
react more strongly to economic developments,
suffering harder falls during recession but
recovering more rapidly when economic growth
resumes, and we are seeing evidence of a rapid
recovery in many markets now with an estimated
10% increase in the first quarter.
With the positive indicators and developments, the
Autofacts forecast calls for a 4% increase in new car
registrations in 2014, reaching 12.8m units.
Economic growth is expected to pick up the pace
while unemployment rates fall, which should
translate into a stronger growth rate of 5.3% to reach
13.5m units in 2015. The LCV sector should see a
slightly stronger recovery of 6.1% in 2014 and 7.4%
in 2015, reaching 1.6m units. Even with the relief of
seeing signs of a turnaround after six years of
declines in the region, combined light vehicle sales
for 2014 will still be ~3m units lower than the peak
of 18.2m units registered in 2007.
Assembly
Export growth has allowed EU production to
outperform EU demand in recent years, but we
anticipate that the two will be more closely aligned
going forward. Strong growth in exports to China,
the US, Russia and Turkey, as those markets grew
between 2010 and 2012, helped EU assembly stay
afloat during the downturn. However, the situation
is beginning to shift, with exports to the Russian and
Turkish markets falling as those markets contract. In
addition, localisation of production, especially in
China, Russia and the US, should trigger a slowdown
in exports to these markets, with potential decline in
the longer term. Autofacts forecast a 4.1% increase in
light vehicle assembly to 16.6m units in 2014,
followed by a 4.5% increase to 17.4m units in 2015.
Though we do not see demand within the EU
returning to the 2007 peak levels due to changing
demographic factors, declining interest from new
consumers and reduction in multiple car ownership,
assembly is expected match the 2007 output of
18.8m units by 2017, thanks to the much higher
levels of exports.
Sales
New car registrations in the EU+EFTA started on a
good note in 2014, with an estimated growth rate of
10.2% in March alone. While this recovery is
calculated from a low basis from Q1 of 2013, the
strength of the increase is welcome and suggests a
stronger recovery for the remainder of 2014 – more
than most observers would have anticipated just
three months ago. This healthy Q1 growth was
bolstered by strong sales in both the UK and Poland,
with other markets beginning to show signs of
recovery as well. Greece, Ireland and Portugal,
which were three of the core debt crisis markets, saw
growth of 17.4%, 26.4% and 40.7% respectively,
albeit from rather low bases. Additionally, the first
quarter marks the first time that all five of the
largest markets in the region(France, Germany,
EU+EFTA
Key Statistics
(YTD through March)
% Change
(YoY)
EU+EFTA new car registrations +8.0%
EU+EFTA LCV registrations +10.0%
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4 Autofacts
www.autofacts.com
Analyst Note Plus
South Korea Sales and Assembly
New car sales have held flat around 1.3m units in
South Korea the past three years, but the market is
finally expected to see a modest increase of 2% in
2014, thanks to positive economic indicators as well
as a handful of key new model introductions. Despite
this positive news, domestic brands continue to face
challenges from import brands which have grown
from a 1% share of the market in 2000 to over 14%
in 2013. Favorable free trade agreements (FTAs)
with both the EU and US have made premium
brands more price competitive while making mass
market nameplates readily available.
These FTAs have also benefitted the market in terms
of assembly growth, with total export volumes
hovering at the 3m unit mark as Korean brands
enjoy increasing popularity on a global scale.
However, the formerly cost-effective assembly base
in South Korea has been plagued with rising costs,
frequent labor strikes, and fluctuating currency
valuations. As such, assembly volumes are expected
to decline in 2014, down 100k from 2013 to reach
4.3m units this year.
Brazil Sales and Assembly
Through the first three months of 2013, the various
markets in South America have shown that the only
constant trend within the region is uncertainty.
Political, social, and economic unrest have continued
coursing throughout Argentina and Venezuela, while
Brazil is left teetering on the hopes that these
markets – and the exports within the region – will
recover in the near term.
Brazil started the year with impressive year-over-
year sales growth in January, but February and
March slowed down again, resulting in a YTD
decrease. This pace suggests that the sluggish
Key Statistics
(YTD through March)
% Change
(YoY)
Australia light vehicle sales -2.4%
Japan light vehicle sales +9.0%
South Korea light vehicle sales
(through Feb)
+10.7%
Developed Asia-Pacific
Australia, Japan and South Korea
Australia Sales
With new car sales of over 1m units in 2013,
Australia continues to be a significant market in the
developed Asia-Pacific region, though YTD sales
have declined in Q1. Small cars and small SUVs
continue to gain market share, and are expected to
grow even as the market contracts. Already a key
export market for many automakers, particularly
from Japan and South Korea, Australia will no
longer be a manufacturing base as all final assembly
plants are expected to close by the end of 2017.
Though local manufacturing jobs and economies will
certainly be impacted, assembly was already on the
decline, with just 210k units assembled in 2013 –
about half of its peak of 419k units a decade prior in
2003.
Japan Sales and Assembly
Light vehicle sales have enjoyed a significant
increase in the past six months through the first
quarter of 2014 as consumers are flocking to buy
before vehicle taxes are raised from 5% to 8% in
April. Through March, sales have increased 9%
when compared to the same period last year, but this
growth is expected to slow once the tax hike takes
effect. Segment wise, hybrids and mini cars remain
popular within the market, with more competitive
and affordable models coming to market in the near
future. In the long term, Japan continues to exhibit
the signs of most developed economies, where
urbanization proliferates as the overall population
ages and contracts in size.
Light vehicle assembly is expected to follow the same
course as sales, as the Japanese brands continue
shifting towards localization of assembly. Though
the recent sales surge has kept assembly volumes
afloat to satisfy domestic demand, overall
production is expected to contract over the long
term, decreasing slightly in 2014 to 8.7m units, and
gradually declining to 8.3m units by 2020.
Key Statistics
(YTD through March)
% Change
(YoY)
Brazil light vehicle registrations -1.7%
Argentina light vehicle sales -25.6%
Venezuela light vehicle sales -88.7%
South America

5 Autofacts
www.autofacts.com
Analyst Note Plus
results of 2013 may continue well into 2014. Exports
have taken a particularly hard hit, down 37.4% YTD
as trade pressures with Argentina mount. Recent
bilateral talks between the two countries indicate
that Argentina's imposed import limitations will be
eased, suggesting that perhaps production will
recover from the current YTD decline of -8.8%.
Argentina Sales and Assembly
Though Argentina enjoyed impressive growth in
both sales and production in 2013, the beginning of
2014 has not been as fortuitous for both sales and
assembly, with declines of -19.6% and -9.0%
respectively. The economic recession, paired with
the continued devaluation of the Argentinian peso,
both serve as constraints on the market, all while
GDP is expected to hold flat for the year at 0.2%
growth – if one could call it that. These various
factors all increase the likelihood of a depressed level
of sales and assembly for the short term forecast.
Venezuela Sales and Assembly
Venezuela has seen a virtual ceasing of sales and
assembly as the nation struggles with escalating
economic and political tension. Several automakers,
like Toyota and Iveco have announced idled facilities
while others like Chrysler and Ford have
significantly decreased their output, bringing total
assembly down by 77.8% YoY through February.
Dollars are increasingly difficult to procure,
preventing the importing of parts and payment of
suppliers. Sales have fared even worse as the
Venezuelan bolivar fuerte sinks to new lows, making
it nearly impossible to purchase vehicles. YTD sales
were down 88.7% through February 2014, and it is
likely that this contraction will last through 2014 and
jeopardize the country's status not only within the
auto industry, but in the region and global market as
a whole. Currently, the downside scenario for
Venezuela could be a complete decommissioning of
the automotive market in the country if the currency
and economic woes are not alleviated soon.
Russia Sales and Assembly
The political instabilities between the primary
markets within the Eastern European region have
undoubtedly impacted the automotive industry
within these countries, with sanctions and ongoing
tensions mounting and undermining consumer
sentiment. With the ongoing sales slump combined
with the uncertainty in regards to Ukraine and a
declining Ruble, Russian sales have declined 2.3%
YTD through the first quarter of 2014, and are
expected to slip further with an 8% decline for the
full year to reach 2.6m units. On top of this, the
Crimean conflict has triggered hesitation regarding
foreign direct investment within the region across
industries, raising the risk that global suppliers will
refrain from entering the market. Such a scenario
would strain both recent and future OEM capacity
investments since local supplier bases are still
lacking in both volume and quality. Assembly is also
expected to decrease by 3.9% to 1.9m units in 2014.
As the unrest subsides, we expect assembly to
stabilize in 2015 and beyond, with a resumption of
investments by global OEMs looking to shift away
from importing and increase domestic production.
Turkey Sales and Assembly
Suffering from a recent tax hike, a weakening Lira,
and burdensome regulatory changes in auto finance,
light vehicle sales in Turkey have dropped by 24%.
New finance regulations now require a higher down
payment in order to finance a vehicle, which has
delayed, and in some cases prevented consumers
from purchasing. With the prohibitive factors in
play, sales in Turkey are forecasted to reach just
753k units this year, representing a full year loss of
12%. Light vehicle assembly has fared better with the
recent increases to localised assembly, particularly
from Toyota and Hyundai. Total production volume
is expected to reach nearly 1.05m units in 2014 for a
slight YoY growth of 0.6%.
Ukraine Sales and Assembly
The Ukrainian car market grew in January and
February, but experienced a dramatic dip in March
with sales declining by 52% compared to March
2013. As a result, YTD sales are down 18% when
compared to last year. With the ongoing uncertainty
related to the Crimean conflict, sales are expected to
register at approximately 190k units, for a full-year
decrease of 10%. Similar to Turkey, assembly output
is expected to weather the downturn and is expected
to reach 68k units thanks to increasing exports.
Eastern Europe
2013 Key Statistics
% Change
(YoY)
Russia light vehicle sales -2.3%
Turkey light vehicle sales -24.0%

6 Autofacts For more information please visit us at www.autofacts.com
Analyst Note Plus
April 2014
Baseline assembly forecast data - Global
Growth analytics (2013-2018)
Region1 2013 2014 2015 2016 2017 2018 Unit diff. % chg CAGR CTG % Rank2
1 Asia-Pacific - developing 27,514,256 30,236,552 33,479,551 36,232,336 38,894,119 40,262,050 12,747,794 46.3% 7.9% 60.0% 1
2 European Union 15,962,569 16,610,928 17,393,055 18,253,850 18,823,766 19,107,286 3,144,717 19.7% 3.7% 14.8% 2
3 North America 16,196,382 16,803,654 17,455,158 17,602,793 18,310,387 18,274,889 2,078,507 12.8% 2.4% 9.8% 3
4 Asia-Pacific - developed 13,523,671 13,241,098 13,236,785 13,152,170 12,992,775 12,960,153 -563,518 -4.2% -0.8% -2.7% 7
5 South America 4,590,359 4,611,768 5,082,212 5,517,928 5,880,201 6,111,575 1,521,216 33.1% 5.9% 7.2% 4
6 East Europe 3,513,159 3,534,227 3,952,857 4,317,994 4,566,517 4,775,252 1,262,093 35.9% 6.3% 5.9% 5
7 Middle East & Africa 1,501,820 1,746,095 2,009,992 2,127,776 2,342,912 2,550,834 1,049,014 69.8% 11.2% 4.9% 6
Global total assembly 82,802,216 86,784,322 92,609,610 97,204,847 101,810,677 104,042,039 21,239,823 25.7% 4.7% 100.0%
Global total capacity 107,003,993 114,422,215 121,992,840 127,994,860 128,524,839 129,590,254 22,586,261 21.1% 3.9%
Global excess capacity 24,201,777 27,637,893 29,383,230 30,790,013 26,714,162 25,548,215 1,346,438 5.6% 1.1%
Global utilisation (%) 77.4% 75.8% 75.9% 75.9% 79.2% 80.3%
Source: Autofacts Global Light Vehicle Assembly Outlook 2014 Q2 Data Release (Updated April 01 2014)

Etude PwC Autofacts production mondiale (mai 2014)

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