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COPYRIGHT 2009, A.T. KEARNEY, INC. ALL RIGHTS RESERVED.
Auto 2020
Expert Perspective
January 2009
- Passenger Cars -
2THE FUTURE FOR AUTO
As automotive executives plan for the future, they are faced with unprecedented uncertainty
How will customer behavior and regulations influence global car markets?
Which segments are the most attractive for growth?
How must the companies’ footprints evolve and what are the consequences?
What role will Asian OEMs play?And what "Newcomers" are to be watched?
What will distinguish the automotive landscape in 2020?
3THE FUTURE FOR AUTO
Customer behavior becomes a "mystery": segments and diverse expectations make forecasts almost impossible
Number of Car ModelsCustomer Segments and Demands
Legislation, global changes, technology trends and uncertainty on the customer side redefine automotive landscape
Emerging market buyers generate ultra low-cost cars (ULCCs) segment
Senior citizens play increasingly important role in mature markets
"Me generation" ask for more tailored products even at higher price
New mobility concepts – non-buyers, instead car sharing and new rental formats
Note: Passenger car models sold in Europe
Source: A.T. Kearney analysis; J.D. Power & Associates
60%
Long-term
6,000
2000 2020
3,700
2008 2010
5,200
4,400
-15%
Short-term
4THE FUTURE FOR AUTO
ULCC is the fastest growing segment, adding 13 million vehicles to the market and cannibalizing the "small" segment
Global Passenger Car Sales Forecast2003 – 2020 (in million units) including ULCC
Market Trend
The ultra low cost car segment (ULCC) will grow by 24.3% per year to 14 million units in 2020
Strong trend towards downsizing (e.g. 4-instead of 6-cylinder) in existing vehicle classes
E-vehicles and hybrids will play a significant role
Luxury
Large
Medium
Small
ULCC
Unclassified
Utility
SUV
0
20
40
60
80
100
2017 2018
87
2019
89
202020092005
65
2006
68
2007
65
2008
55
60
2010
68
2011
75
2012
77
2013
79
2014
81
2015
86
57
2003
60
2004
62
82
2016
84
4846
45
Gap bet-weenbest and worst case
49 50
65
Opportunities from uncertainly, e.g.• Elimination of old style production
facilities• Inventory clearing• Push to pull
5THE FUTURE FOR AUTO
In 2020 pure alternative powertrains will have a market share above 40%
80%
19%
Plug-in Hybrid/Electric vehicle
Full-Hybrids
Natural Gas
Diesel
Gasoline
46%
14%
12%
18%
9%
Americas Europe AsiaWorldwide
Average
Note: "Moderate drive for change" scenario
Source: A.T. Kearney study “Powertrain of the future”
Powertrain landscape 2007 vs. 2020
Powertrain Landscape2020
Powertrain Landscape 2007
29%
28%14%
19%
10%
51%
14%
11%
15%
8%
6THE FUTURE FOR AUTO
Source: A.T. Kearney analysis; Global Insight
E-vehicle Development
OEM Model Type Launch
BYD F3DM, F6DM Plug-in 2008
BYD E6 EV 2009
Tesla Roadster EV 2008
Toyota Prius Plug-in 2009
Mitsubishi MiEV EV 2009
GM Volt Plug-in 2010
PHEV/EV Status Quo
(excerpt)
Asian players and start-up companies are
currently leading on electric vehicles
In addition, Asian suppliers control 90% of the
Lithium-Ion battery market
US and European OEMs are still in prototype
and field testing stages
Example: BYD F3DM
Worldwide first plug-in Hybrid
Price in China at market introduction on
December 15, 2008: 15.000 Euro
Use of state-of-the art lithium-ion
technology (iron phosphate cathodes)
Asian players are currently leading in the electric vehicles
segment
7THE FUTURE FOR AUTO
Global vehicle overcapacity will remain an issue while Japan and Korea must continue their focus on exports
787877767574
60
4645454446
68747473
0
10
20
30
40
50
60
70
80
90
100
2011 2012 2013 2014 2015 2016 2017 2018 2019 20202005 2006 2007 2008 2009 2010
Global Utilization remains poor
through 2020 – OEMs need to
close facilities
Japan and Korea must
continue to be heavy
exporters or they will face
significant capacity
underutilization
31.431.631.832.032.033.0
27.021.322.423.223.124.0
34.236.539.941.7
29.930.230.530.830.931.025.1
19.619.619.719.018.925.023.923.7 25.5
0
10
20
30
40
50
60
70
80
90
100
2007 2008 2009 2010 2011 2012 20132005 2006 2014 2015 2016 2020
Japan
Korea
2017 2018 2019
Global Vehicle Plant Utilization1) (%)
Note: 1) If no counter measures are takenSource: A.T. Kearney analysis; Global Insight, J.D. Power
Japan and Korea – Domestic Sales / Production Capacity (%)
8THE FUTURE FOR AUTO
The shift of innovation hubs towards Emerging Markets is a
logical trend, automotive is just the next industry
1970s:
Automotive industry
2000s:
Semi-conductors
1990s:
Shipbuilding
1960s:
Optical systems
2010s: “Big Bang”
Automotive Industry
Shift of Innovation Leadership: Past and Future
1980s:
Consumer electronics
1990s:
Automotive industry
Source: A.T. Kearney analysis
9THE FUTURE FOR AUTO
As OEMs from emerging markets dominate the new ULCC segment, their global market share will grow to over 30%
Note: Scenario does NOT include potential mergers and acquisitions between established OEMs and OEMs from emerging countries
Source: J.D. Power, A.T. Kearney analysis
Global Market Split 2006 (%) Global Market Split 2020 (%)
OEMs Emerging Markets (China, Russia,
India, Iran, Malaysia, etc.)
Traditional OEMs (Germany, France,
UK, Italy, US, Japan, Korea, etc.)
9%
91%
32%
68%
10THE FUTURE FOR AUTO
This growth (organic and external) will allow OEMs from emerging markets to challenge established players
Growth of Emerging Market OEMs
Source: J.D. Power Sales Forecast Global and for Chinese Market, A.T. Kearney analysis
Sales (mil. units) organic growth
China
JAC ChanganSAIC BAICChery FAW Mitsubishi FiatTata Suzuki Isuzu
2006 2020 Sales (mil units) Growth by acquisition
0.60.60.71.0
1.4 0.5
2.01.9
3.2
0.6
1.3
1.7
3.2
1.4
3.9
0.4
1.41.5
2.2
0.4
1.11.2
1.9
0.30.30.30.50.5
0.40.3
2.3
3.7
1.6
2.6
1.2
1.9
1.1
1.7
1.0
1.6
Volvo
India
Mazda Daimler BMW
Group
Units sold by selected established OEMsUnits sold by Top Emerging OEMs
Japan Europe
11THE FUTURE FOR AUTO
Despite the many changes by 2020, we still anticipate a general dominance of regional OEMs in their home markets
Passenger Car Market Share of OEM Groups
39%
70%
43%
77% 23%
57%
30%
61%
95%5%
43%
49%
53%
77%
90%
57%
51%
47%
23%
10%
Western
Europe
US
Japan
China
India
Japan and Europe – strong
position of regional OEMs although
foreign OEMs can increase their
share
China – market increasingly
dominated by regional OEMs
U.S. – strong growth of foreign
OEMs mainly from Japan, Korea,
and China
India –an exception with regard to
dominance of foreign OEMs
(Suzuki-Maruti JV expected to gain
more than 30% of total market)
2005 2020
Regional OEMs Foreign OEMs
Source: J.D. Power, A.T. Kearney analysis
12THE FUTURE FOR AUTO
Government investment would be better spent by scrapping older vehicles than supporting industry contraction
Incur >$300 Billion cost for Industry Contraction (4 year period)
Invest $300 Billion in Vehicle Parc Replacement (4 year period)
20 Million older vehicles (>15 years age) replaced - $15,000 per vehicle subsidy
Employment of 2.1 million workers including direct, indirect, and spinoff to support 5 million vehicles per year production
Decrease CO2 emissions by 76 Billion kg
Enable auto companies time to:
Develop Technology
Increase agility
Move from push to pull
Eliminate incentives
Total Impacts After 4 Years
Personal Income ($ billions) $ 272
Combined loss of tax receipts and
increase in government welfare$ 106
Source: J.D. Power, CAR, BLS, A.T. Kearney analysis
Benefits for CO2 emissions not realized
Impact on health care costs transferred to government not represented
Total Negative Impact = $380 Billion
Example
13THE FUTURE FOR AUTO
Financial fitness and technological strength are essential to survive in times of reduced revenues
Ability to Refinance in Times of Reduced Revenues
Capitalize on Technological Strength
Sh
ort
-te
rm A
ss
et
Op
tim
iza
tio
n
Sto
ck
re
du
cti
on
So
urc
ing
Me
as
ure
s
Ove
rhe
ad
Co
st
Re
du
cti
on
General Recommendations for Suppliers in Times of Crisis
Reduce variable costs to
keep EBIT positive
Ensuring financial fitness
through cash
optimization
Capitalize and further
improve technological
strength
Suppliers in Times of Crisis