Market Dynamics and Their Potential Impact on the Collision Repair Industry

Calgary, ABSeptember 18, 2015

Market Dynamics and Their Potential Impact on the Collision Repair Industry

Calgary, ABSeptember 18, 2015

September 6, 2014, Jim Prentice elected as Leader of the 43 year old Progressive Conservative dynasty in Alberta to clear out the rot and lead the PC’s to victory in a 2016 fixed election

Calls early election on May 5, 2015 to support controversial budget that would increase taxes significantly and still have a $5B deficit

What a difference a year makes…

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What a difference a year makes…

3

May 5thElection

New Democrat

Wildrose ProgressiveConservative

Liberal AlbertaParty

Before 4 5 72 5 0

After 53 21 10 1 1

Top 5 Economic Policies:

1. Increase corporate taxes from 10% to 12%

2. Job creation tax credit that subsidizes 10% of any new employee salary up (up to $5K)

3. Support economic diversification (high tech, alt energy, advance R&D)

4. Income tax increases for top earners:

o 12% on $125K - $150K

o 13% on $150K - $200K

o 14% on $200K- $300K

o 15% over $300K

5. Incentivize investment in value-added processing and refining of oil and gas

What a difference a year makes…

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What a difference a year makes…

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Goldman Sachs suggests oil could drop to $20/bbl and stay at $45 through 2016

What a difference a year makes…

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Rig activity in oil sector down 50%

Overall Oil and Gas Sector investment down 30%

35,000 jobs lost in the oil patch this year - Canadian Association of Petroleum Producers

o Overall unemployment rate jumps from 4.7% to 5.7%

Notley government poised to announce budget deficit of at least $6.5B in October, as it deals with flagging economy and potential stimulus investment in infrastructure

What a difference a year (or less) makes…

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08/14/15 – Environment Minister Shannon Phillips Releases Climate Leadership Discussion Paper

Climate Change – Why it should matter to you

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1. Driving regulators to implement aggressive greenhouse gas (GHG) emission standards that will see a vehicle in 2025 utilizing half of the fuel and producing half of the emissions as a vehicle in 2008 Driving rapid adoption of new, light weight materials – aluminum, magnesium,

carbon fiber Driving integration of new advanced vehicle technologies - electric, plug-in hybrid,

fuel cell vehicles Driving connected car development to increase traffic efficiency, reduce emissions

and reduce accidents

2. Driving insurers to re-think their pricing models in the face of more severe, unpredictable weather ( think hail, flooding etc.)

What a difference a few days makes…

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What’s it all Mean for the Automotive Industry?

Maybe it’s not all bad!

DesRosiers Automotive Consultants Analysis

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Price per litre in Calgary (09/14/15)

15 cent decline translates into ~$273 savings per year. If applied across Alberta car parc = $921M stimulus package

to the Alberta economy = Potentially more – not less demand for vehicles = Potentially more - not less demand for fuel inefficient

vehicles = Potentially higher – not lower margins =Potentially higher – not lower service and repair activity

2014 2015

116.9 cents/litre 92.4 cents/litre

DesRosiers Automotive Consultants Analysis

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Alberta has: Fastest growing driving age population in Canada Total licensed drivers grew over 10% in last 5 years alone

Vehicle registrations that have almost doubled in the last 20 years The 2nd largest auto insurance market in Canada ($3.9 B) The 3rd largest Light-duty vehicle market in Canada ( 268,409 in 2014) A market that is oriented 60% towards FCA, Ford and General Motors A market that is 78% oriented to light duty trucks (the truck share of

total sales has increased 6.2 percentage points over the past 5 years alone)

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0510152025303540455055

SubCompact

Compact

Sport

LuxuryIntermediate

Luxury High

Luxury Sport

CanadaAlberta

Passenger Car Segmentation

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05

10152025303540455055

 Sub Compact SUV

Compact SUV

Intermediate SUV

Large SUV

Luxury CompactSUV

Luxury IntermediateSUVLuxury Large SUV

Small Pickup

Large Pickup

Small Van

Large Van

CanadaAlberta

Light Truck Segmentation

Alberta Vehicle Units in Operation

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1,500,0001,600,0001,700,0001,800,0001,900,0002,000,0002,100,0002,200,0002,300,0002,400,0002,500,0002,600,0002,700,0002,800,0002,900,0003,000,0003,100,0003,200,0003,300,0003,400,0003,500,000

Total UIO

Light Vehicle registrations have increased almost 100% in 20 years

Alberta New and Used Vehicle Sales

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100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

NewUsed

Vehicle Sales 1995-2014 – Canada vs. Alberta

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1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

1,800

1,900

2,000

025,00050,00075,000

100,000125,000150,000

175,000200,000225,000250,000

275,000300,000

000’s

Alberta (LHS) Canada (RHS)

It took until 2013 to surpass the previous highwater sales mark set in 2002

Alberta set a sales record in 2007 that wasonly surpassed in

Canada vs. Alberta – YTD 2015

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90

100

110

120

130

140

150

160

170

180

190

200

0

5000

10000

15000

20000

25000

000’s

Alberta (LHS) Canada (RHS)

Alberta Year Over Year

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10000

15000

20000

25000

30000

10000

15000

20000

25000

30000

2015 2014

YTD Sales in 2015 are down 10%

Top Ten Best Selling Vehicles YTD

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1. Ford F- Series – 78,750

2. Ram P/U – 63,537

3. Honda Civic – 42,667

4. GMC Sierra P/U – 35,784

5. Toyota Corolla – 34,601

6. Hyundai Elantra – 32,882

7. Ford Escape – 31,704

8. Dodge Caravan – 30,784

9. Chevrolet Silverado P/U – 30,670

10. Toyota RAV4 – 27,057

1. Ford F- Series – 19,334

2. Ram P/U – 15265

3. GMC Sierra P/U – 7,984

4. Chevrolet Silverado P/U – 6,818

5. Ford Escape – 4,158

6. Toyota RAV4 – 3,145

7. Dodge Caravan – 2,639

8. Nissan Rogue – 2,578

9. Dodge Journey – 2,285

10. Honda CRV – 2,211

11. Hyundai Elantra – 32,882

12. Ford Escape – 31,704

Canada Alberta

Contact Information

2 Bloor St WSuite 1804, PO Box 5Toronto, ON M4W 3E2

David C. Adams, PresidentEmail dadams@globalautomakers.caTel 416.595.8251

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