Presentation to MBS 2018 – Forecast Panel...The next decade will drive unprecedented change … •Risk abatement is front and center o Better planning to shift gears towards sectors,

© 2018 IHS Markit. All Rights Reserved.© 2018 IHS Markit. All Rights Reserved.

Presentation to MBS 2018 –Forecast Panel

Michael RobinetManaging Director, Automotive Advisory Solutions

© 2018 IHS Markit. All Rights Reserved.

Past 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

• 2018: Mitigating Expanding Risk• Finding stability amid shifting trade, regulatory, cost and market dynamics

MBS 2018 Conference / August 2018

© 2017 IHS Markit. All Rights Reserved.© 2017 IHS Markit. All Rights Reserved.

Mitigating Expanding RiskPresentation to MBS 2018 – Forecast Panel

Michael RobinetManaging Director, Automotive Advisory Solutions


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© 2018 IHS MarkitTM. All Rights Reserved. 5


Improving US Economy Balanced by Auto Input Hikes

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

96

98

100

102

104

106

2014 2015 2016 2017 2018

Year

/Yea

r Cha

nge

Aut

o PP

I

Y/Y PPI (Auto Mfg. Inputs)

0

25

50

75

100

125

150

2000 2003 2006 2009 2012 2015 2018 2021 2024 2027

Dol

lars

/bar

rel

0

2

4

6

8

10

-9

-6

-3

0

3

6

2007 2009 2011 2013 2015 2017 2019

Perc

ent o

f lab

or fo

rce

Ann

ual %

cha

nge

Real US GDP (L)

Unemployment Rate (R )

Structurally, Oil Stable for Years to Come US Economic Activity & Low Unemployment

Pressure on Auto PPI is Alarming Abating surging costs will be critical to profitability. Reducing the impact of extraneous influences.


Global Production OutlookAlmost 75% of Growth is Focused on Emerging Asia – NA, Japan/Korea and EU are Stagnant

6

Global production

© 2018 IHS MarkitSource: IHS Markit

0

20

40

60

80

100

120

2005 2010 2015 2020 2025

Mill

ions

Middle East/Africa South America Japan/KoreaSouth Asia North America EuropeChina

Global production growth: 2017-2025


-0.6

0.6

0.6

1.5

1.7

5.5

6.1

-2 0 2 4 6 8

Japan/Korea

North America

Middle East/Africa

Europe

South America

South Asia

Greater China

Millions



Capitulation of Cars — CUVs/SUVs Continue to Rise

7

11.0

39.9

8.1

8.7

6.1

0.5

30.8

39.2

9.2

8.7

6.8

0.4

42.7

42.5

10.2

8.0

6.8

0.4

0 20 40 60

C/SUV

Car

PUP

Van

MPV

Sport

Millions

202520172010

Global segment

2017–25 growth (mil.)

Share ofgrowth

Sport -0.1 -0.4%

MPV 0.0 0.2%

Van -0.7 -4.6%

PUP 1.0 6.2%

Car 3.3 21.2%

C/SUV 11.9 77.4%

Source: IHS Markit

Global Light Vehicle Production by Bodytype Group

C/SUV volumes in EU and China are growing at 2x North America


© 2018 IHS Markit. All Rights Reserved. 8

Market Shifting to a “Declining Plateau”; Segment Shifts Continue

0

2

4

6

8

10

12

14

16

18

20

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

Mill

ions

US Light Vehicle Sales

Car Light Trucks

CY US LV Sales2017 17.2 mil (-1.8%)

2018 17.0 mil (-1.2%)

2019 16.8 mil (-1.6%)

2020 16.6 mil (-1.0%)

• Economic activity, tax cuts• Replacement cycle strong• New vehicle launches

• Credit availability, financing costs

• Incentive support• Off-lease vehicles• Vehicle economics


© 2018 IHS MarkitTM. All Rights Reserved.

North America Light Vehicle OutputStable overall production volumes – Several shifts beneath

9

North America Light Vehicle Production


17.5 17.817.1 17.2 17.4 17.4 17.5 17.5 17.7 17.7 17.6

02468

101214161820

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Mill

ions

Production Volume

New capacity driving import substitution (Volvo, Daimler, BMW etc.)

Adjustment towards CUVs –improving flexibility.

Production market shifts away from Detroit 3.

Midwest/Ontario facilities will experience greatest impacts.

Policy and regulatory uncertainty will continue despite expected clarity.

Export growth outside of NAFTA.



NA Production Volume DetailsBelow Topline – Difficulties Emerge

0.40.60.81.01.21.41.61.82.02.2

Q2

2017

Q4

2017

Q2

2018

Q4

2018

Q2

2019

Q4

2019

Q2

2020

Q4

2020

Q2

2021

Q4

2021

Qua

rter

ly O

utpu

tM

illion

s Quarterly NA Output by Bodytype

C/SUV Sedan Pickup Others

10

S/CUV Near-term Peak

Pickups PeakSedan Trough

Gap between SUVs and Sedans continues to widen throughout the forecast horizon

4.0

mil

Annu

aliz

ed

0.40.60.81.01.21.41.61.82.02.22.4

Q2

2017

Q4

2017

Q2

2018

Q4

2018

Q2

2019

Q4

2019

Q2

2020

Q4

2020

Q2

2021

Q4

2021

Qua

rter

ly O

utpu

tM

illion

s

Quarterly NA Output by OEM Group

US 3 Asian 4 All Others

Imbalances are driven by the sedan exodus vs. ability to

capture customers into CUVs


10


0

10

20

30

40

50

60

CAFÉ Standard (MPG)

Model Year

Cars

Trucks

Combined

EPA vs. NHTSA vs. CARB vs. EU vs. China: Many Considerations…

• US Administration announces results of a mid-term review -standards may be frozen as of 2020 ……

• Complicating factors include the California Exemption, the ‘177’ states which follow California as well as emission reduction/electrification efforts of China, EU and Quebec.

• OEMs have to design most vehicles to the ‘highest common denominator’ with an eye on regional powertrain flexibility.

11

Which 2020-25 regulatory structure emerges?

Cars

Trucks

Current Regulations

Gov’t Desired Regulations

OE desired Regulations

11



ElectricMHEV FHEVICEStop-start PHEV

12

Source: IHS Markit Powertrain Production Forecast

8%6%2%

31%6%

47%

Europe

Regional Preferences and Incentives Create Shifts in Propulsion Mix

5%6%4%11%

17%57%

North America

ICE & ICE/SS = 74%

ICE & ICE/SS = 53% 6%5%

17%

23%12%

37%

Japan/Korea

ICE & ICE/SS = 49%

7%8%2%

31%15%

37%

China

ICE & ICE/SS = 52%

1%4%

23%72%

South America

ICE & ICE/SS = 95%

Global Propulsion System Design - 2025

(Internal Combustion Engine) (Mild Hybrid Electrical Vehicle) (Full Hybrid Electrical Vehicle) (Plug-in Hybrid Electrical Vehicle)



Global Platforms Consolidate / Become Vocation-Driven

182

137

284,000

677,000

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

0

20

40

60

80

100

120

140

160

180

200

Volu

me

per P

latfo

rm

Glo

bal P

latfo

rm C

ount

Global Platform Consolidation

Global Platform Count

13

Some conventional

platforms can

implement batteries,

but cannot change the

overall architecture

to form a battery driven vehicle

assembly.

Initially designed to support both

BEV and conventional powertrain vehicles.

Structure is more flexible

than conventional

platform.

Platform is designed only for pure BEV applications. Skateboard

style architecture allows for

more battery capacity and more interior

space with the same vehicle

size.

Con

vent

iona

l

Mul

ti-En

ergy

Batte

ry E

lect

ric

While BEV platforms will demand greater

attention (technology), multi-energy efforts will hub the highest volume opportunities over the

next 15 years

2000 2025



Autonomy – Short-term vs. Long-term Focus

14

ADAS: Advanced Driver Assistance Systems

Level 2-3

• Customer-focus implementation

• Autonomous will increasing emerge as a true market differentiator

• Rise to 6+ mil units by 2023

Level 4-5

• Regulatory, societal and technical challenges continue

• Growth accelerates after 2030 to 30+ mil by 2040


14


New Challenges Demand Alternative Approaches to Reduce Risk

15

A Proactive Stance is Critical• Defined method to ‘Opportunity Targeting’

• Platform entry zones• Compliance gaps

• Technology Road Mapping• Partner, HR & upstream supplier alignment.• Shift to new sectors – abandon underperforming areas.

• Production/Development Support Footprint• Global vs. Regional

• Competitive Analysis• True understanding of one’s competition – capacity, technology

and partnerships.

• Financial Outlook• Company tolerance for risk and required capital.• Exit vs. expansion strategy

Compliance Opportunity Targeting

Competitive Analysis


© 2018 IHS MarkitTM. All Rights Reserved. 16

Navigating Several Disruptions The next decade will drive unprecedented change …

• Risk abatement is front and centero Better planning to shift gears towards sectors, customers, technologies and geographies.

o Everchanging trade winds, input cost escalations & emissions regulations.

• Shift in platform design drives new differentiators.

• Impact of ACES – Autonomous, Connected, Electrified & Sharedo Speed and drivers of adoption need to be followed closely.

• Emergence of ‘Super Tier 1s’o System capability in electrification, connected, and autonomous systems.

• Planning in a plateauo Opportunity targeting, scenario analysis and optimizing resources.


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Michael Robinet

Managing Director, IHS Markit AutomotiveAdvisory [email protected]

Documents

Presentation to MBS 2018 – Forecast Panel...The next decade will drive unprecedented change … •Risk abatement is front and center o Better planning to shift gears towards sectors,