automotive industry outlook october 2016 automotive industry outlook philippe funda, pwc autofacts®...

Automotive Industry Outlook

Philippe Funda, PwC Autofacts®

www.pwc.com

6 October 2016 Automotive Logistics UK Summit

PwC

6 October 2016

Growth of a Global Industry!

Automotive Industry Outlook • Philippe Funda, PwC Autofacts®

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PwC Autofacts ®

Light vehicle assembly is forecasted to grow by 25.6% between 2015 and 2022 with emerging markets driving future industry growth – on a volume basis

1 A Sector in Transformation

3

46.6 49.4 53.3 57.6 61.5 64.4 66.4 67.8

41.6 42.1

41.5 41.8

43.1 43.0 42.9 43.0

-

20

40

60

80

100

120

2015 2016F 2017F 2018F 2019F 2020F 2021F 2022F

Global Light Vehicle Assembly Outlook 2015 – 2022 (millions)

Emerging Mature

88.2

110.8

Contribution to Growth [CATE

GORY NAME]

: [VALU

E]

[CATEGORY

NAME]:

[VALUE]

+21.2m

Emerging Markets

Mature Markets

+1.4m

Volume Change

Source: Autofacts 2016 Q4 Forecast Release

PwC Autofacts ®


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Sales

Assembly

2016 2022 2016 2022

Global: Light Vehicle Sales vs. Assembly 2016 – 2022 (millions)

Source: Autofacts Analysis, Autofacts 2016 Q4 Forecast Release

China

4.9m 2016 2022 2016 2022

31.8 25.5 33.0 24.9

NAFTA

19.8 21.0 21.6 17.7

Japan

2016 2022 2016 2022

4.7 4.8 8.2 8.2

South Korea

2016 2022 2016 2022

4.1 1.6 1.5 4.3

Growth in global vehicle assembly follows demand, but also leverages location factors and free trade agreements

18.3m 15.8m 2016 2022 2016 2022

EU + EFTA

20.2 17.0 20.1 19.0

23,4

RoW

2016 2022 2016 2022

24.3 32.1 25.5 16.7

PwC Autofacts ®

Global Capacity Footprint


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European Union

North America

South America

Eastern Europe

Middle East & Africa

Asia-Pacific

Global Light Vehicle Assembly Capacity 2015 – 2022 (millions)

Source: Autofacts 2016 Q4 Forecast Release

+2 plants

+209 product launches

+4 plants

+301 product launches +3 plants


+2 plants


+6 plants


+10 plants


22.8 19.9

2015 2022

2.9

23.5 22.2

2015 2022

1.3

7.0 5.9

2015 2022

1.1

6.4 5.8

2015 2022

0.6

4.4 3.7

2015 2022

0.7

77.0 68.1 2015 2022

9.0

PwC Autofacts ®

0%

20%

40%

60%

80%

100%

2014 2018 2022 2026 2030 2014 2018 2022 2026 2030 2014 2018 2022 2026 2030

Source: Autofacts Analysis

Gasoline Diesel Mild-hybrid Full-hybrid Plug-In-hybrid Electric


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2022 2022 2022 2014 2030 2014 2030 2014 2030

The shares of powertrain systems are shifting as sales of electrified vehicles will gain momentum

2025 will mark the begin of an era of change.

After a slow start, hybrids gain momentum beyond 2020, but are seen as a transitory technology.

Electric cars follow some years later, but are expected to become the dominating technology in the long term.

Percentage Share of Powertrain Systems in Light Vehicle Registrations 2014 – 2030 (percentage share)

PwC

6 October 2016

Growth of EU Market!


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PwC Autofacts ®


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Source: ACEA, Autofacts Analysis

Recovery patterns of the main EU markets have been diverse, and will continue to develop individually driven by economic growth and technology

0

1

2

3

4

5

Germany UK Italy France Spain EU-13

EU+EFTA: New Car Registration Variance 1990 – 2016F (millions)

2015

26-year high

(1990-2015)

26-year low

(1990-2015)

2016F

EU+EFTA: Contribution to Growth 2016 - 2022 (percentage)

Regional Sales: Comparison & Growth 2022 vs. 2016

3.6m

+7.3%

3.9m

3.0m

3.3 m

+8.9%

1.3m

1.9m

+42.0%

2.0m

2.6m

+29.6%

1.3m

1.8m

+36.5%

2.4m

2.8m

+15.0%

9.8%

Germany

9.9%

UK Spain

20.4% 21.4%

Italy EU-13

17.6% 13.4%

France

PwC Autofacts ®

In 2016, new car registrations are likely to increase by almost 1 m or 6.4% to 15.1 m new cars.

Backed by dynamic LCV market growth of 10.9%, light vehicle sales are now expected at 17.1 m units in 2016.

14.2 15.1 15.6 15.9 15.9 16.5 17.3 17.8 18.3

1.8 2.0

2.1 2.1 2.1 2.2

2.3 2.4 2.5

-

5

10

15

20

25

2015 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F

EU+EFTA: New Light Vehicle Registrations 2015 – 2023 (millions)

LCV Registratons Car Registrations

17.1 million new light vehicles expected for 2016 backed by various supportive factors such as low fuel prices and improving employment

Source: ACEA, Autofacts Analysis


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20.8 20.2 19.6

18.7 18.0 18.0 17.7 17.1

16.0

PwC

6 October 2016

Growth in UK?


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PwC Autofacts ®


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Q4 2017

Formal negotiation period ends and the UK leaves the EU. It is likely that the negotiations on the UK’s future relations with the EU will continue for more than two years. The timings of this are uncertain but could last from 5-10 years. The UK would also continue to pursue a number of free trade agreements with its key trading partners which will take time

2019 and beyond

French Presidential Election (Depending on the outcome this could have a large impact on the UK/EU negotiations)

Q2 2017

German Parliamentary Election

To be continued…

Negotiations commence between the UK and the European Commission

Q2/Q3 2017

?

?

? ?

?

UK Government triggers Article 50 thus notifying the European Council of its intention to leave the EU

Q1/Q2 2017

UK Government attempts informal negotiations with the EU and starts to negotiate global trade deals

Q3/4 2016 UK votes to leave the EU. Brexit wipes $2 trillion off global markets and the pound tumbles to a 30 year low. David Cameron announces he will step down as PM in September

24 June

Theresa May is elected Conservative leader

13 July

While there is uncertainty, there are somethings we do know – Brexit is a process not an act, with a period of negotiation in the midst of other political events

Investments on hold

PwC Autofacts ®


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Article 50 negotiations – Potential deals

Scenario

Case Study

Analysis

EEA member Bespoke bilateral deal No access agreement

Norway Switzerland US

The UK remains part of the EEA and keeps the four freedoms of labour, capital, goods and services

UK will need to make a substantial contribution to the EU budget and comply with EU social, employment and product regulation

The UK enters into a bilateral integration treaty with the EU

UK would have access to some areas of the Single Market, at the cost of adopting the relevant EU regulations

The UK does not establish any new trade agreements with the EU

Only WTO terms are still applied – UK goods and services would be treated in the same way as American ones in the EU

Disruption to economy Low Medium High

Access to single market High – via passport/regulatory equivalence Medium Low

Influence over EU regulations

Some – no voting rights but limited formal engagement. Some autonomy in other areas.

No No

Application of EU regulations

Yes, including social and labour law (Working Time Directive)

Technically no, but required in practice if domiciling in other territories (e.g. Swiss banks operating out of UK)

Technically no, but limited discretion in reality if third country equivalence is required

Independent immigration policy

No – all four freedoms retained Some autonomy, but Switzerland cannot restrict EU immigration

Yes

Independent trade policy Yes – UK may negotiate free trade agreements (FTA) with other countries

Yes – UK may negotiate FTAs with other countries

Yes – UK may negotiate FTAs with other countries in FS and other services

Automotive Sector Impact

A B C

PwC Autofacts ®


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1

2

3

6

4

7

5

1

3

4

2

EU member states

Non-EU states

The UK is preferred by European manufacturers due to well-educated personnel, strategic positioning, and sales expectations

Source: Autofacts 2016 Q4 Forecast Release *in 2015 **in 2020 ***excl. United Kingdom

UK: Light Vehicle Assembly of Top Alliance Groups

No. Alliance Group Brand Volume* City

1 Renault-Nissan Nissan 474,844 Sunderland

2 BMW Group Mini 201,207 Oxford

3 Toyota Group Toyota 190,161 Burnaston

4 GM Group Opel-Vauxhall 153,077 Ellesmere Port & Luton IBC

5 Honda Group Honda 119,414 Swindon

6 VW Group Bentley 10,888 Crewe

7 BMW Group Rolls-Royce 3,769 Goodwood

∑ 1,153,360

EU27***: Excess Capacity of UK-located brands

No. Alliance Group Brand Excess Capacity** Country/City

1 BMW Group Mini 100,000 & 50,000 NL / Born & AT / Graz

2 Renault-Nissan Nissan 125,000 ES / Barcelona

3 Tata Group Land Rover 150,000 AT / Graz

4 Tata Group Jaguar 50,000 SK / Nitra

5 Toyota Group Toyota 50,000 FR / Onnaing

∑ 525,860

5

PwC Autofacts ®


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Only few Manufacturer have the operational and financial resources to think about a shifting of light vehicle assembly from UK to the European mainland

-

0.5

1.0

1.5

2.0

2.5

2015 2016 2017 2018 2019 2020 2021 2022 2023

UK: Light Vehicle Assembly Scenarios 2015 - 2023 (millions)

Source: Autofacts Analysis, Autofacts 2016 Q4 Forecast Release

…to be continued ! ? ? !

Brexit Exit

New decision phase Upside Scenario

Base Scenario

Downside Scenario

Disinvestments

New Investments

2019

Realisation of investments

2021

No new Investments

Possible effects

• Plant closures • Dealership closures • Reduction of

existing trainings • Staff reduction

Possible effects

• New plants • New dealerships • Implementation of

new trainings • Hiring new

personnel

Thank you for your attention!

Autofacts®

PwC Autofacts ®

Autofacts contact

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Philippe Funda Autofacts EU Lead Analyst PwC Germany T: +49 711 25034 1137 E: [email protected]

PwC Autofacts ®

The information contained in this report represents the culmination of proprietary research conducted by Autofacts, an analytical group within PwC. All material contained in this report was developed independently of any

PwC client relationship and does not represent the firm’s view as an auditor to any legal business entity. While every effort has been made to ensure the quality of information provided, no representation or warranty of any

kind (whether expressed or implied) is given by PwC as to the accuracy, completeness or fitness for any purpose of this document. As such, this document does not constitute the giving of investment advice, nor a part of

any advice on investment decisions. Accordingly, regardless of the form of action, whether in contract, tort or otherwise, and to the extent permitted by applicable law, PwC accepts no liability of any kind and disclaims all

responsibility for the consequences of any person acting or refraining from acting in reliance on this document.

©2016 PwC. All rights reserved. “PwC” refers to PricewaterhouseCoopers LLP (a Delaware limited liability partnership) or, as the context requires, other member firms of PricewaterhouseCoopers International Ltd., each of

which is a separate and independent legal entity. “Autofacts” is a globally registered trademark of PwC.

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