IHS AUTOMOTIVE Presentation
The Outlook for the Global Economy and Automotive Demand IHS Automotive Customer Briefing – Frankfurt | 17 June 2015
Tim Armstrong, VP Forecast Planning IHS Automotive © 2015 IHS
ihs.com
World Light Vehicle Selling Rates
LV Sales SAAR, Millions Sold
Low oil will help weak global market; China remains the key to industry growth
World
World Without China Global market, without China, finally back to pre-recession levels
Source: IHS Automotive Analysis, monthly data with X12 Seasonal Adjustment
© 2015 IHS
2
The “Great Divergence” • Over the past four years global growth has been remarkably stable –
between 2.5% and 3.0% • However, the composition of growth has changed fundamentally – with
a gradual growth acceleration among the advance economies and a sharp deceleration in the emerging world • Four trends have driven this divergence: • Debt and deleveraging • The plunge in the price of oil and other commodities • Central banks moving on different paths • The rise of the dollar and the fall in other currencies
© 2015 IHS
3
Implications • The net effect of the “Great Divergence” is that the momentum of the
global economy will improve modestly in the second half of 2015 and in 2016 • Better prospects will be the result of solid growth in the US and a slight
pickup in the pace of Eurozone and Japanese economic activity • The plunge in oil prices will add 0.3 to 0.5 percentage point to global
growth over the coming year • More stimulus by the Bank of Japan, People’s Bank of China and the
European Central bank will also support growth • A stronger dollar is a lifeline to Europe and Japan, but is a challenge to
many emerging markets – and US exporters • China’s growth will slow further, and for other large emerging markets it
will be a good news (India), bad news (Brazil and Russia) story © 2015 IHS
4
Global real GDP growth: divergent paths Real GDP 10
Percent change
8
6 4
2 0
-2 -4 1990
1993
1996
World Source: IHS
© 2015 IHS
1999
2002
2005
Advanced countries
2008
2011
2014
2017
2020
Emerging markets © 2015 IHS
5
Asia-Pacific (excluding Japan) and Sub-Saharan Africa will achieve the fastest growth in real GDP Real GDP Annual percent change
7 6 5 4 3
2 1 0 -1 NAFTA
Source: IHS
© 2015 IHS
Other Western Emerging MideastSubAmericas Europe Europe N. Africa Saharan Africa 2013 2014 2015 2016 2017-21
Japan
Other AsiaPacific © 2015 IHS
6
Oil and other commodity prices have tumbled in response to structural excess supply • Rising production and weak demand growth have left the global oil
market oversupplied, driving down prices • A mismatch between fundamentals, on the one hand, and financial
market expectations and inventory building, on the other, caused the recent price rally – this may not last • As oil production growth slows in the second half of 2015, prices will
begin to recover • IHS expects the price of Dated Brent crude oil to average $59 in 2015
and $66 in 2016 • Big difference: the US is now a swing producer – driven by market
forces • Other commodity prices have fallen mostly because of weak demand
from and excess capacity in China © 2015 IHS
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US crude oil prices: A big drop – but for how long?
140
14
120
12
100
10
80
8
60
6
40
4
20
2
Dollars/million Btu
Dollars/barrel
Crude oil and natural gas prices
0 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020
Crude oil, WTI (Left scale) Source: IHS Energy
© 2015 IHS
Natural gas, Henry Hub (Right scale) © 2015 IHS
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Winners and losers from low oil prices • Winners: • • • • •
US consumers are the biggest winners – especially low-income families European consumers benefit proportionally less because of high gasoline taxes Emerging-market consumers will also benefit less because of large fuel subsidies Energy-intensive industries, such as agriculture and transportation Governments in oil-importing countries with large fuel subsidies
• Losers: • Oil producers, especially those with high costs • Major oil exporters, especially those at a “fiscal break-even point” above USD100 per
barrel such as Iran, Russia, Venezuela, Ecuador, and Angola
• Net effect: • In the United States and worldwide, the net effect on consumers and producers is
positive, boosting real GDP growth by roughly between 0.3 and 0.5 percentage point in late 2015 and 2016 • A 40% drop in oil prices represents a transfer of about USD1.4 trillion from oil exporters to oil importers—the latter have a higher marginal propensity to spend than the former © 2015 IHS
9
The US Federal Reserve will lead in raising policy interest rates, followed by the Bank of England Policy interest rates
Percent, end of quarter
6 5 4 3 2 1
0 2007
2008
2009
2010
United States Source: IHS
© 2015 IHS
2011
2012
Eurozone
2013
Japan
2014
2015
2016
2017
United Kingdom © 2015 IHS
11
The dollar: Rising but still competitive Real trade-weighted dollar index 1,6
Index, 2009 = 1.0
1,4 1,2 1,0 0,8 0,6 1980
1984
1988
1992
1996
Major trading partners
© 2015 IHS
2000
2004
2008
2012
2016
2020
Other important trading partners
12
IHS expects the Euro/$ rate to strengthen again, moving back to its long(er) term trend-value 1,7 History
Forecast
1,6 1,5 1,4 1,3 1,2 1,1 1,0 0,9 0,8 Jan 99 Jan 01 Jan 03 Jan 05 Jan 07 Jan 09 Jan 11 Jan 13 Jan 15 Jan 17 Jan 19 Jan 21 Jan 23 Jan 25 © 2015 IHS
13
US real GDP growth and the unemployment rate: ignore the first quarter data 6
10,0
3
8,8
0
7,6
-3
6,4
-6
5,2
-9
4,0 2006
2008
2010
Real GDP growth (Left scale) Source: IHS
© 2015 IHS
2012
2014
Percent
Annual percent change
Real GDP and unemployment
2016
Unemployment rate (Right scale) © 2015 IHS
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The Eurozone recovery looks a little stronger; and UK growth remains robust • Growth will be better in 2015 (1.5%) thanks to lower oil prices, a weak euro,
reduced fiscal headwinds, and an accommodative monetary policy – but slow progress on deleveraging is a problem • A weak euro has helped exporters, but reduced the purchasing power of
consumers • The ECB’s QE program has already led to easing credit conditions – even
Greek bond yields remain relatively low (compared with 2011/12) • While the risks of a Greek exit are still elevated, the contagion effects will
probably be small • Low inflation and (very) gradually improving labor market conditions will support
consumer spending, especially in Northern Europe • Stronger export growth and growing pent-up demand boost capital spending • Meanwhile (much like the US), UK growth will be solid (around 2.5%) – the
strong election results will help © 2015 IHS
16
Real GDP growth in Western Europe Real GDP
Annual percent change
3 2 1 0 -1 -2 Germany
United Kingdom
2013 Source: IHS
© 2015 IHS
2014
France
2015
Italy
2016
Spain
2017-21 © 2015 IHS
17
Can Greece de-stabilise Europe?
beginning to recover … • … And public finances were
headed in the right direction • The renewed uncertainty
discourages investment and caused a further tightening of credit conditions • The spill-over effects of a Grexit
on the rest of Europe will be limited … • … if there is no contagion to
Spain, Portugal and Italy © 2015 IHS
Greece real GDP, %chya
Government balance as a share of GDP, % 5% 0% -5% -10%
-15% -20%
Govt balance as a share of GDP Primary surplus as a share of GDP 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
• Greece’s real GDP growth was
8 6 4 2 0 -2 -4 -6 -8 -10 -12
21
Financial contagion is unlikely Most of Greece’s public debt is held by the official lenders
Manufacturing only accounts for 13.3% of Greece’s Value Added. Tradeable services account for another 10%
Manufactu Tradeable ring services 13,3% 10,1%
Nontradeable services 76,6% EFSF
EU Bilateral Loans
Bonds (ECB/NCB)
Bonds (No-ECB)
IMF
Other
© 2015 IHS
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Should Greece exit the Eurozone, its economy would fall back for another 4 years before partly recovering – Real GDP 8 6 4 2 0 -2
2007
2009
2011
2013
2015
2017
2019
2021
-4
-6 -8 -10
Baseline Grexit
-12 © 2015 IHS
23
The impact on Europe and the world depends on the reaction of financial markets and the Euro/$ rate 3,0 2,5 2,0
1,5 1,0 0,5 0,0
Baseline Grexit Greece Exit With Contagion
-0,5 -1,0 -1,5
2011 © 2015 IHS
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021 24
China’s growth rate will decelerate more • The recent deceleration in the Chinese economy is due mostly to weak
domestic demand (because of the real estate bust) • The government is trying to balance concerns about weak jobs growth and
social unrest with its desire to tackle the glut of debt and industrial overcapacity in the Chinese economy – although it is providing modest stimulus and has lowered the target growth rate from 7.5% to 7.0% • Since November, the People’s Bank of China has cut interest rates three times
and reduced the required reserve ratio – but real interest rates are still high and the PBoC will likely ease more again • Lower borrowing costs and the new debt swap program will help ease debt
servicing costs but have done nothing to cut the stock of debt • The vast (and growing) excess industrial capacity in China, financed by an
explosion of debt, is the biggest threat to China’s growth prospects • Bottom line: limited support from fiscal and monetary policy will not be enough
to prevent growth from weakening further, from 7.4% in 2014 (the weakest since 1990) to around 6.5% in 2015 and 6.3% in 2016 © 2015 IHS
27
China’s economic growth will downshift in the long run Real GDP
Source: IHS
© 2015 IHS
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Global Light Vehicle Sales: How did the forecast change? Downgrade builds across forecast Long term forecast has been lowered by around 2.3% on average
120
Millions
100 Light Vehicle Sales
Mismatch with the cheap oil price environment ! Although mature markets have been upgraded in line they cannot offset the big corrections in Russia and Brazil.
By early 2020’s World GDP is approx. $2 trillion smaller than we forecast one year ago
110
- Impacting autos growth path via a lower long term motorisation and resulting annual auto sales volume
90
2.39 m unit forecast downgrade in 2021
Apr 14 Apr 15
80
1.5 million unit downgrade in 2015
70
Vol
% Chg
2014
86.3
3.5%
2015
87.5
1.4%
2016
90.7
3.6%
60
50 `04
© 2015 IHS
`05
`06
`07
`08
`09
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
30
Consumer boon from low oil is being more than offset by downgraded economic performance in the BRICs
500000
0 China India
-500000
Russia Brazil WE US
-1000000
-1500000
-2000000 2015
2016
2017
2018
2019
2020
2021
2022
Forecast changes to LV sales volume over the last 6 months (March 2015 vs Sept 2014) – i.e. the period of the oil price collapse © 2015 IHS
Global Light Vehicle Sales (IHS Total Market for LV’s) 2015 Outlook by Region +3%
90 +3.6%
89
+6.9%
493k
475k
+5% -3%
420k
33k
-9%
-24k
1.63m
88
-23%
-145k -228k -784k
Sales in Millions
87
+1.4%
86 85 84 83 82 81 80
© 2015 IHS
86.3 Million
87.5 Million
Country Light Vehicle Sales Growth Among the largest markets, Russia/South America will have a tough year
Forecasted Change in LV Sales
20%
2015
1.8%
10%
2016
3.6%
0% -10% -20% -30%
Russia
Brazil
Japan
Saudi Arabia
South Korea
South Africa
Australia
Indonesia
World
Canada
USA
France
UK
Germany
Malaysia
Iran
Italy
Mexico
China
India
Thailand
Turkey
Spain
-40%
Source: IHS Automotive 2015 and 2016 LV sales forecasts
© 2015 IHS
11
The Bottom line – Europe's Auto Market Phases 20
16
+4.9% (15)
6
© 2015 IHS
Employment Fundamentals and Replacement demand
8
Eurozone Crisis Peaks
10
Great Recession
12
Buying Propensities Rebound
+5.8% (14)
14
Weak European Demographics take hold
Structural adjustments from crisis =lower long term purchase propensities
18
Weak replacement demand –Echo of Crisis
Millionen
West & Central Europe – LV Sales
5,0
18
4,5
16
4,0
14
3,5
Millionen
Millionen
Europe Light Vehicle Sales Outlook
12
3,0
10
2,5 8
2,0
Central Europe East Europe
6
1,5
CY 2020
CY 2019
CY 2018
CY 2017
CY 2016
CY 2015
CY 2014
CY 2013
CY 2012
CY 2011
CY 2010
0 CY 2009
0,0 CY 2008
2 CY 2007
0,5
CY 2006
4
CY 2005
1,0
West Europe (RHD)
In April 2015, European sales reached 1.61 million units, a 1.3% y/y increase. Western and Central Europe kept a good rhythm in April (up 7.3% y/y) while the situation in Eastern Europe kept deteriorating (down 21.9% y/y). YTD through April, the European continent has grown 2.7% y/y, slightly decelerating over the first quarter. Western and Central Europe seem to be on the road to recovery, up 8.5% y/y up to April. The general environment is increasingly supportive (with, notably, quantitative easing from the European Central Bank and lesser pressure on households’ wallets thanks to relatively low resources prices). Meanwhile, Eastern Europe remains in dire straits. Despite the rebound in Turkey (correcting from previous tax-related distortions), the subregion is embroiled in a vicious cycle centered on the collapsing Russian economy. The subregion was down 22.7% y/y in the first four months of the year. Consequently, we anticipate an awkward situation in 2015 for the continent: a strong recovery in the West totally wiped out by the effects of the Russian crisis. © 2015 IHS
Germany and France sales outlook 4,0
8,0%
3,5
6,0%
3,0
4,0%
2,5
Year-on-year change
Million units
Germany sales
2,0%
2,0
0,0%
1,5
-2,0%
1,0
-4,0%
0,5
0,0
-6,0% 2012
2013
2014
April 2015 Germany
YTD
2015
2016
2017
Change
2,5
10,0%
2,0
5,0%
1,5
0,0%
1,0
-5,0%
0,5
-10,0%
0,0
-15,0% 2012
2013
2014 April 2015 France
© 2015 IHS
YTD
2015
Change
2016
2017
Year-on-year change
Million units
France sales
German sales remained solid in April, increasing 6.3% y/y. This maintained the year-to-date performance at a satisfying level, with 6.6% y/y growth. Tactical (dealer, rental) sales channels, a typical feature of the German market, remain strong (up 11%). We anticipate this situation to continue throughout 2015, with an increase of around 3.0–3.5% y/y. In the longer run, despite very sound macro factors, we confirm Germany as essentially a replacement-only market—mostly stable and no longer passing the 3.5-million-unit threshold on a regular basis.
French sales decelerated neatly in April, up 3.2% y/y. This brought the year to date below 5% y/y. The actual potential of the market lies in the return of private buyers (currently still very cautious). We continue to expect this to happen in the second part of the year (amid a better economic climate and some product activity). In this context, we have slightly raised our outlook for 2015 to around 2.5– 3.0% y/y.
Italy and Spain sales outlook 2,0 1,8 1,6 1,4 1,2 1,0 0,8 0,6 0,4 0,2 0,0
30,0% 25,0% 20,0% 15,0% 10,0% 5,0% 0,0% -5,0% -10,0% -15,0% -20,0% -25,0%
2012
2013
2014 April 2015 Italy
YTD
2015
2016
Year-on-year change
Million units
Italy sales
Change
Thousand units
30,0% 25,0% 20,0% 15,0% 10,0% 5,0% 0,0% -5,0% -10,0% -15,0% -20,0%
1200,0 1000,0 800,0 600,0 400,0 200,0 0,0 2014
April 2015 Spain
© 2015 IHS
YTD Change
2015
2016
2017
Year-on-year change
1400,0
2013
Italy is on the recovery track but artificial support (discounts, incentives, etc.) is definitely a part of the equation. We expect the current scenario to continue into 2015, with growth of nearly 6% y/y.
2017
Spain sales
2012
The Italian market accelerated markedly in April, up 23.1% y/y. The remarkable fact is that for the second month in a row, private buyers made strong contributions to growth (increasing 28% y/y in April).
Spain slowed down in April, up 4.9% y/y after months of double-digit progressions. The YTD gain was brought back to 25.3% y/y. The PIVE scrapping incentive funds ended in April with immediate consequences. Consequently, officials confirmed the renewal of the scheme (PIVE 8) in May for a last round that will end with the current year. This strategy will help sustain sales and, consequently, will improve our expectations for full-year 2015.
UK and Russia sales outlook 3,5
12,0%
3,0
10,0% 8,0%
2,5
6,0%
2,0
4,0%
1,5
2,0%
Year-on-year change
Million units
United Kingdom sales
0,0%
1,0
-2,0%
0,5
-4,0%
0,0 2013
2014
April 2015
YTD
United Kingdom
2015
2016
2017
Change
In April, the Russian market kept nose diving, with sales down 41.5% y/y.
Russia sales 3,5
20,0%
3,0
10,0%
2,5
0,0%
2,0
-10,0%
1,5
-20,0%
1,0
-30,0%
0,5
-40,0%
0,0
-50,0% 2012
2013
2014 April 2015 Russia
YTD
2015
Change
2016
2017
Year-on-year change
Million units
In addition, customer confidence in April reached its highest level since 2002. The very attractive lease offers and incentives by OEMs also help maintain the momentum. Nevertheless, we anticipate some leveling off during the year as pent-up demand should dry up. For the full year, we currently expect growth around 3.0–3.5% y/y.
-6,0% 2012
© 2015 IHS
Sales in the United Kingdom remained strong in April, up 6.6% y/y (8.0% y/y for the YTD). The market increased on robust fleet and private demand (rising 9% and 3%, respectively).
Consequently, our forecast for 2015 calls for a 36% y/y decline to barely 1.6 million units; by comparison, the market reached nearly 3.0 million units in 2012.
Under our present assumptions, the Russian market will not reach the 3-million-unit mark before the next decade—far later than previously envisioned.
US: Status of Automotive Market Consumer buying desire remains high; stronger wages will improve ability
•
Since August SAAR hit 17.5m units some momentum has been lost, but many positive factors contribute to strong outlook and March’s 17.1 SAAR a modest surprise.
•
The cyclical nature of autos is kicking in – growth rate slowing now as pent-up demand has now been spent and want based demand replaces need based.
•
Low oil prices will help consumer spending, and autos in particular, but oil volatility may make consumer skeptical thus moderating potential gains.
•
Housing market has much more recovery to come which will help sales through jobs and wealth.
•
Transactions prices are strong, and will remain strong in the long-run.
•
Manufacturing cost pressures will remain low over near-term due to weak commodity prices.
•
Credit and jobs will bring the younger buyers into the showrooms.
•
Auto credit availability may be slowing - lengthening loan maturity is an issue.
•
The US sales forecast peaking at 17.7m units in 2017 before sales growth declines.
© 2015 IHS
US: Light Vehicle Sales SAAR Strong recovery since 2009, expected to continue
“Keep America Rolling”
22
“Employee Pricing For All”
Monthly Sales (millions)
20 18 16
“Cash For Clunkers”
14 12 10 8 1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
Source: IHS Automotive, light vehicle sales forecast
© 2015 IHS
40
US: Product Launches New/refreshed nameplates will drive showroom traffic; OEMs need products to be liked
New/Refresh Sales Market Share
New/Refresh Nameplate Counts
12%
90 85
10%
80 75
8%
70 6%
65
5,4%
60 55
4%
53
50
2%
45 2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2012
0%
40
Source: IHS Automotive, current light vehicle sales forecast
© 2015 IHS
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China General Market Developments Comments:
Total Light Vehicle Sales China 2012 - 2025 (in thousands) Apr 2014 FC
• China GDP forecast for 2015-2017 was downgraded in line with lower acceptable government target growth and policy
Apr 2015 FC
• Despite slowdown 2014 sales came in line with last years forecast
35.000
33.000
• Slowdown in investment sectors rather than consumer sector which has bounced up to over 52% of GDP. Changes in components of economic growth reflected in still strong passenger sales
31.000 29.000
• China provincial level analysis increased our long term forecast (2020-2025) by 250k-400k units per year using bottom up approaches which uplifted base demand before slower economic growth rates were pulled back – leaving net impact smaller at just -1.1% (i.e. less than implied by simple adjustment modeling)
27.000 25.000 23.000 21.000 19.000
17.000 15.000 `12
© 2015 IHS
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
• IHS expects anti-trust campaign could alter the relationships among consumer, dealer and OEMs. The campaign is expected to have a long lasting effect on premium parts/vehicle prices in China. Coupled with anti-corruption campaign, the momentum could lead to faster downward adjustment in premium pricing which helps provide another boost to premium penetration to further increase in China in the next decade. Consequently, we raised our outlook for premium TIV by 3%-4 in the forecast horizon.
Russia General Market Developments Comments: Total Light Vehicle Sales Russia 2012 - 2025 (in thousands) Apr 2014 FC
• 3 rounds of significant downgrade of Russian TIV in 2014 Apr 2015 FC
• Short-term downgrade based on underperforming economy • Short-, mid- and long-term downward revision due to influence of sanctions against Russia on its economy
4.000
• Short-term downgrade owing to liquidity crisis, oil price slump and substantial currency depreciation
3.500
•
Russian stimulus program has been launched in Sep. ‘14 and is highly appreciated by consumers. The program should end in Sept. 2015. Additionally, 3rd round of loan subsidy program was introduced in Apr. 2015. However, their scale won’t be enough to save the market from notable decline.
•
Much slower recovery compared to the crisis in 2009 is expected. Lack in growth of disposable incomes and significant increase in vehicle prices together with postponed reduction of import tariffs will not allow market to post impressive growth rates in the near future.
•
Rebound in 2017/18 is mainly based on improving energy prices, abolishment of sanctions and new preelection initiatives of the government. Replacement demand from years 2008 and 2012 will spur Russian sales volumes in this time frame.
3.000
2.500
2.000
1.500 `12 `13 `14 `15 `16 `17 `18 `19 `20 `21 `22 `23 `24 `25
• Further very strong downward potential comes from weak currency and possible escalation of Ukrainian conflict © 2015 IHS
Brazil General Market Developments Comments:
Total Light Vehicle Sales Brazil 2012 - 2025 (in thousands) Apr 2014 FC
Apr 2015 FC
5.500
Key Information: • Short-term: Full IPI tax has been restored, gasoline/ethanol prices are up and consumer confidence is at all time low. • Short-term: Government is focused on increasing revenues and has removed several subsidies (IPI being among them). April GDP for 2015 is now -0.9% (not reflected in forecast) as SELIC is now at 12.75% whereas consumer confidence is hitting lows.
5.000 4.500 4.000
• Medium-term: Without exports or strong consumer to rely upon we expect weak GDP growth in the medium term. Inflation remains stubbornly high making credit more expensive and currency continues to devalue.
3.500 3.000
• Long-term: GDP outlook saw serious downward revision:
2.500 2.000 1.500 `12 `13 `14 `15 `16 `17 `18 `19 `20 `21 `22 `23 `24 `25
GDP in US$ Trillion Feb ’14 2020 US$ 3.26 2025 US$ 4.53
Feb ‘15 US$ 2.59 (-20.6%) US$ 3.44 (-24.1%)
• Long-term: GDP per Capita has also been revised downwards
© 2015 IHS
Key themes of this year’s forecast •
Lower global economic growth projections– across the forecast horizon.
•
EM’s - Downgraded again. Almost all key emerging market economies have decelerated , some are forecast to enter recession and even medium term trend growth has been shaved due to inadequate evidence on progress of structural reforms
•
Stronger recovery phase for Western mature markets. Overshoot with dip or uplifting the longer term trend?
•
How much to adjust car demand forecasts for new ‘price’ environments
•
•
Oil Price collapse
•
Currency adjustments
China - a new normal and new reform policy approach
© 2015 IHS