The Upward Surge in the Automotive Industry Today s and Tomorrow s Trends

19th Annual Logistics and Manufacturing Symposium LDF and L&MA Port Laredo September 19-20, 2012 The Upward Surge in the Automotive Industry – Today’...
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19th Annual Logistics and Manufacturing Symposium LDF and L&MA Port Laredo September 19-20, 2012

The Upward Surge in the Automotive Industry – Today’s and Tomorrow’s Trends Ralph Biedermann Mexico Consulting Group The MRB Group

México Consulting Group

Agenda • • • • • • •

Global Auto Sales and Production Trends Technology and Retail Trends Emerging Markets The Auto Industry in Mexico IMMEX Manufacturing Today Mexico’s Economic Outlook Issues on the Horizon

México Consulting Group

Global Auto Sales and Production Trends

México Consulting Group

Global Light Vehicle Production Forecast (000 Units)

IHS Automotive, July 2012

México Consulting Group

Global Light Vehicle Sales Forecast (units)

IHS Automotive, July 2012

México Consulting Group

Global Light Vehicle Production - Country

IHS 2011

México Consulting Group

Geographic Breadth

IHS 2011

México Consulting Group

Global Production – Top 10 Platforms in 2017 (millions)

IHS 2011

México Consulting Group

North America Light Vehicle Production Forecast

México Consulting Group

North America Light Vehicle Production Forecast: 2012 - 2022 Country

2007

2012

2017

2022

Canada Mexico USA

2,542,150 2,033,658 10,555,043

2,210,000 2,030,000 2,040,000 2,752,000 3,339,800 3,604,400 9,484,400 11,272,870 11,564,100

Total

15,130,851 14,446,400 16,642,670 17,208,500

Polk, July 2012

México Consulting Group

North America Light Vehicle Production and Capacity Forecast (000) Production

Canada Mexico U.S. Total

2010

2013

2016

2,060 2,258 7,621

2,052 2,843 10,307

11,941

15,204

Capacity 2010

2013

2016

1,800 3,873 11,670

2,520 2,642 11,393

2,570 2,836 11,976

2,090 3,902 12,506

17,345

16,555

17,382

18,228

IHS Automotive, August 2012

México Consulting Group

North America Light Vehicle Production – by Country

Polk

México Consulting Group

U.S. Light Vehicle Sales

IHS 2012

México Consulting Group

U.S. Light Vehicle Sales – Car Segments

IHS 2012

México Consulting Group

U.S. Auto Investment

México Consulting Group

Technology and Retail Trends

México Consulting Group

Recent Technology Movements o o o o

Energy Efficient/Electrified Vehicles Battery and Fuel Cell Development New Electronic Component Suppliers Government-Industry Partnerships

México Consulting Group

U.S. Electric Vehicle Sales

México Consulting Group

U.S. Electric Vehicle Sales

México Consulting Group

U.S. Electric Vehicle Sales

Note (1)

(1) 0% should be 38.5%

México Consulting Group

U.S. Electric Vehicle Sales

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Technology Gaps o o o o o o o

Alternative Fuels Alternative Powertrains (beyond batteries) Bio-materials Lightweight Materials Vehicle Connectivity (Internet) , Communications and Driver Assistance Systems and other Vehicle Electronics How to Meet Higher Fuel Efficiency Standards (54.5 MPG by 2025)

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Retail Trends o Sales Growth Driven by Pent-up Demand: used car prices, scrappage rates, vehicle ages, and the number of cars per driver are all outside their historic equilibrium levels o Better Access to Auto Loans and Increased pricing Flexibility o Continued Low Interest Rates o Improved Warranty and Service Options o Increased Investment in Web Marketing and Advertising o Increased Investment in IT Systems and E-Commerce Platforms o Leasing is on the Way Back

México Consulting Group

Emerging Markets

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“Follow the Yellow BRIC Road” o Sales volumes in Russia are expected to overtake Germany (3.2 million this year) by mid-decade, becoming the largest market in Europe o Sales in China and Brazil have accelerated to double-digit y/y gains in recent months, bolstered by government stimulus programs o In China, the government created a RMB 6 billion subsidy program for purchases of fuel efficient cars with engines of less than 1.6 litres o In Brazil, car sales have jumped 25% y/y since the government unveiled a new US$10bn stimulus package, including suspending an industrial tax and freeing up nearly US$8.8bn in bank deposit requirements for lenders to boost auto loans o A KPMG survey found 80% of respondents saw China to be the largest automotive market in sales and production in 2016 followed by the U.S. and then Brazil and India o LMC Automotive forecasts that the four BRIC countries will have a combined market share of 43% in 2016

“Follow the Yellow BRIC Road” o On the downside, despite forecasted growth, fears of government intervention are the largest in China and especially Russia and barriers to entry to both markets could be high o China’s market could be the most over-built by 2016 and could have an unused capacity of 6 million units in that year – three times the current size of the German car market o By 2016, the global automotive market could be overbuilt by 20-30 percent o On the non-traditional side, electro-mobility will offer the greatest growth potential in the BRIC countries – depending on which technology is chosen

BRIC Light Vehicle Production Forecast

México Consulting Group

Asia – The New Battleground

México Consulting Group

China Light Vehicle Production Forecast

México Consulting Group

The Auto Industry in Mexico

México Consulting Group

Impressive Positions

ProMexico, May 2012

México Consulting Group

Some Recent Data o Mexico now is the world’s 8th largest vehicle producer (forecast 2012 production: 3.0 million units) and is the second largest producer in North America (19% share) o In 2012, close to 80% of production will be exported o Total vehicle output through July was 1.65 million units, up 13% from prior year o Total vehicle exports through July were 1.38 million units, up 14% from prior year (full year exports forecast: 2.39 million ) o Domestic market sales this year should hit a record high: 1.06 million; domestic market sales up in July for 29th consecutive month o Mexican new car production/exports now account for 10.3% of US new car sales; second largest country supplier of US new car imports after Japan; through July, exports to US market: 881,853 units o There are now 30 makes of automobiles and SUVs available in the Mexican market (including imported units) o For 2013 the current industry forecasts are: production - 3.3 million units, exports 2.8 million and domestic sales 1.15 million México Consulting Group

Mexico Auto Industry Sales

ProMexico, May 2012

México Consulting Group

New Light Vehicle Sales in Mexico January-July

%Variation

2012

JJ12/JJ 11

The “Top 10” Nissan

136,998

18

General Motors

99,791

11

Volkswagen

71,718

2

Chrysler

47,392

6

Ford

44,893

(1)

Toyota

29,455

18

Honda

28,615

60

Mazda

14,900

(3)

Renault

13,744

8

Seat

11,990

22

(a) Includes automobiles, SUVs and light trucks. Sources: Mex. Automotive Industry Association (AMIA), KASO y Asociados

México Consulting Group

Mexican Domestic Light Vehicle Sales Forecast

México Consulting Group

Mexico Auto Production

ProMexico, May 2012

México Consulting Group

Mexican Auto Production Forecast

México Consulting Group

Mexico Auto Parts Production Value ($ billions) Year

GPV (a)

2005

50.5

2006

56.0

2007

61.6

2008

59.8

2009

43.0

2010

62.0

2011

66.0

2012*

68.0

2013*

70.0

2014*

71.8

*Forecast as of August 2012. (a) Includes Maquiladoras Sources: Banco de Mexico, National Auto Parts Industry Association (INA), IHS Automotive

México Consulting Group

Mexico Auto Exports

ProMexico, May 2012

México Consulting Group

Mexican Auto Production by Destination

México Consulting Group

Mexican Auto Exports by Region

México Consulting Group

FDI in Mexico ($ millions) Total

2005 2006 2007 2008 2009 2010 2011 2012

N/A $20,006 $31,313 $26,889 $15,959 $20,208 $19,440 $19,600 (1)

Manufacturing

N/A $10,007 $13,600 $ 7,809 $ 5,659 $11,542 $ 8,572 $ 9,000 (1)

Vehicles and Parts $2,335.4 $1,728.4 $2,194.3 $1,252.6 $1,295.6 $ 680.3 $ 855.9 $3,152.0 (six mos.)

(1) Y/E Forecast ProMexico, May and July 2012; Banco de Mexico, General Foreign Investment Directorate, National Foreign Investment Registry

México Consulting Group

Mexico’s Auto Industry Competition Makes

Makes

Makes

1993

1998

2012

(The Year Before

(NAFTA plus

(44 FTAs

NAFTA)

Other FTAs)

in Place)

Vehicle Type Automobiles

5

14

32

Light trucks

5

7

30

Light vehicles (such as SUVs)

5

14

36

Heavy trucks

5

8

14

Trailer tractors

4

6

5

Passenger buses

5

4

5

Heavy-duty vehicles (off-road)

8

8

16

12

22

52

192

512

1,475

Total makes Total models, new vehicles

Source: KASO y Asociados, with data from 3 industry trade associations (AMIA, AMDA, ANPACT)

México Consulting Group

New OEM Projects Announced in 2012 Company

Investment (a)

Daimler-Benz

Plant Location (state)

100

Nuevo Leon

1,300

Sonora, Mexico

Fiat

900

Coahuila

General Motors

990

S. Luis Potosi, Guanajuato

Ford

Coahuila Honda

800

Guanajuato

Mazda

600

Guanajuato

Nissan

2,200

Aguascalientes

Audi

1,300

Puebla

(a) In millions of dollars Source: ProMexico, “MexicoNow”, direct research

México Consulting Group

New OEM Projects Pending Announcement Company

Investment (a)

Plant Location (state)

BMW

NA

Queretaro p

Mercedes-Benz

NA

NA

(a) In millions of dollars *As of August

p Probable site

NA = not yet announced

Source: ProMexico, “MexicoNow”, direct research

Other New Plant Possibilities  Toyota – no decision yet, probably none this year  Infiniti – possible, but seems remote  One Chinese automaker – also a possibility, but also a remote one

México Consulting Group

Major New Parts/Assembly Projects Announced or Completed in 2012 Company

Parent Country

Plant Location (state)

Canada

San Luis Potosi

Japan

Guanajuato

US

San Luis Potosi

US/UK

Durango, Tamaulipas

Denso

Japan

Aguascalientes

F&P Manufacturing

Japan

Guanajuato

GIS

US

Guanajuato, Nuevo Leon

Henninges Automotive

US

Torreon

Hella Lighting

Germany

Guanajuato

Hyundai Transland

S. Korea

Baja California

Indiana Mills & Mfrng.

US

Coahuila

Janesville

US

Guanajuato,

Johnson Controls

US

Queretaro

Japan

San Luis Potosi

KSR

Canada

Coahuila

Lear

US

Chihuahua

AMB Tools Ahebono Brake Cummins Delphi Automotive

Koito Manufacturing

México Consulting Group

Major New Parts/Assembly Projects Announced or Completed in 2012 – Cont’d Company

Parent Country

Plant Location (state)

Canada

Guanajuato

Maruchi

Japan

Aguascalientes

Nippon Metal One

Japan

Guanajuato

Nishikawa Cooper

Japan

Guanajuato

Germany

Queretaro

Japan/UK

Baja California

Japan

Guanajuato

Italy

Guanajuato

Sumitomo Wire Systems

Japan

Chihuahua

THK

Japan

Guanajuato

US

Queretaro, Tamaulipas

Germany

Puebla

Japan

Aguascalientes

Valeo

France

Queretaro

Yutaka

Japan

Guanajuato

Zanini

Italy

Tamaulipas

Magna

Novem NSG Group/Pilkington Omron Automotive Pirelli Group

TRW Automotive Thyssenkrupp Unipres Mexicana

México Consulting Group

IMMEX Manufacturing Today

México Consulting Group

The Maquiladora Industry •



• •

Started as the Border Industrialization Program in 1965, this export promotion program took on the name “maquila” or “maquiladora;” it’s purpose was the create jobs and bring economic development to the border region (technically known as the “frontera”) Initially, companies legally incorporated in Mexico and having a “maquila permit” could temporarily import raw materials and components duty free with the stipulation that the final products had to be exported Gradually “maquilas” were allowed to operate anywhere in Mexico although the majority today are still located in the border cities and states The “industry” had a long period of annual double-digit growth in numbers of plants, employees, and production value – until the recession of 2001; growth since then has been less dramatic

México Consulting Group

The Maquiladora Industry – Cont’d • •

In 2006, another export promotion program, PITEX, and the maquila program were combined to form IMMEX, with provisions similar to maquila Manufacturing in the IMMEX industry thru November, 2011, accounted for almost 74% of all manufactures exports from Mexico; 78% of the IMMEX exports were accounted for by former maquila plants

México Consulting Group

Key Maquiladora Industry Statistics Number of Operating Plants 1980 1985 1990 1995 2000 2002 2006 2010 (1) 2011 (1)

620 758 1,920 2,267 3,703 3,240 2,813 2,454 2,448

Employment (000) 123.9 217.5 446.3 681.3 1,310.0 1,090.0 1,210.0 1,400.0 1,450.0

Total Exports ($B) 2.52 5.08 14.09 31.10 79.47 57.8 81.9 117.6 132.2

Source: INEGI, CNIME, MRB Research (1) Not including PITEX, ECEX or ALTEX Plants. México Consulting Group

IMMEX Industry Statistics

2007 (1) 2009 (1) 2011 (1) 2012 (2)

Number of Operating Plants

Employment (000)

5,138 5,235 5,045 5,093

1,938 1,617 1,882 2,220

Source: INEGI, Secretariat of the Economy (1) As of September (2) As of May

México Consulting Group

Top Ten IMMEX Plant Locations (Manufacturing Only)

Total IMMEX Baja California (a) Nuevo Leon (a) Chihuahua (a) Coahuila (a) Tamaulipas (a) Jalisco Sonora (a) Guanajuato Queretaro Puebla

Plants

Employ. (000)

5,093 917 661 474 393 365 298 241 223 192 189

2,220.0 233.0 233.6 271.7 187.9 167.8 104.7 105.1 71.5 60.5 18.8

*As of May 2012. Figures do not include 1,151 IMMEX companies and employees in the services fields (a) States with strong to dominant presence of maquiladora plants Source: National Statistics and Geographic Institute (INEGI), direct research

México Consulting Group

Mexico’s Economic Outlook

México Consulting Group

Global GDP Growth (%)

México Consulting Group

GDP Growth by Area (%)

México Consulting Group

U.S. and Mexican Manufacturing Trends (M/M % Change)

México Consulting Group

Mexican Inflation Rates

México Consulting Group

Exchange Rates – Pesos to Dollars

México Consulting Group

Mexico Consensus Economic Forecast - 2013

UTEP, 4-1-12

México Consulting Group

Issues on the Horizon

México Consulting Group

A Weak Economic Outlook

México Consulting Group

Western European Car Market Structural Shift

México Consulting Group

Slowing World Growth

México Consulting Group

Trade Slowing Down

México Consulting Group

Unemployment Picking Up

México Consulting Group

China’s Exports Down

México Consulting Group

Employment Growth = Car Sales and Auto Jobs

ScotiaBank, August 14, 2012

México Consulting Group

Employment Growth = Car Sales and Auto Jobs

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Jobs

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And More Jobs

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Thank You! [email protected] www.mexicoconsultinggroup.com

México Consulting Group

U.S. Auto Manufacturing Locations

México Consulting Group

U.S. Auto Manufacturing

México Consulting Group

Mexico Consensus Economic Forecast

UTEP, 4-1-12

México Consulting Group

Issues on the Horizon o Eurozone Financial Crisis o Slowing Global Economic Growth

México Consulting Group

México Consulting Group

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