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Automotive & Transportation Global Automotive Industry Vehicle Production and Business Outlook Vigneshwaran Chandran – Team Leader Business Strategy and Innovation Group – Automotive Practice. 12 th February 2008. U.S. Stimulus Packages and Policy Initiatives. Plan Details.

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Automotive & Transportation

Global Automotive Industry Vehicle Production and Business Outlook

Vigneshwaran Chandran – Team Leader

Business Strategy and Innovation Group – Automotive Practice

12th February 2008


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U.S. Stimulus Packages and Policy Initiatives

Plan Details

Policy Measures

Impact on Economy

  • GDP increase by 1.2 %

    to 3.5 % by 2010

  • 1.2 million to 3.6 million

    jobs created

  • Size of Package

  • $ 819 billion (House)

  • $ 885 billion (Senate)

  • Investment in infrastructure, education, health and

    energy

  • Business Investment Initiatives

  • Temporary relief such as food stamps and

    unemployment insurance

  • Fiscal relief to education and healthcare sectors

  • Use of Funds

  • Direct Government

    Spending -$604 billion

    spending on new

    projects

  • State Fiscal Relief

    and Tax Cuts

    -$212 billion in

    tax cuts

Source : American Recovery and Reinvestment Plan, January 2009


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European Stimulus Packages and Policy Initiatives

Country

Description of Policy Initiatives

Germany

  • Package I : package of measures worth 31 billion euros, aimed at generating 50 billion euros

    of investment and new contracts over two years

  • Package II:50 billion euro ($66 billion) second stimulus package, combining investment

    spending and tax cuts. It included investment in infrastructure projects and education,

    incentives for new car purchases

United Kingdom

  • November Package : 20 billion pound ($29.91 billion) fiscal package announced.

    Tax cuts and 3 billion pounds of capital spending, amounting to about

    1 percent of GDP.

  • 26 billion euro stimulus package, equivalent to 1.3 percent of gross domestic product.

France

  • 80 billion euros to support companies and families hit by the crisis.

Italy

  • 38 billion Euro stimulus package (6 billion euros in tax cuts and 4 billion euros of liquidity to

    credit-strapped companies and households). Government spending of 11 billion euros on

    public works to create 0.3 million jobs. Auto Sector to get 800 million euros

Spain


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Automotive stimulus packages of governments approaches $40–50 billion in key global markets

Government Measures To Stimulate the Automotive Industry

Country

Boost Sales / Increase Demand

Sustain Production of OEMs

Cost of Bailout


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2001 – 03 $40–50 billion in key global markets

4

1980 – 82

1990 – 93

2

3

1973 – 75

1

Recessions in the Automotive Industry usually last for 2 years; 2010 is expected to be the turnaround year!!!

Global Automotive Passenger Cars Production History 1950 – 2008

4

3

2

1

Collapse of the housing market in the US, leads to bank collapses in the US and Europe. Credit availability is sharply curtailed and consumer confidence falls to a low.

Units (Million)

Source: American Automobile Manufacturers Association, DRI-WEFA, and Global Insight;

Frost & Sullivan Analysis

  • 1973 Oil Crisis driven by OPEC embargo on oil exports to west, leads to global economic slowdown

  • 1973 oil crisis and 1979 energy crisis leads to high inflation and economic stagnation (stagflation)

  • The 1987 stock market crash, followed by the 1990 Gulf war and a resulting rise in Oil prices affected global industrial production

  • Dot-com bubble bursts driving the economy down

  • September 11 attacks on the US further causes an economic contraction


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0.57m $40–50 billion in key global markets

0.49m

The global automotive market is expected to contract at a CAGR of -2% between 2007 and 2010

CAGR : –2.7%

63.8 million

58.8 million

7.9m

6.3m

2.1m

0.63m

0.6m

0.54m

1.7m

0.53m

0.49m

0.43m

Turkey

Units (Million)

2010

2007

Note: CAGR calculated for 2007 to 2013; All figures are rounded; the base year is 2007. Source: Frost & Sullivan


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18.9m $40–50 billion in key global markets

13.2m

5.0m

10% Vans

13.5m

9% Vans

13% Vans

42%

30%

41%

49%

16.1%

Europe (including Russia)

USA

Asia*

Japan

Small, affordable and clean cars are mega trend in the auto industry in the next 5 years

Global Sales Volumes of Light Vehicles – by Vehicle Segment, 2008

  • Basic and small cars have a strong sales trend in Europe and Asia at present making one fourth of the market size

  • USA to witness a strong growth of Small cars and super-minis in 2009 and 10

  • Pickup sales expected to reach close to 1m units, while SUVs are expected to sell 1.3m units in Asia by 2010

  • Asia and Europe are big markets for commercial Vans, while Japan has Vans in the passenger segment too

*(India, China, Thailand, Malaysia, Indonesia, Korea)


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27% $40–50 billion in key global markets

U.S. auto sales to start improving in the second half of 2009, with significant recovery in 2010

USA Auto Sales – by Vehicle Segment, 2008

USA Auto Sales – mix of Alternate Powertrain, 2008

2008

2010

  • 46% of vehicle sales in the US constituted SUVs and Pickups in 2007 – Will fall to less than 39% by 2010

  • Small cars are gaining more market share with an increase from 12% in 2007 to about 15% in 2010

  • The US super-mini segment is a growth area with a CAGR of 10% (2007-10), driven by fuel prices (2007 and early 2008) and emission and recession concerns


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Developed Markets in Red; Russia and CEE are expected to clock positive growth in 2010; West EU down until mid ‘10

European Auto Sales, 2008

European Auto Sales, 2008

-19.5%

-11.8%

-2.1%

Million Units

Million Units

-2.3%

4.8%

-3.4%

*Eastern Europe excludes Russia volumes

*Austria, Belgium, Denmark, Finland, Greece, Ireland, Luxembourg, Netherlands, Norway, Portugal, Sweden, Switzerland

  • Russia and Turkey are the only considerable growth markets in 2010 with positive growth trends, although they are also expected to witness weakness in 2009

  • Russia is expected to become the largest market in Europe on par with Germany by 2010

  • All key 5 western European markets are expected to witness negative growth with 2010 expected to be the year of recovery with improving economic conditions


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What will catalyze the turnaround? clock positive growth in 2010; West EU down until mid ‘10 – BRIC and emerging economies will lead the recovery through 2010

Q2/Q3 2010

Q3/Q42009

  • Improvement in credit availability and increase in consumer confidence index

  • Customer demand bounce-back based upon stimulus – scrapping bonus and incentive for buying fuel-efficient cars

  • US demand for vehicles is highly cyclical and currently down on credit worries

  • Although there is a supply side govt. stimulus, demand is still low

  • Cumulative deferred demand (CDD), government stimulus & global recovery to drive growth

USA

Q4 2009

Mid2010

  • Government measures include subsidizing new car purchases and, increase procurement of new cars for governmental needs and provide financial support to Russian OEMs

  • Banking and financial system is expected to recover by Q4 with government backup, bringing liquidity and credit back in the market

  • The Brazil and Colombian markets have been impacted by the credit crunch, with more than 70% of vehicles being credit financed

  • Recovery from the slowdown is subject to improvement in Credit situation and vehicle financing by 2010

Europe

Brazil

Q2/Q3 2009

Q4 09 /Q1’10

  • Indian market still showing positive growth on the back of economic boom driven by services industry

  • Manufacturing slowdown in 2009, is expected to recover with recover of the US and rising consumer confidence

  • Growth will also be driven by new low-cost car model launches in 2009/10

  • RMB appreciation, rise in raw material prices, low demand in export markets and low credit availability have affected China's auto export market

  • Government stimulus, revival of the export market and local consumption will revive Auto growth

Russia

China

India


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“Flexibility in Capacity” and “Inter Brand JVs” Will Help OEMs Survive the Industry Downturn:Example of Toyota’s new Takaoka Plant ; Able to Build 8 High-Volume Models as against 3 on the Original Assembly Line

Press Shop

Welding Parts Shops

Body Shop

Paint Shop # 1

Assembly Shop # 1

Paint Shop # 2

Body Shop

Assembly Shop # 2/3

Paint Shop # 3

  • 2006 – 660,000 Capacity

Current Plant

  • Cost-cutting to generate more than $2.5 billion

  • Lead time to add new model halved

  • Sensors that monitor quality during each process

Stamping presses that use servo-motors rather than hydraulics, combined with high-speed delivery robots.

Future Plant

Welding Parts Shops

Press Shop

A "set parts system" that delivers a basket of parts to each vehicle.

A welding system that slashes the cost of jigs and other tooling.

Body Shop

Paint Shop # 1

Ditch huge expensive machinery

Assembly Shop # 1/2

A paint process that eliminates the need to let the base coat dry.

Paint Shop # 2

  • 2009 – Capacity 500,000


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Developing economies to drive future growth in global vehicle production – By 2016/17; 60% of global production to come from Asia, Eastern Europe and South America

World Automotive Market: Light Vehicle Production, 2007-2015

95 Million Vehicles

18.1%

70.3 Million Vehicles

7.0%

22.9%

41.1

17.6%

5.1%

Others 2.5

Thailand 2.2

Korea

3.8

1.7%

21.4%

10.7%

27.4

Japan

11.1

1.6%

8.5%

Others

10.5

Million Units

India

4.4

16.7

UK 2.0

Others

5.1

U.K. 2.0

43.3%

Spain 2.6

39.5%

Germany

6.3

China

17.1

Others 3.2

6.7

USA

11.6

France

3.3

1.2%

1.6

Brazil

5.4

1.1

Russia

3.1

0.3

Note: Vehicle Production in Million Units

The above vehicle production forecast is for passenger cars and light commercial vehicles (<3.5 t). Vehicle segments included are Basic, Executive, Large, Lower Midsize, Luxury, MPV, Pickup / Truck, Small, Sports, SUV, Upper Midsize and Van

Note: Africa - Morocco, South Africa

Asia - Australia, China, India, Indonesia, Japan, Korea, Malaysia, Philippines, Taiwan, Thailand

Eastern Europe – Azerbaijan, Belarus, Bosnia, Czech Republic, Hungary, Kazakhstan, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, Turkey, Ukraine, Uzbekistan

Middle East - Iran

North America - Canada, Mexico, USA

South America - Argentina, Brazil, Chile, Colombia, Ecuador, Uruguay, Venezuela

Western Europe - Austria, Belgium, Finland, France, Germany, Italy, Netherlands, Norway, Portugal, Spain, Sweden, UK

Source : JD Powers / Frost & Sullivan


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Next Steps vehicle production –

  • Register for Frost & Sullivan’s Growth Opportunity Newsletter and keepabreast of innovative growth opportunities(www.frost.com/news)

  • Register for the next Chairman’s Series on Growth: (www.frost.com/growthEU)

  • Join us at our 3rd Annual Customer Contact Executive MindXchange (June 2009, Europe)

  • Join us in London on 19 – 20 May at Growth, Innovation and Leadership 2009: A Frost & Sullivan Global Congress on Corporate Growth Event (www.frost.com/giluk)

  • Request a proposal for a Growth Partnership Service to support you and your team to accelerate the growth of your company.


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Your Feedback is Important to Us vehicle production –

What would you like to see from Frost & Sullivan?

Growth Forecasts?

Competitive Structure?

Emerging Trends?

Strategic Recommendations?

Other?

Please inform us by taking our survey.


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Thank you! vehicle production –

Anna Anlauft

Corporate Communications Executive

Corporate Communications

+49 (0) 697 703 312

[email protected]

Vigneshwaran Chandran

Team Leader

Automotive & Transportation

+44 (0) 20 7915 7880

[email protected]


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