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Trends Impacting the Automotive Aftermarket June 2013 Automotive Distribution Network NIS Tech Forum - Nashville. Agenda. Who is Polk & Where Do Our Insights Come From Economic Backdrop Key Indicator Outlook The 5 Trends. R. L. Polk & Co.

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slide1

Trends Impacting the Automotive Aftermarket

June 2013

Automotive

Distribution Network

NIS Tech Forum

- Nashville

agenda
Agenda

Who is Polk & Where Do Our Insights Come From

Economic Backdrop

Key Indicator Outlook

The 5 Trends

r l polk co
R. L. Polk & Co.

Polk collects and interprets global data, and provides extensive automotive business expertise to help customers understand their market position, identify trends, build brand loyalty, conquest new business and gain a competitive advantage.

  • Privately-held company
  • 130+ year Detroit history - based in Southfield, MI
  • 1300 employees global
  • Go to market as:

Automotive market intelligence and solutions

Vehicle history reports for U.S. consumers and dealers

offices in 11 countries 4 continents
Offices in 11 Countries—4 Continents

St. Albans,

United Kingdom

Essen,

Germany

Paris, France

Toronto, Canada

Southfield, Michigan

Avigliana, Italy

Beijing, China

Long Beach, California

Woodcliff Lake,

New Jersey

Tokyo, Japan

CARFAX,

Centreville, VA

Seoul,

South Korea

Madrid, Spain

Sydney, Australia

Melbourne, Australia

longest and deepest recession since wwii
Longest and Deepest Recession Since WWII

Worst Three Real GDP Contractions Since 1973

Peak to Trough in Quarters

Source: Haver Analytics

recovery path of real gdp
Recovery Path of Real GDP

Trough of

‘73 & ’81 Recessions

4.0 YEARS

Source: Haver Analytics

severe wealth destruction in 2008 09 recession
Severe Wealth Destruction in 2008-09 Recession

Trough of

‘73 Recession

Current

Source: Haver Analytics

change in driving volume
Change in Driving Volume

First time seeing sustained flat miles driven, under 3,000,000,000 miles since 2007

10

Source: R.L. Polk and FHWA

change in driving volumes year o year
Change in Driving Volumes – Year-o-Year
  • 2012 Up 0.3%
  • Feb 2013: Down 0.4%

Source: R.L. Polk and FHWA

slide13

Trend #1:

OEM’s Becoming More Aggressive as New Vehicle Sales Continue to Rise

slide14

New Light Vehicle Registrations - 2012

Light vehicle registrations hit 14.3 million units for 2012

14.3

MILLION

+13%

Y-O-Y

Source: Polk

u s registration history forecast the road to wellness
U.S. Registration History/Forecast: The Road to Wellness

USA: Light Vehicles – Source: Polk Forecast

interest rates
Interest Rates

Interest rates are exceptionally low and the Fed has promised to keep them at these low levels for the foreseeable future

“Rates are basically zero.”

strengthening housing market
Strengthening Housing Market
  • Homeprices increased 8.1% in January from a year ago, the largest increase in six and a half years and the eleventh consecutive monthly gain. Home prices increased in April, going up 12.1 percent year-over-year. The annual increase is the biggest in more than seven years. Prices were up 3.2 percent in April from March.
  • Prices increased in every one of the 20 markets surveyed to generate the S&P/Case-Shiller index
  • The number of existing homes for sale fell to 1.7 million in January, down 25% versus a year ago and the lowest inventory level since December 1999
  • In January 2012 homes were on the market for an average of 99 days before they sold; this past January that time period decreased to 71 days
new product activity
New Product Activity

Models are being replaced at an accelerating rate by all manufacturers

used cars are hard to find
Used Cars are Hard to Find

“The scarcity (of used cars) has pushed up used car

prices, often to the point that consumers who

finance a purchase with subsidized interest rates can

get brand new vehicles for about the same as a

monthly payment required for a late-model used

car.”

Joe White

Wall Street Journal

February 21, 2013

WSJ 2-21-2013 P. B1-2

headwinds
Headwinds
  • Sluggish GDP growth (.1% growth in 4Q 2012)
  • High unemployment (7.7% in February, U.S. unemployment rate dropped in April to a four-year low of 7.5 percent, down from 7.6 percent in March)
  • Ongoing violence and turmoil in the Middle East
  • Ongoing polarization and gridlock in Washington
slide24

Volkswagen

Become #1 by 2018

Must add 800K VW and 200K Audi

slide25

Volkswagen

30%

VW 2012 new vehicle sales up 30% over prior year.

slide26

Volkswagen – Successful Launch

Passat

VW’s

#2

Model

>117K units in 2012

slide27

Toyota and Honda

+27%2012

Back on track!

+24% 2012

slide28

Hyundai/Kia

Focused on maintaining market share.

+11% 2012

north american production
North American Production

Detroit Three Market Share

2000

77%

2012

54%

2018

50%

chrysler
Chrysler
  • Last 2 Years:
  • 16 redesigned models
  • Launched 2 Brands – Ram & Fiat
  • 2012 = 21% growth
ford motor company
Ford Motor Company
  • Transformed dramatically
  • Debt is down
  • Labor costs on-par
  • Eliminated Mercury brand
  • 2012 = 5% growth
general motors
General Motors
  • Less debt
  • Only 4 makes
  • New models
  • 2012 = 4% growth
slide35

New MD/HD Vehicles – 2012 (GVW 4-8)

Medium & Heavy Vehicle new registrations hit 379,000units

379

THOUSAND

+16%

Y-O-Y

Source: Polk

slide36

U.S. New MD/HD Registrations (GVW 4-8)

59.7%

7.8%

25%

16%

Source: Polk

slide37

Trend #2:

The Vehicle Population Continues to Age

average age of light vehicles in operation
Average Age of Light Vehicles in Operation

All Light Vehicles = 11.3 Years

+14%+17%

Source: Polk Annual Snapshots

slide39

Rising Length of Ownership

New & used combined > 24 month increase in ownership since 2001

71.6

58.2

51.7

47.5

34.2

28.3

2001

2012

Source: Polk

u s vio aging
U.S. VIO Aging

‘08 to ‘12: +19M units

‘08 to ‘12:-18M units

Source: Polk

slide42

Trend #3:

CUVs & Mid-Size Cars are Driving the Recovery in New Vehicle Sales

large vehicles on the decline
Large Vehicles on the Decline

New Registration Data

Large pickup volume is flat whereas industry increased 1.1 million units 2008-2012

Large pick-ups dropped from 13% to just over 10% in 5 years

Large Vehicle Segment

Source: Polk

car segment analysis
Car Segment Analysis

Corolla

Malibu

Taurus

Source: Polk

light truck segment analysis
Light Truck Segment Analysis

Equinox

Caravan

F-Series

Explorer

Source: Polk

suv analysis
SUV Analysis

New Vehicle Registrations

Cherokee

Escalade

Expedition

Wrangler

Lexus GX

Source: Polk

cuv analysis
CUV Analysis

New Vehicle Registrations

Traverse

BMW X3

ML Class

Crosstour

Source: Polk

segments
Segments

Polk divides the U.S. new vehicle industry into 32 segments, but just 4 account for more than half of all new registrations

4 cylinder engines on the rise
4 Cylinder Engines on the Rise

+20%

As portion of new registrations

Source: Polk

slide51

U.S. New Light Vehicle Engine Trend

New Vehicle Registrations

Source: Polk

slide52

Changing Domestic v Import Vehicle Mix in U.S. VIO

3.1%

13.3%

10.2%

2.8%

23.0%

25.8%

39.3%

38.5%

-0.8%

27.6%

22.4%

-5.1%

Source: Polk

cars continued import strength
Cars - Continued Import Strength

12.6%

-18.4%

Source: Polk

trucks imports gaining share
Trucks - Imports Gaining Share

-1.8%

31.1%

Source: Polk

vio change past 10 years
VIO Change Past 10 Years

257%

51.3%

48.9%

VIO

-8.5%

8.5%

Source: Polk

slide56

Trend #4:

Globalization of Platforms & Model Families is Accelerating

global vehicle production next 10 years
Global Vehicle Production – Next 10 Years

Global Production to grow

44%

2023

114 Million Units

2012

Light, Medium & Heavy Vehicles

Source: Polk

slide58

Growth in Global Production by 2023

7%

NAFTA Region

9%

Western Europe

62%

Asia Pacific

Light, Medium & Heavy Vehicles

Source: Polk

slide59

More Models on Fewer Platforms

Increase units built from a single platform

slide60

Platforms Expanding

2023

10 largest platforms will comprise24% of production this year.

By 2023, it will be 28%.

2012

slide61

Highest Volume Global Platforms

Nissan B:2.5 million units

3d-car-shows.com

VW MQB:10 million units

(by 2020)

themotorreport.com.au

slide62

Globalization of platforms and model families

is accelerating

  • Reduce capital expenditures by:
  • Reducing tooling costs
  • Improving inventory efficiency
slide63

Trend #5:

Technologically Advanced Vehicles Offer Increasing Aftermarket Opportunity

cafe standards continue to rise
CAFE Standards Continue to Rise

CAFE Standards

54.5 MPG

2025

CAFÉ requirements dominate product and powertrain planning in the new vehicle industry today

2016

35 MPG

strategies for meeting caf standards
Strategies for Meeting CAFÉ Standards
  • The vehicle itself
  • The traditional internal combustion engine (ICE)
  • Alternative powertrains
1 the vehicle
1.) The Vehicle
  • Utilizing lighter materials (aluminum, carbon fiber)
  • Reducing un-necessary content
  • Improving aerodynamics (closing grill, improving undercarriage)
  • Adjusting size to meet standards (larger vehicles’ requirements are lower)
2 the traditional internal combustion engine ice
2.) The Traditional Internal Combustion Engine (ICE)
  • Gasoline direct-injection
  • Turbo chargers
  • Stop/start capability
  • Cylinder de-activation
  • More efficient transmissions
    • more speeds and CVTs
  • Other technologies (4x4 disconnect)
3 alternative powertrains
3.) Alternative Powertrains
  • Gas/electric hybrids (Prius, Volt)
  • Plug-in hybrids (Prius)
  • Electric vehicles (Tesla Model S, Leaf)
  • Diesel
  • Natural gas
fuel type new light vehicle registrations
Fuel Type – New Light Vehicle Registrations

Hybrids and diesels each account for 2-3% of all new vehicle registrations, while EVs remain well below 1%

hybrid penetration at dma level
Hybrid Penetration at DMA Level

The ten DMAs with the highest hybrid penetration are all on the West Coast

electric vehicles
Electric Vehicles

Electric vehicles remain a small part of the overall U.S. car market

slide74

Routine Maintenance = Repair Opportunities

Oil Changes

Most common service

opportunity.

driver dealer connectivity
Driver – Dealer Connectivity

Telematics

OEM Goal:

Direct, 2-way communication with the vehicle owner

driver dealer connectivity1
Driver – Dealer Connectivity

Right Message.

Right Customer.

Right Time.

driver shop connectivity
Driver – Shop Connectivity

Right Message.

Right Customer.

Right Time.

5 in 5
“5 in 5”
  • OEMs become more aggressive as light vehicle sales continue to rise
  • The vehicle population continues to age
  • CUVs and Mid-size Cars are driving the recovery in new vehicles sales
  • Globalization of platforms and model families is accelerating
  • Technologically advanced vehicles offer increasing aftermarket opportunity
slide80

Thank you!J. Scott HustonGlobal Aftermarket / Commerical(949) 230-3377scott_huston@polk.comFor more information please visit www.polk.com.

Any use of this material including reproduction, modification, distribution or republication without the prior written consentof R. L. Polk & Co. is strictly prohibited.