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SMMTs Production Outlook and Economic Forecast 28 January 2015 Ian - - PowerPoint PPT Presentation

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SMMTs Production Outlook and Economic Forecast 28 January 2015 Ian Henry, Director, AutoAnalysis Aleksandra Taskovic, Business Economist, SMMT Robert Morbin, Member Relations Manager, SMMT SMMT, the S symbol and the Driving the

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SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED

SMMT, the ‘S’ symbol and the ‘Driving the motor industry’ brandline are trademarks of SMMT Ltd

SMMT’s Production Outlook and Economic Forecast

28 January 2015 Ian Henry, Director, AutoAnalysis Aleksandra Taskovic, Business Economist, SMMT Robert Morbin, Member Relations Manager, SMMT

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SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED

SMMT, the ‘S’ symbol and the ‘Driving the motor industry’ brandline are trademarks of SMMT Ltd

UK Economy Update Aleksandra Taskovic, Business Economist, SMMT

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UK Economy – reflecting on 2014

  • Economy in 2014 much better positioned on recovery trend
  • But, problems in Eurozone and expected austerity

measures

  • Autumn Statement – boost to UK investments, exports and

skills

  • Car buyer confidence was strong throughout 2014
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UK Economy – 2015 forecasts

  • Recent strong growth momentum – low inflation, interest

rates and oil prices – positive impact on household purchasing power and consumer confidence

  • Immediate growth prospects now boosted by oil, but uneven

distribution of benefits

  • Strong business confidence – continuation in 2015 depends
  • n political factors
  • Unemployment rate remains low and is forecast to continue

to decline

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Forecasting pack - prospects for the UK in 2015 (1)

house prices - %

percentage change year before

Source: HM Treasury

HM Treasury Monthly Poll of independent forecasts for 2015 - averages of key variables comparison of survey conducted at July 2014 and January 2015

Real GDP Consumer Manufacturing House Prices (Q4)

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Forecasting pack - prospects for the UK in 2015 (2)

Oil $pbl

percent change year before / base rate

Source: HM Treasury

HM Treasury Monthly Poll of independent forecasts for 2015 - averages of key variables comparison of survey conducted at July 2014 and January 2015

CPI (Q4) RPI (Q4) base repo rate (Q4) OIL $pbl

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UK Economy – challenges ahead

  • Weaker demand in key export markets
  • UK’s persistent current account deficit
  • Low, yet unstable oil and commodity prices
  • Persistent volatility in global foreign exchange markets
  • Expected austerity policies
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UK vehicle markets – all recovered; stable for now

  • New car, van truck and bus markets better positioned too
  • Recent growth trends vary, yet demand levels are all up
  • Current growth potential keyed-in to domestic confidence
  • Probably resilient, albeit differences of emphasis by

vehicle-buyer-market types and marketing needs

  • Yet significant and serial restructuring tensions in the mix:

1) challenges of cyclical peaks, leasing and funding streams 2) connected structural - technology - environmental agendas 3) OEM’s competition, collaboration and competitiveness

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UK new car TIV trends to 2015

1900 2000 2100 2200 2300 2400 2500 2600 1900 2000 2100 2200 2300 2400 2500 2600 Thousands rolling 4 quarter yearly totals to quarters shown; actual data to Q4 2014

High - Projection SMMT - Actual SMMT - Forecast Low - Projection

SMMT Forecast (Oct 2014)

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UK light commercials TIV trends to 2015

230 250 270 290 310 330 350 370 230 250 270 290 310 330 350 370 Thousands 4 quarter rolling years to quarters shown; actual data to Q4 2014

High - Projection SMMT - Actual SMMT - Forecast Low - Projection

SMMT Forecast ( at Oct 2014)

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In the mix (1) – cars and brands 2007 - 2014

  • 80,000
  • 60,000
  • 40,000
  • 20,000

20,000 40,000 60,000 80,000 Nissan Audi Hyundai Kia Mercedes-Benz Skoda BMW Dacia Seat Volkswagen Volvo Land Rover Fiat Mini Daihatsu Chrysler Jeep Mazda Citroen Chevrolet Ford Saab Toyota Peugeot Honda Renault Vauxhall volume changes of 5,000 and more units and minus 5,000 and more units on 2007 annual volumes

UK car registrations by marque: change in volumes 2007 to 2014

these 25 marques = 94% of all 2014 registrations 2 exits = Saab and to be Chevrolet 2014 - 2007

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In the mix (2) – cars and segments 1999 - 2014

27.02% 32.70% 37.20% 35.79% 4.50% 6.99% 6.64% 11.72% 2.35% 4.91% 4.75% 6.76% 32.02% 28.40% 26.61% 26.07% 23.35% 17.90% 14.21% 9.21% 8.95% 7.68% 7.17% 6.92% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1999 2004 2009 2014 segment's percentage share of total new car registrations

UK new cars - shifts in segments 1999 to 2014

Exc/Lux/SpeSport Upper Medium Lower Medium Multi Purpose Dual Purpose Super Mini Mini

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In the mix (3) – cars and alternatives 2007 - 2014

10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000 calendar years

UK Alternatively fuelled cars - number of new registrations

Petrol/electric Diesel/electric Pure Electric Petrol/alcohol Petrol/gas Other

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Alternatives in the CV mix – how green is my CV

100 200 300 400 500 600 700 200000 225000 250000 275000 300000 325000 350000 375000 2010 2011 2012 2013 2014 Calendar years

UK CV registrations - LCVs and Trucks: conventional and alternative-fuelled

Diesel and petrol all AFV types - pure electric/hybrids/CNG

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Key agenda items for vehicle markets 2015 and beyond

  • Technology and innovation in supply
  • OEM vehicle marketing and lease-funding strategies
  • Roads, public transport policies and role of vehicles
  • Cities , traffic congestion and air quality
  • Population growth, urban (re)development and vehicle use
  • Government Grant Aid for suppliers & vehicle owner-users
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In sum: sound prospects for firm UK domestic demand

  • Constraints on demand have eased; uncertainties raised again,

but monetary policy ultra supportive and for longer

  • Confidence and credit impulse remains firm; base rate rises

parked; jobs growth to continue; real wage growth up

  • Twin deficits and other restructuring challenges remain
  • UK vehicle markets recovered, stable volumes, but vulnerable to

confidence effects and markets restructuring

  • Changing patterns of car use and leasing to continue
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SOCIETY OF MOTOR MANUFACTURERS AND TRADERS LIMITED

SMMT, the ‘S’ symbol and the ‘Driving the motor industry’ brandline are trademarks of SMMT Ltd

European Car and Light Commercial Vehicle Production Outlook Ian Henry, AutoAnalysis

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Europe in 2014

  • Recovery continued through 2014, pent-up demand returned, boosted by

several new model launches

  • More than 12 months’ year-on-year rises in EU registrations. 2014 the

first year since 2007 to show annual rise

  • Medium term production outlook in Europe is broadly positive
  • 2014 European production est., ex. Russia, c18.24m vs. 17.47m in 2013
  • Production growth in: Czech Rep., Germany, Hungary, Spain, Slovenia

and Turkey

  • PSA cut jobs in France; PSA & Renault shifted small car production

eastwards, although Renault will maintain domestic production with increased van production, including for other brands.

  • Ford also cutting jobs in Romania, but opened a new plant in Turkey;

switched production from Belgium to Spain

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The UK in 2014

  • Positive sales story continued in 2014 - strong retail demand and

consumer confidence, despite economic uncertainty; UK market up 9.3% to nearly 2.5m, a 10-year high

  • 2014 production c1.58m cars and LCVs, almost unchanged on 2013
  • JLR up >30,000 to nearly 464,000. GM and Mini up slightly, but Japanese VMs fell
  • Model cycles effects responsible for downturn at Nissan and slow ramp-up at Mini
  • Positive news at JLR – announcements re Jaguar XE and Land Rover

Discovery Sport production. More good news in 2015 with F-PACE

  • New models at JLR, Vauxhall and Nissan, plus full year production of

new Mini and Qashqai should push UK output over 1.6m in 2015

  • 2014 also saw very positive news re supply chain, with multiple

announcements of new contracts and investments

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Production Outlook: Beyond 2014

  • Incl. Russia, production Europe should reach c21.4m in 2016 and

c23.4m by 2019, slightly below previous view

  • Germany will remain powerhouse of European production, with

production approaching 6mn upa. Ford Germany has retained Fiesta production (had been threat some would go to Romania). More Audi Q and Mercedes models to be made in Germany …

  • UK car production now exceeds France (France produces many

more vans than UK) – this will continue

  • The role of VMs’ factories in Spain – and recent significant

investment – means Spain will remain the second-ranked European producing country in the medium term.

  • Spanish production to exceed 2.4mn upa consistently from 2016
  • Further production growth in Turkey, Hungary, Czech and Slovakia
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Production Outlook: Europe excl. Russia

5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Others Geely Volvo Volkswagen Group Toyota Tata JLR Suzuki Renault-Nissan-Dacia PSA Mitsubishi Hyundai-Kia Honda GM Ford Fiat Daimler BMW

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Production Outlook: Europe excl. Russia

6.8% 7.5% 7.9% 8.1% 8.0% 8.3% 8.4% 8.2% 8.4% 8.5% 7.4% 7.2% 8.0% 8.6% 8.4% 8.6% 8.1% 7.5% 7.2% 7.5% 9.4% 8.4% 7.5% 7.2% 6.7% 7.0% 7.8% 8.4% 8.6% 8.9% 9.4% 7.9% 7.2% 7.4% 7.2% 7.1% 6.8% 6.6% 6.5% 6.5% 7.2% 6.5% 5.4% 5.0% 4.9% 4.7% 5.1% 5.4% 5.2% 5.1% 2.8% 3.2% 4.0% 3.9% 4.5% 4.6% 4.3% 4.1% 4.3% 4.5% 12.9% 12.3% 10.9% 10.7% 10.1% 9.4% 9.0% 9.3% 9.6% 9.4% 13.2% 13.2% 13.4% 13.5% 13.6% 14.6% 15.0% 15.0% 14.3% 13.9% 1.4% 1.6% 2.1% 2.5% 2.5% 2.6% 2.7% 2.9% 3.4% 3.7% 2.6% 2.5% 2.7% 3.1% 3.2% 3.1% 3.1% 3.2% 3.1% 3.0% 23.6% 25.5% 26.2% 25.9% 26.8% 25.9% 25.5% 24.8% 24.7% 24.4% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Others Geely Volvo Volkswagen Group Toyota Tata JLR Suzuki Renault-Nissan-Dacia PSA Mitsubishi Hyundai-Kia Honda GM Ford Fiat Daimler BMW

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Primacy of German production is clear

1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Units Years

Production Volumes 2007-2019: Major Countries, excl. Russia

Czech Rep France Germany Italy Spain Turkey UK

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Relative position of major producing countries,

  • excl. Germany

500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Units Years

Production Outlook Major Countries, excl. Germany and Russia

Czech Rep France Italy Spain Turkey UK

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UK and France battle for 3rd place behind Germany and Spain

  • Germany’s leadership position clear, consistently close to 6m upa.
  • Spain is and will remain 2nd largest producing country.
  • Spanish production growth reflects breadth of VM investment and long-term

commitment by most major VMs:

  • Ford, GM, PSA, Renault-Nissan and VW have all increased investment in

Spain in last 2 years.

  • Ambitious national objective to reach 3mn vehicles pa, inc CVs
  • UK and France compete for 3rd place in production rankings:
  • UK car production will exceed France in long term
  • French car production is falling while LCV production will rise strongly in

medium term including contract manufacturing for non-French brands.

  • Key factors: new model timings from JLR & Nissan, plus degree to which Renault

and PSA plants meet production targets set in labour agreements.

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Production continues to head east …

  • Renault has switched most Clio production to Turkey, PSA most of 208

to Slovakia, with C3 to follow

  • Mercedes and Audi increasing production in Hungary
  • Fiat will make Punto replacement in Poland
  • Toyota added new SUV/crossover to Turkey rather than UK
  • Ford opened new small van plant in Turkey
  • Rise of Turkey to c1.4m+ upa reflects expansion at Tofas and

concentration of Ford van production in Turkey.

  • Czech Republic production remains >1.4m
  • Slovakia will exceed 1m
  • But Romanian production appears to have peaked – Ford B-Max

production falling and most Dacia Sandero production switched to Morocco

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Economic and political uncertainty means things may well turn out differently …

15,000,000 16,000,000 17,000,000 18,000,000 19,000,000 20,000,000 21,000,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Units Years

European Production Excl. Russia - Base Outlook and 4 less attractive scenarios

Base w/o Russia Scen 3 w/o Russia Scen 4 w/o Russia Scen 5 w/o Russia Scen 6 w/o Russia

  • It does not take much for production to dip significantly
  • A 10% fall in 2015 and a further 5% in 2016 (scenario 6), with a slow recovery would

place severe strain on the industry's current structure

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Will the UK hit the 2m units a year?

  • Potential remains for this to be achieved …
  • But slowdown at Honda and allocation of third model to

Toyota Turkey rather than UK are cause for concern

  • UK needs Nissan to maintain current production and …
  • Mini to achieve full utilisation at Oxford
  • Astra to be a success
  • And JLR to continuing growing, increasing UK production ahead of

international expansion

  • If this happens, and economic collapse is averted, then

the 2m target remains achievable and realistic – with substantial opportunities for suppliers …

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Implications and opportunities for UK-based suppliers

  • Rising UK production should mean significant potential for UK suppliers to

win new business.

  • Recent BIS report highlights a further UK£2bn worth of annual sourcing
  • pportunities
  • Discovery Sport SOP in October accompanied by award of £3.5bn of

business to 55 UK suppliers over life of contract

  • Similar awards expected to be announced 2015 for Jaguar XE and F-PACE
  • Expansion of engine production by Ford offers major potential for suppliers
  • Significant recent investment by major tier 1s on back of this and export

business: Calsonic, Gestamp, Lear, TRW, Tenneco, Getrag, Borg Warner and Cosworth have all recently announced UK investments or expansion

  • New supplier park at Sunderland
  • Automotive Investment Organisation secured c80 automotive projects in

first year of operation, creating or securing >5,000 jobs – many more to follow.

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