Society of Automotive Analysts Strategic Planning Summit Dave Andrea Center for Automotive Research dandrea@cargroup.org September 13, 2016
The Center for Automotive Research (CAR) Automotive industry contract research and service organization (non-profit ) with more than 30 years experience forecasting industry trends, advising on public policy, and sponsoring multi-stakeholder communication forums. • CAR conducts leading edge Research that impacts the future of the global automotive industry. • CAR hosts Events and Conferences that engage industry leaders in the discussion of critical topics. • CAR’s Affiliates — automotive manufacturers and suppliers benefit from advance access to research results, exclusive networking, and participation in working groups.
CAR Research Themes (current iteration) • Mobility Networks - investigating passenger and cargo models for access, purchase, and operation • Public Policy Initiatives – exploring the regulation, legislation, and economic incentives to deliver societal goals • Industry Impact – understanding financial and human capital, global trade and investment and economic development • Human Capital Needs – assessing the industry’s stock and future need of human talent and skills • Product and Manufacturing Technology Requirements – evaluating future product designs, materials, engineering, procurement, manufacturing, and sales/service ………………………………. • Industry 4.0 Futuring – mapping tomorrow’s industry, product, and manufacturing and business processes transformation
Industry Meeting Current CAFE Mandate CAGR; It is Keeping up with the Future is the Question PC Standard PC Performance LT Standard LT Performance 60.0 55.3 55.0 50.0 Miles per Gallon (mpg) 45.0 39.3 40.0 36.5 35.0 33.3 30.0 27.5 26.4 25.0 26.0 19.9 20.0 20.7 18.2 18.0 17.5 15.0 Model Year Source: NHTSA 2009, NHTSA 2011, and NHTSA 2014
Midterm Evaluation (MTE) Three Step Process Final Determination due by April 1, 2018 (no joke)
Gasoline Prices (Real) January ‘03 – June ‘16 $5.00 Dollars per Gallon $4.43 $4.12 $4.04 $3.61 $3.79 $3.68 $3.47 $3.49 $4.00 $3.11 $2.91 $2.92 $2.81 $3.00 $2.50 $2.19 $2.37 $2.00 $1.00 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Source: EIA
Positive Economic Factors/CAFE Headwinds For every $1,000 increase/decrease in PDI, small car/electric vehicle share will decrease/increase by .50 percent. Increase/decrease in gasoline prices by $1.00 per gallon results in an increase/decrease in the small car/EV market share 1.1 percent. For every 100 basis point increase/decrease in unemployment rate, small car/electric vehicle share will decrease/increase by .6 percent.
Source: BEA 100% 20% 40% 60% 80% 0% U.S. Light Vehicle Sales By Cars and Trucks 1/1/1976 10/1/1977 Cars Share of Sales 7/1/1979 4/1/1981 1/1/1983 10/1/1984 7/1/1986 1976 – July 2016 4/1/1988 1/1/1990 10/1/1991 7/1/1993 4/1/1995 Light Trucks Share of Sales 1/1/1997 10/1/1998 7/1/2000 4/1/2002 1/1/2004 10/1/2005 7/1/2007 4/1/2009 1/1/2011 10/1/2012 7/1/2014 4/1/2016
Segment Breakdown - U.S. LV Sales Percent Change July YTD 2016 vs July YTD 2015 Total 1.1% Small CUV 38.5% Van 22.1% Pickup 6.1% SUV 4.8% Middle CUV 4.0% Large CUV -2.5% Large Car -3.4% Small Car -6.7% Luxury Car -9.4% Middle Car -9.7% -20% -10% 0% 10% 20% 30% 40% 50% Source: Ward’s Automotive Reports
2025 Pathways Diverge Between Agencies SOLUTIONS ARE APPARENT TO CONSUMERS Agencies’ Technical Assessment Report Assumptions, 2025 GHG CAFE Turbocharged and downsized gasoline engines 33% 54% Higher compression ratio, naturally aspirated gasoline engines 44% <1% 8-speed and other advanced transmissions 90% 70% Mass reduction 7% 6% Stop-start 20% 38% Mild hybrid 18% 14% Full hybrid <3% 14% Plug-in hybrid electric vehicles <2% <1% Electric vehicle <3% <2% Environmental Protection Agency and National Highway Traffic Safety Administration Technical Assessment Report Table ES-3
And with Industry – Particularly with Electrification Regulators say few electrics needed… 2025 Light-duty Vehicle Fleet Electrification Industry greatly - Strong hybrids 3% disagrees, - EV/PHEVs 4% – expecting 5 to 10 times more electrification. Advanced Gasoline Vehicle Technologies
U.S. Electrified Light Vehicle Sales and Take Rate 1999 – 2016 June YTD Electrified LV Sales % of LV Sales 600 4.00 U.S. Electrified Sales 500 Percent of LV Sales (%) 2.6% 3.00 Real Gas Price ($) 400 (000’s) 300 2.00 200 1.00 100 0 0.00 Note: Electrified vehicles consist of BEV, HEV and PHEV Source: Ward’s Automotive Reports, HybridCars.com and CAR Research; EIA
Gasoline Saved for Incremental Fuel Economy Improvement And the Customer Demands a Three-Year Payback (area under curve represents total fuel saved for that increment per year at 12,000 miles per year) 140 Annual gallons saved per 600 Gallons 200 Gallons 100 Gallons 60 Gallons 40 Gallons 28.5 Gallons 120 MPG improvement 100 80 60 40 20 0 10 20 30 40 50 60 70 Miles Per Gallon Source: CAR Research
Technology Pathway and Relative Cost Carbon Fiber/Al. Body Aluminum/Mag. Closures Mag. I.P. beam & seats The steps get bigger Aluminum Body Cost ($/lb.) Aluminum Closures Magnesium I.P. beam & seats $6X AHSS/UHSS BIW Aluminum Closures MY 2015 Representative Vehicle $3X AHSS BIW HSS/Al Closures $X HSS BIW Mild Steel Closures Mild Steel BIW 0% 5% 10% 15% Mild Steel Closures NET Mass Reduction Percentage Net Mass Reduction = (Mass Reduction) – (Weight add-back)
Which truck is more expensive to lightweight? Model Year 2011 Model Year 2015 Model Year 2015 Curb Weight 4,800 lbs 1 Curb Weight 4,521 lbs 2 Curb Weight 4,050 lbs 3 Platform Launch 1998 Platform Launch 2014 Platform Launch 2014 Body Architecture Mild Steel Body Architecture High Strength Steel Body Architecture Aluminum The lightweighting cost and vehicle performance varies significantly for each of these vehicles 1 - 4.3L V6 Regular Cab Short Box 2 - 4.3L V6 Regular Cab Short Box 3 - 3.5L V6 Regular Cab Short Box
Weight Add-Back Agency Recognition Cars – 4.71% Trucks – 4.88% Safety Performance* Safety Performance 0% AVERAGE 2.45% 2.26% 1.85% 3.03% % cost reduction per year Net Mass Reduction = (Mass Reduction) – (Weight add-back) *Performance – NVH, torsional rigidity, handling
Learning Curves Agency Recognition Time Period AHSS/UHSS Aluminum Magnesium Composites 3% / year 2% / year 2012-2021 0.80% 1.30% 1.13% 1.80% AVERAGE % cost reduction/year 2022-2027 0.56% 1.26% 0.88% 2.36% Direct Manufacturing Cost Reduction between 2012-2027 Agencies OEMs 10-17% Metals 32% 26% Composites Industry does NOT agree with the learning factors applied uniformly for all materials in the agency analysis
CAR Calculated Mandate Rate = 1.86 • Retail Price Equivalent = 1.5 • Corrected for dealership gross margin rate • Corrected for vehicle sales tax • Corrected for incremental consumer financing • Corrected for incremental insurance costs
There is no average… Manufacturers are pursuing many technology pathways. No two manufacturers have the same product and technology portfolio, nor fuel economy strategy. Therefore, applying an “industry average” for technology cost or implementation may be misleading. Some manufacturers will bear a much greater burden than other manufacturers.
20 Impact on U.S. Automotive Industry, 2016-2025 Long Run Demand Impact Baseline -1.30% -4.95% -8.60% -0.76% -4.41% -8.06% +0.82% -2.83% -6.48% GAS Price/Cost of $2.44/ $2.44/ $2.44/ $3.00/ $3.00/ $3.00/ $4.64/ $4.64/ $4.64/ - $2,000 $4,000 $6,000 $2,000 $4,000 $6,000 $2,000 $4,000 $6,000 FE Total MV Expenditure $792 $782 $753 $724 $786 $757 $728 798 770 741 ($Billion) Impact of 2025 CAFE - -10.0 -39.0 -68.0 -6.0 -34.9 -63.9 +6.5 -22.4 -51.4 ($Billion) Vehicle Price $42,491 $43,397 $45,940 $48,483 $43,022 $45,565 $48,108 $41,922 $44,465 $47,008 (2025$) Light Vehicle Sales (Million 18.64 18.01 16.39 14.93 18.27 16.61 15.14 19.05 17.31 15.76 Units) Light Vehicle Production 12.93 12.59 11.68 10.86 12.73 11.80 10.98 13.17 12.19 11.32 (Million Units)* Automotive 862,000 839,100 778,400 724,100 848,700 787,000 731,700 877,700 812,800 754,900 Employment *Include vehicles for export Sources: CAR Research 2015
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