Orange County Auto Outlook

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1 Comprehensive Information on the Orange County Automotive Market Quarterly Report Fourth Quarter 2006 (Released: February 2007) Orange County New Retail Light Vehicle Registrations Predicted to Level Off in 2007 The Orange County new vehicle market ended 2006 with less than satisfactory results. County new retail registrations of cars and light trucks decreased 4.3% in the Fourth Quarter of last year, and that decline was compared to weak results in the Fourth Quarter of 05 For the entire year, the market was off 6.1% from is now history and all eyes are focused on what lies ahead in Unfortunately, we think the road looks a little bumpy. Definitely not impassible, but 2007 could be a bit of a rough ride for Orange County new vehicle sales. Our expectation of a softer market this year can be found by assessing the key reasons that lead consumers to purchase new vehicles. Following is a list of these key reasons, and how they are likely to impact new vehicle sales during Reason #1 for purchasing a new vehicle: Current vehicle is old, unreliable and needs to be replaced. Following strong sales between 2000 and 2005, many Orange County residents are behind the wheel of a relatively new car or truck. Improved quality and reliability make it a viable proposition for consumers to delay vehicle purchases. Replacement demand is not likely to be a pillar of strength for the market during Reason #2 for purchasing a new vehicle: Economic conditions are good and employment prospects are encouraging. Consumers are more likely to commit to a new vehicle purchase when economic growth is strong, unemployment levels are low, and the outlook is bright. The resulting upbeat attitudes give a boost to new vehicle sales. Unfortunately, the outlook for economic growth and employment is not great. Few economists expect a recession this year, but most are looking for slower growth than in This should exert a slight drag on new vehicle sales. Reason #3 for purchasing a new vehicle: It represents a big improvement over current vehicle. Consumers frequently spend money on what they want, not necessarily on just what they need. We think this has given a boost to new vehicle sales over the past several years, and it should continue to be a positive force in More attractive styling, higher performance, better fuel economy, more innovative interior designs, and advanced infotainment features are a few reasons why consumers may want to purchase a new vehicle, even if the current vehicle meets their basic needs. Reason #4 for purchasing a new vehicle: It s affordable. Affordability, the cumulative impact of vehicle pricing, personal income, and interest rates, is clearly a primary factor when a new vehicle purchase is being considered. On balance, affordability is expected to turn slightly weaker this year, but remain strong based on historical standards. Forecast Summary: New retail light vehicle registrations in Orange County are predicted to decline 2% this year. Some good news: the decline is well below the 6.1% drop in 2006, and the market has a good chance of improving in The Orange County New Retail Light Vehicle Market At a Glance Top Ten Scoreboard Quarterly Forecast (% change 2007 vs. 2006) 3rd QUARTER, th QUARTER, 2006 Change in Rank Make Share Rank Make Share mkt. Share 1 Toyota 24.4% 1 Toyota 25.1% 0.7% 2 Honda 12.8% 2 Honda 10.5% -2.3% 3 Ford 8.2% 3 Ford 7.1% -1.1% 4 Chevrolet 7.5% 4 Chevrolet 6.6% -0.9% 5 Lexus 5.5% 5 Lexus 6.3% 0.8% 6 Mercedes 5.3% 6 Mercedes 6.2% 0.9% 7 Nissan 5.1% 7 Nissan 5.1% 0.0% 8 BMW 3.8% 8 BMW 4.9% 1.1% 9 Dodge 2.5% 9 Dodge 2.5% 0.0% 10 GMC 2.2% 10 Acura 2.3% 0.2% The three summaries provide an overview of the Orange County new retail light vehicle market. The table above shows the Top Ten sellers in the county during the Third and Fourth Quarters of last year, and the change in market share for each brand. (Note: Toyota registrations include Scion.) Quarterly Forecast presents the change in registrations during the four quarters of this year versus The Annual Review table on the right shows our forecast for 2007, and actual figures for 2005 and Forecasts for all brands can be found on page 8. Source for historical data: AutoCount, an Experian Company. % change in registrations vs % 5.0% 0.0% -5.0% -10.0% -1.7% -4.2% -5.3% 4.1% 1st Q 2nd Q 3rd Q 4th Q Annual Review and Forecast Forecast % ch '06 to '07 TOTAL 194, , , % Car 99,847 98,886 97, % Light Truck 94,651 83,764 81, % Big Three 60,421 49,358 45, % Japanese 98,750 98,365 98, % European 31,401 30,927 30, % Korean 3,926 4,000 3, %

2 Page 2 Table of Contents Covering Fourth Quarter, 2006 Forecast Summary and Analysis... 1 Market Tracker... 2 Segment Watch... 3 Brand Outlooks... 4 Brand Outlooks (continued)... 5 Brand Scoreboard... 6 Data Source Information Exclusive source for new vehicle registration data presented in Orange County Auto Outlook is AutoCount, an Experian Company. AutoCount specializes in providing detailed new and used vehicle sales and registration statistics. Data is available on a timely basis and is conveniently available directly over the Internet. For more information on Auto Count, call or visit AutoCount s web site: Comparison of County and Other Markets... 7 Brand Forecast... 8 Market Tracker Domestic Brands Lose Four Market Share Points During 2006 It s no secret that Domestic Brands (the Traditional Big Three) are behind the eight ball in the hotly contested new vehicle market. The basic strategy is one of retrenchment and regrouping. Market share losses for the Big Three are inevitable as the companies cut production and scale back incentive offers. The hope is that they will emerge as leaner, more focused, more profitable, and more competitive. In the meantime, the picture will not be pretty, as illustrated by the graph below. Collectively, the Big Three lost four market share points in Orange County last year. Japanese brands were the primary benefactors, with their market share increasing 2.9 points. Source: AutoCount, an Experian Company. Change in New Retail Light Vehicle Market Share: 2006 vs Big Three Japanese European Korean Big 3 GM Ford Chrysler Japan. Toyota Honda Nissan Other Euro. VW BMW MB Ford Other Korean Brands included above: Big 3: GM (Buick, Cadillac, Chevrolet, GMC, Hummer, Oldsmobile, Pontiac, and Saturn), Ford (Ford, Lincoln, and Mercury), Chrysler (Chrysler, Dodge, and Jeep). Japanese: Toyota (Toyota, Lexus, and Scion), Honda (Honda and Acura), Nissan (Nissan and Infiniti), Other (Isuzu, Mazda, Mitsubishi, Subaru, and Suzuki). European: VW (Audi, Bentley, and Volkswagen), BMW (BMW, Rolls Royce, and Mini), MB (Mercedes Benz), Ford (Aston Martin, Jaguar, Land Rover, and Volvo), Other (Ferrari, Lotus, Maserati, and Saab). Korean: Hyundai and Kia.

3 Covering Fourth Quarter, 2006 Page 3 Segment Watch Entry and Sub Compact Car Segments Record Biggest Gains During 2006 Not surprisingly, as fuel prices moved higher during most of 2006, market share levels for many light truck segments eroded. As shown on the graph to the right, the Full Size Pickup segment had the largest decline in market share in Orange County from 2005 to 2006, down 1.7 points. Many area consumers who were reluctant to purchase a pickup or SUV, purchased a car instead. The Entry Car segment (which includes Toyota Yaris, Honda Fit, etc.) had a one point increase in market share last year. What s the outlook for 2007? Assuming gas prices do not head sharply higher, we believe that light truck and SUV segments will hold their own this year. This is especially true for the Full Size Pickup segment, where several new products (i.e., Silverado, Sierra, and Tundra) should give sales a boost. Entry Car Sub Compact Car Near Luxury Car Compact SUV Standard Mid Size Car Full Size Luxury SUV Sports Car Sport Compact Car Mid Size Luxury SUV Large Mid Size Car Full Size Van Full Size SUV Compact Pickup Mid Size Crossover SUV Luxury Car Mini Van Mid Size SUV Full Size Pickup Change in Segment Market Share-2006 vs Top Selling Models in Each Segment - Orange County New Retail Registrations, 2006 Annual Totals and Market Share of Segment Cars Entry Sub Compact Sporty Compact Standard Mid Size Model Regs. Share Model Regs. Share Model Regs. Share Model Regs. Share Toyota Yaris Toyota Corolla Scion tc Toyota Camry Scion xa Honda Civic Ford Mustang Honda Accord Honda Fit Toyota Prius Acura RSX Nissan Altima Hyundai Accent Scion xb Mitsubishi Eclipse Hyundai Sonata Chevrolet Aveo Volkswagen Jetta Hyundai Tiburon Volkswagen Passat Large Mid Size Near Luxury Luxury Sports Car Model Regs. Share Model Regs. Share Model Regs. Share Model Regs. Share Chrysler BMW 3-Series Mercedes E-Class Chevrolet Corvette Toyota Avalon Lexus IS BMW 5-Series Nissan 350 ZX Nissan Maxima Lexus ES Mercedes S-Class Porsche Chevrolet Impala Mercedes C-Class Lexus GS BMW Z Hyundai XG350/Azer Acura TL BMW 7-Series Porsche Cayman Light Trucks Compact Pickup Full Size Pick Up Mini Van Full Size Van Model Regs. Share Model Regs. Share Model Regs. Share Model Regs. Share Toyota Tacoma Ford F-Series Toyota Sienna Chevrolet Express Nissan Frontier Toyota Tundra Honda Odyssey Ford E-Series Ford Ranger Chevrolet Silverado Dodge Caravan GMC Savana Honda Ridgeline Dodge Ram Chrysler T & C Chevrolet Colorado Nissan Titan Nissan Quest Compact SUV Mid Size SUV/Crossover SUV Full Size SUV Mid Size & Full Size Luxury SUV Model Regs. Share Model Regs. Share Model Regs. Share Model Regs. Share Toyota RAV Honda Pilot Chevrolet Tahoe Lexus RX Honda CRV Toyota 4Runner GMC Yukon Land Rover Range R Honda Element Toyota Highlander Toyota Land Cruiser Mercedes ML-Class Ford Escape Ford Explorer Ford Expedition Cadillac Escalade Nissan Xterra Nissan Murano Chevrolet Suburban BMW X

4 Page 4 Brand Outlooks Acura and Jeep Predicted to Post Market Share Gains During 2007 The brand forecast projections for 2007, presented on page 8, are based on Auto Outlook s detailed analysis of brand competitiveness in the Orange County market. Below is our appraisal of each brand s strengths and weaknesses for the coming year, and the prospects for gaining (or losing) market share. Acura Strengths: Full year of RDX sales and redesigned MDX. Weaknesses: TL and TSX still strong sellers, but aging. RL faces tough competition in luxury sedan segment. Audi Strengths: Q7 SUV is selling well and will benefit from a full year of sales. Redesigned TT. Weaknesses: Gains will be hard to come by for A4 and A6. BMW Strengths: Redesigned X5. Weaknesses: 3-Series sales could be impacted by new Infiniti G35. Buick Strengths: All-new Enclave crossover SUV. Weaknesses: Lacrosse and Lucerne newness is wearing off. Rendezvous and Rainier disappearing. Cadillac Strengths: New CTS arriving later in the year. Full year of sales for new Escalade. Weaknesses: SRX sales dropping, other models aging. Chevrolet Strengths: Redesigned Silverado, Aveo, and Malibu (late in year). Weaknesses: Impala aging in competitive segment. GM production cutbacks. Chrysler Strengths: Redesigned Sebring and all-new Aspen full-size SUV. New Town & County later this year. Weaknesses: 300 sales declining. Dodge Strengths: All-new Nitro and Avenger (replacement for Stratus). Caravan and perhaps Challenger, late in 07. Weaknesses: Magnum sales easing. Durango and Ram are aging and face bevy of new competitors. Ford Strengths: All-new Edge crossover SUV and redesigned Expedition. Fusion gaining traction. Weaknesses: Taurus dropped. Explorer on decline. F-Series faces formidable competition. Production cutbacks. GMC Strengths: Redesigned Sierra and allnew Acadia crossover. Weaknesses: Envoy is aging and competition is exploding. Honda Strengths: Redesigned CRV and full year of Fit sales. Weaknesses: Accord and Pilot aging in highly competitive market. Hummer Strengths: Largely avoids ultracompetitive SUV wars due to distinctive designs and market positioning. Weaknesses: No new products Hyundai Strengths: Redesigned Elantra. Veracruz SUV (lengthened Santa Fe) possible late in Weaknesses: Sonata to face tough competition. Pricing flexibility hindered by strong Korean won. Infiniti Strengths: Redesigned G35 coupe and sedan. Possible introduction of X crossover later in year. Weaknesses: FX and QX sales sagging as fuel prices remain high. Isuzu Strengths: None. Weaknesses: Ascender aging. Jaguar Strengths: Full year of XK sales. Weaknesses: Another year for aging X and S types. Redesigned S-Type launch not likely until Jeep Strengths: All-new Compass and Patriot add sales volume. Redesigned Wrangler, which includes a four door model for the first time. Weaknesses: Grand Cherokee and Commander sales declining. Market Share Outlook: Up Slightly.

5 Covering Fourth Quarter, 2006 Page 5 Brand Outlooks (continued) Saturn and Suzuki Predicted to Post Market Share Gains During 2007 Kia Strengths: Rondo small mini van to be introduced in early 07. Weaknesses: Spectra and Optima face formidable competition. As with Hyundai, pricing flexibility lessened due to strong Korean won. Land Rover Strengths: LR2 is introduced in entry luxury SUV segment. Weaknesses: LR3 faces tough new competition. Lexus Strengths: Redesigned LS 460 sedan. New crossover? Weaknesses: GS does not stand out in crowded luxury sedan segment. Lincoln Strengths: Redesigned Navigator. Allnew MKX crossover. Weaknesses: LS dropped. MKZ faces tough competition Market Share Outlook: Up Slightly. Mazda Strengths: Full year of CX-7 sales. CX-5 and CX-9 bow later this year. Weaknesses: Mazda6 faces bevy of new competitors. Mercedes Strengths: Redesigned C-Class, full year of sales for M and G Class SUVs. New S-Class. Weaknesses: Although freshened for 2007 model year, E-Class is older than most other products in its segment. Mercury Strengths: Mild restyling for Mariner. Weaknesses: Mountaineer sales likely to continue declining. Mini Strengths: Redesigned Mini arrives in Spring. Weaknesses: Intense competition in sub compact segment. Mitsubishi Strengths: Redesigned Outlander and new version of Lancer. Weaknesses: Endeavor and Galant are aging. Nissan Strengths: Full year of sales for redesigned Altima and Sentra. All-new Versa. Weaknesses: Titan and Armada sales likely to decline. Pontiac Strengths: G5 coupe introduction late in the year. Weaknesses: G6 faces tough competition. Solstice sales leveling off. Porsche Strengths: Re-skinned Cayenne likely during Weaknesses: Softening economy could hurt sports car market. Saab Strengths: None. Weaknesses: Almost all competitors have fresher product offerings. Saturn Strengths: Aura sedan and Outlook crossover SUV look strong. Full year of Sky sales. Weaknesses: Ion dropped in March. Market Share Outlook: Up. Subaru Strengths: Redesigned Impreza. Weaknesses: Forester sales likely to decline as crossover segment explodes with new product. Suzuki Strengths: Redesigned XL7 and allnew SX4. Weaknesses: Verona dropped and Forenza competition intense. Market Share Outlook: Up. Toyota/Scion Strengths: Redesigned Tundra. Full year of sales for Yaris and FJ Cruiser. New versions of Highlander and Sequoia late in the year. Weaknesses: Corolla and Matrix aging in competitive segments. Market Share Outlook: Up. Volkswagen Strengths: Full year of sales for Jetta and Eos. New Tiguan compact SUV. Weaknesses: Touareg sales are falling. Market Share Outlook: Up. Volvo Strengths: New C30 hatchback and redesigned S80. Weaknesses: S40 and S60 are aging and face intense competition.

6 Page 6 ORANGE COUNTY BRAND SCOREBOARD COMPREHENSIVE REVIEW OF BRAND SALES PERFORMANCE IN THE COUNTY AUTOMOTIVE MARKET DURING 2006 The table below presents a wellrounded picture of brand sales performance during Two primary measures are displayed and rated. The first, entitled Longer Term Results, represents the percent change in new retail light vehicle registrations during all of 2006 versus Brands are then rated (from highest to lowest), using a 1 to 5 scale. Brands having the highest increases in registrations receive a 5 rating, and those with the largest decreases get a rating of 1. The second measure, Shorter Term Results, represents the percent change in registrations from the First to the Second Half of this year. Brands are also ranked and rated on the same 1 to 5 scale. The last column in the table is the sum of the ratings for Longer Term and Shorter Term sales growth. Brands at the top of the table had relatively large sales gains last year, and gained momentum as the year progressed. Data Source: AutoCount, an Experian Company. Longer Term Results Shorter Term Results 2005 to 2006 First Half '06 to Second Half '06 Combined % ch Rating 1 half 2 half % Rating Rating Brand regs. regs. '05 to '06 (5 is high) regs. regs. Change (5 is high) (10 is high) Lexus 9,055 10, % 5 4,894 5, % 5 10 Mazda 2,579 2, % 5 1,175 1, % 5 10 Hyundai 3,115 3, % 5 1,771 1, % 4 9 Mini % % 5 9 Hummer % % 3 8 Toyota/Scion 42,229 43, % 4 21,905 22, % 4 8 Audi 1,919 1, % % 4 8 Saturn 1,373 1, % % 5 8 Jeep 2,689 2, % 3 1,212 1, % 5 8 Honda 20,876 21, % 4 10,973 10, % 3 7 Pontiac % % 4 7 Volkswagen 3,356 2, % 3 1,504 1, % 4 7 Subaru 1,235 1, % % 5 7 Land Rover 1,491 1, % 5 1, % 1 6 Porsche 993 1, % % 1 6 Mercedes 10,210 10, % 4 5,595 5, % 2 6 BMW 8,625 8, % 4 4,539 3, % 2 6 Mitsubishi 1,831 1, % % 3 6 Acura 4,288 3, % 3 2,010 1, % 3 6 Chevrolet 14,774 12, % 2 6,235 6, % 4 6 Cadillac 2,848 2, % 2 1,258 1, % 2 4 Dodge 5,700 4, % 2 2,583 2, % 2 4 Nissan 11,933 9, % 2 5,167 4, % 2 4 Ford 18,829 14, % 2 7,984 6, % 2 4 Volvo 2,216 1, % % 3 4 GMC 5,084 3, % 1 1,886 1, % 3 4 Infiniti 3,592 2, % 1 1,523 1, % 1 2 Lincoln 1,476 1, % % 1 2 Suzuki % % 1 2 Chrysler 4,736 3, % 1 1,930 1, % 1 2

7 Covering Fourth Quarter, 2006 Page 7 COMPARISON OF ORANGE COUNTY, LOS ANGELES COUNTY, AND U.S. MARKETS Market Characteristics Market Growth % change in registrations 2006 vs Car Market Share Car share of industry retail light vehicle 2006 Domestic Brand Market Share Domestic brand share of industry retail light vehicle registrations % 25.6% 49.2% New Retail Light Vehicle Registrations (by brand) New Retail Registrations Orange County Los Angeles County U.S. % ch. % ch. Regs. from '05 Regs. from '05 Regs. Orange County Los Angeles County U.S. Market -6.1% -4.2% -4.3% 54.1% 57.3% 49.1% % ch. from '04 Market Share (YTD '06) Orange County L.A. County Brand U.S. Acura 3, % 9, % 201, % Audi 1, % 6, % 90, % BMW 8, % 23, % 274, % Buick % 1, % 240, % Cadillac 2, % 5, % 227, % Chevrolet 12, % 30, % 2,396, % Chrysler 3, % 7, % 604, % Dodge 4, % 10, % 1,077, % Ford 14, % 33, % 2,415, % GMC 3, % 8, % 456, % Honda 21, % 53, % 1,308, % Hummer % 2, % 71, % Hyundai 3, % 4, % 455, % Infiniti 2, % 7, % 121, % Isuzu % % 8, % Jaguar % 1, % 20, % Jeep 2, % 5, % 460, % Kia % 4, % 294, % Land Rover 1, % 3, % 47, % Lexus 10, % 22, % 322, % Lincoln 1, % 3, % 120, % Mazda 2, % 6, % 268, % Mercedes 10, % 23, % 247, % Mercury % 1, % 180, % Mini % 2, % 39, % Mitsubishi 1, % 2, % 118, % Nissan 9, % 32, % 898, % Pontiac % 2, % 410, % Porsche 1, % 2, % 34, % Saab % 1, % 36, % Saturn 1, % 4, % 226, % Subaru 1, % 2, % 200, % Suzuki % 1, % 100, % Toyota/Scion 43, % 112, % 2,220, % Volkswagen 2, % 8, % 235, % Volvo 1, % 4, % 115, % Other % 1, % 11, % The two tables above provide a comparison of the Orange County, Los Angeles County, and U.S. new retail light vehicle markets. As shown on the top table, the Orange County market declined 6.1% from 2005 to 2006, while the Los Angeles County market fell 4.2%. Source: AutoCount, an Experian Company.

8 Page 8 Orange County New Retail Car and Light Truck Registrations - History and Forecast Registrations Market Share Units Percent Change Share (%) Change Forecast 2007 '05 to '06 Forecast '06 to ' Forecast 2007 '05 to '06 Forecast '06 to '07 TOTAL 194, , , % -2.0% Acura 4,288 3,971 4, % 3.5% Audi 1,919 1,919 1, % -3.3% BMW 8,625 8,400 8, % -0.4% Buick % -14.6% Cadillac 2,848 2,397 2, % -11.4% Chevrolet 14,774 12,516 11, % -8.3% Chrysler 4,736 3,433 3, % -9.6% Dodge 5,700 4,779 4, % -7.1% Ford 18,829 14,848 13, % -10.2% GMC 5,084 3,697 3, % -2.4% Honda 20,876 21,438 20, % -2.1% Hummer % -8.4% Hyundai 3,115 3,514 3, % -3.1% Infiniti 3,592 2,806 2, % -4.8% Isuzu % -30.8% Jaguar % -29.0% Jeep 2,689 2,456 2, % 2.8% Kia % -4.1% Land Rover 1,491 1,840 2, % 11.5% Lexus 9,055 10,076 10, % 0.2% Lincoln 1,476 1,141 1, % 0.4% Mazda 2,579 2,812 2, % 0.2% Mercedes 10,210 10,670 10, % 1.6% Mercury % -13.3% Mini % 8.6% Mitsubishi 1,831 1,702 1, % -1.5% Nissan 11,933 9,735 9, % -3.3% Pontiac % -11.4% Porsche 993 1,068 1, % -5.2% Saab % -22.8% Saturn 1,373 1,325 1, % 23.8% Subaru 1,235 1, % -11.0% Suzuki % 7.7% Toyota (incl. Scion) 42,229 43,911 44, % 2.0% Volkswagen 3,356 2,985 3, % 4.4% Volvo 2,216 1,686 1, % -12.6% Others % -4.4% Historical Data Source: AutoCount, an Experian Company Published by: Auto Outlook, Inc. 5 Great Valley Parkway, Suite 234 Malvern, PA Phone: Editor: Jeffrey A. Foltz Reproduction, including photocopying of this publication in whole or in part, is prohibited without the express permission of Auto Outlook, Inc. Any material quoted must be attributed to Orange County Auto Outlook, published by Auto Outlook, Inc. on behalf of the Orange County Automobile Dealers Association. Unforeseen events may affect the forecast projections in Orange County Auto Outlook. Consequently, Auto Outlook, Inc. is not responsible for management decisions based on the content of. is distributed free of charge to members of the Orange County Automobile Dealers Association. The publication is sponsored and supported by the Association. is published and edited by Auto Outlook, Inc., an independent automotive market analysis firm. Opinions expressed are solely those of Auto Outlook, Inc., and are not necessarily shared by the Association. Copyright Auto Outlook, Inc., February, 2007

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